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State Bank of Travancore Vs. C.T. George and anr. - Court Judgment

LegalCrystal Citation
SubjectBanking;Commercial
CourtKerala High Court
Decided On
Case NumberA.S. No. 285 of 1970
Judge
Reported inAIR1975Ker169
ActsUsurious Loans Act, 1918 - Sections 3(2)
AppellantState Bank of Travancore
RespondentC.T. George and anr.
Appellant Advocate K.C. John, Adv.
Respondent Advocate C.M. James Chacko,; E.R. Venkateshwaran and; Joseph Vada
Cases ReferredIn Antony v. Mala Catholic Union Bank.
Excerpt:
banking - compound interest - section 3 (2) of usurious loans act, 1918 - order interfering charging of compound interest challenged - challenge on ground that respondent waived protection under act - waiver of protection cannot be inferred from mere signing of confirmation slips given to bank - section 3 empowers court to interfere in case of imposition of excessive interest - reduction of interest rate by lower court valid and does not require interference. - - on failure on his part to make payments, the suit was instituted on 13-12-1965 for recovery of amounts due. and it is well established that the effect of this system is to capitalize the interest at the end of each year and treat it as a fresh advance by the bank; this method of dealing with loan accounts, which became.....janaki amma, j.1. the plaintiff, the state bank of travancore is the appellant. the first respondent had dealings with the chaldean syrian bank, trichur by way of overdraft current account on 6-1-1951. he executed ext, a-1. a hypothecation bond for rs. 8,750/- made up of the balance outstanding in his account and the expenses in connection with the deed. ext. a-1 stipulated that the 1st respondent should pay interest at 9% per annum with quarterly rests. on the same day, the 1st respondent executed ext. a-2, a possessory mortgage of the same properties for rs. 1,000/- in favour of one f. c. george, an officer of the bank the properties were taken by the 1st respondent on lease-back under ext. a-3. the pattom was fixed under ext. a-3 at rs. 1,500/-. an amount of rs. 1,410/- was to be.....
Judgment:

Janaki Amma, J.

1. The plaintiff, the State Bank of Travancore is the appellant. The first respondent had dealings with the Chaldean Syrian Bank, Trichur by way of overdraft current account On 6-1-1951. he executed Ext, A-1. a hypothecation bond for Rs. 8,750/- made up of the balance outstanding in his account and the expenses in connection with the deed. Ext. A-1 stipulated that the 1st respondent should pay interest at 9% per annum with quarterly rests. On the same day, the 1st respondent executed Ext. A-2, a possessory mortgage of the same properties for Rs. 1,000/- in favour of one F. C. George, an officer of the Bank The properties were taken by the 1st respondent on lease-back under Ext. A-3. The pattom was fixed under Ext. A-3 at Rs. 1,500/-. An amount of Rs. 1,410/- was to be retained by the 1st respondent, towards the upkeep and maintenance of the rubber trees and for payment of jenmi dues and interest to the Chaldean Syrian Bank. The balance Rs. 90/- was to be paid as purappad. Interest at the rate of 9% per annum was fixed for arrears of purappad, if any. F. C. George transferred the rights under Exts. A-2 and A-3 to the Chaldean Syrian Bank as per Ext. A-4 dated 10-1-1951. The bank was maintaining separate accounts for the two transactions. Exts. A-5 and A-6 are the copies of the accounts. On 18-3-1965, the bank issued Ext. A-10 notice stating that consequent on the rise in Bank rate, interest would be charged at 12% per annum from 1-3-1965, in case the amount under the loan account was not paid before 31-3-1965. The assets and liabilities of the Chaldean Syrian Bank became merged in the appellant-bank with effect from 1-10-1965 as per the order, Ext. A-11 issued by the Director of Banking under Sub-sections (2) and (3) of Section 38 of the State Bank of India (Subsidiary Banks) Act of 1959. The first respondent was called upon by the appellant-bank to confirm the correctness of the amount entered in the bank accounts and the balance due on 1-10-1965 under the two transactions. Exts. A-13 and A-14 are the confirmation statements signed by the first respondent. Thereafter on 4-12-1965, the appellant-bank issued a registered notice calling upon the first respondent to discharge the amount due under the two transactions. On failure on his part to make payments, the suit was instituted on 13-12-1965 for recovery of amounts due. Interest at the rate mentioned in the documents was claimed till 1-10-1965 and thereafter at 12%. The second respondent is a subsequent mortgagee. Several pleas were raised by the first respondent. Those relevant for this appeal are:

(1) that the first respondent being an agriculturist was entitled to relief under the Usurious Loans Act as amended by Act 8 of 1937 (Madras) and was not bound to pay compound interest or interest at the rate of 12% and;

(2) that the first respondent was liable to pay off the debt as per the provisions of Act 31 of 1958. The first respondent also contended that the confirmatory statements were signed by him without reference to the accounts, which were not available to him and that the said documents would not debar him from claiming whatever reliefs that he was otherwise entitled under law.

2. The District Judge, Kozhikode, who disposed of the case held that the first respondent was an agriculturist coming under Section 3 of the Usurious Loans Act as amended by Madras Act 8 of1937 which does not favour charging of compound interest in respect of loans by agriculturists. The contention that he waived his rights by signing the confirmation letters, Exts. A-13 and A-14 was not accepted by the trial court. The court refused to reopen the accounts prior to 6-1-1951. Relief under Act 31 of 1958 was not granted to the first respondent, A decree was passed for the principal amounts under Exts. A-1 and A-2 with simple interest at 9% per annum till 1-3-1965 and at 12% per annum thereafter less the amounts appropriated as per the loan accounts, Exts. A-5 and A-6. Aggrieved by the above decree, the plaintiff-bank has come up in appeal. The first respondent has filed cross-objections claiming relief under Act 31 of 1953,

3. We shall first deal with the availability of the benefit under the Usurious Loans Act, on the assumption that the first respondent is not an agriculturist entitled to relief under Act 31 of 1958. Sub-sections (1) and (2) of Section 3 of the Usurious Loans Act run as follows:

'3. (1) Notwithstanding anything in the Usury Laws Repeal Act, 1855, where, in any suit to which this Act applies, whether heard ex parte or otherwise, the Court has reason to believe,--

(a) that the interest is excessive: and

(b) that the transaction was, as between the parties thereto, substantially unfair,

The court may exercise all or any of the following powers, namely, may,--

(i) re-open the transaction, take an account between the parties, and relieve the debtor of all liability in respect of any excessive interest,

(ii) notwithstanding any agreement, purporting to close previous dealings and to create a new obligation, re-open any account already taken between them and relieve the debtor of all liability in respect of any excessive interest, and if anything has been paid or allowed in account in respect of such liability, order the creditor to repay any sum which it considers to be repayable in respect thereof;

(iii) set aside either wholly or in part or revise or alter any security given or agreement made in respect of any loan, and if the creditor has parted with the security, order him to indemnify the debtor in such manner and to such extent as it may deem just:

Provided that, in the exercise of these powers, the Court shall not-

(i) re-open any agreement purporting to close previous dealings and to create a new obligation which has been entered into by the parties or any persons from whom they claim at a date more than twelve years from the date of the transaction;

(ii) do anything which affects any decree of a Court. Explanation:-- In the case of a suit brought on a series of transactions the expression 'the transaction' means, for the purposes of proviso (i), the first of such transactions.

2 (a) In this section 'excessive' means in excess of that which the Court deems to be reasonable having regard to the risk incurred as it appeared, or must be taken to have appeared, to the creditor at the date of the loan.

(b) In considering whether interest is excessive under this section, the Court shall take into account any amounts charged or paid, whether in money or in kind, for expenses, inquiries, fines, bonuses, premia, renewals or any other charges, and if compound interest is charged, the periods at which it is calculated, and the total advantage which may reasonably be taken to have been expected from the transaction.

(c) In considering the question of risk, the Court shall take into account the presence or absence of security and the value thereof, the financial condition of the debtor and the result of any previous transactions of the debtor, by way of loan, so far as the same were known, or must be taken to have been known to the creditor.

(d) In considering whether a transaction was substantially unfair, the Court shall take into account all circumstances materially affecting the relations of the parties at the time of the loan or tending to show that the transaction was unfair, including the necessities or supposed necessities of the debtor at the time of the loan so far as the same were known, or must be taken to have been known, to the creditor.

Explanation:-- Interest may of itself be sufficient evidence that a transaction was substantially unfair'. As per the Madras Act 8 of 1937, a proviso was added to Clause (b) of Sub-section (2) as follows:

'Provided that in the case of loans to agriculturists, if compound interest is charged, the court shall presume that the interest is excessive.'

There is no scope for doubt that the word 'agriculturist' in the Madras Amendment extracted above, is used in its ordinary dictionary sense of a person who actually follows the calling of agriculture. The case Venkata Ramanayya v. Mallikharjanadu, AIR 1942 Mad 533 is a decision on the point. If a person has agricultural lands and looks after their cultivation, the fact that he conducts agricultural operations on a commercial scale or that he owns a rice mill will not disentitle him from claiming relief under the Usurious Loans Act and getting over the liability to pay compound interest. See Venkanna v. Muhammad Rowthar, AIR 1944 Mad 105 and Rajayya v. Ramachandra Rao, AIR 1954 Mad 488. Though the first respondent in the instant case is described as a banker in Ext. A-1, there is no case that he was conducting banking business on the date of the document or on any subsequent date. On the other hand, Ext. A-1 to Ext. A-3 would show that the first respondent was having agricultural lands and was attending to agricultural operations. There is, therefore, no doubt that he is an agriculturist entitled to relief under the Usurious Loans Act as amended by Madras Act 8 of 1937.

4. The stipulation in Ext. A-1 is that the first respondent should pay and obtain receipt for the interest calculated: at 9 per cent, per annum at the end of every three months. Interest if kept in arrear would be added to the principal and the consolidated amount would bear interest at the same rate and such interest should be paid on the next due date. The question is whether the above terms amount to an agreement to pay compound interest.

5. In a transaction where compound interest is charged at each settlement of accounts, there is a sinking of the interest in arrear into the principal debt and the composite sum carries interest till the next settlement. After each settlement, the debtor loses his right to have the unpaid interest separated from the principal and dealt with independently. (See Muthu v. Meenakshisundaram, AIR 1928 PC 35 and Venkanna v. Muhammad Rowther, AIR 1944 Mad 105). Compound interest is described in Law Lexicon of British India by Shri P. Ramanatha Aiyar as follows:

'Compound interest is interest upon interest; where accrued interest is added to the principal sum and the whole treated as a new principal for the calculation of the interest for the next period.

It is to be observed, however, that there are two distinct methods of computing what is loosely termed compound interest. By the first method periodical rests are made and at each rest the principal and the accrued interest thereon is combined into new principal which bears interest until the next rest and so on; this method results in giving interest not only upon the principal and upon the interest on the principal, but also in giving interest upon the interest on the interest and so on ad infinitum until payment, and this is what is meant by 'compound interest' when the term is used in its strict sense. By the other method, the accrued interest is not combined with the principal but each instalment of interest on the principal becomes interest on the interest; and although this method is also sometimes called compound interest, it has been more correctly described as a middle course between simple and compound interest'.

Judged in the light of the above, Ext. A-1 contains an agreement to pay compound interest in the strict sense. It follows that in view of the proviso to Section 3(2) of the Usurious Loans Act which is applicable to the Malabar area, the Court should presume that the interest stipulated in Ext. A-1 is excessive.

6. It is, however, argued on behalf of the appellant that the provision relating to interest in Ext, A-1 does not amount to an agreement to pay compound interest and that it is a term in consonance with the practice which prevails in banks under which to enable payment of interest on the due dates the banks would make advances to the debtor and add the sums so advanced to the principal. Reference has been made in this connection to Pazhaniappa Mudaliar v. Narayana Ayyar, AIR 1943 Mad 157 decided under the Madras Agriculturists' Relief Act, 4 of 1938. In that case, there was a course of dealings following an account opened in the name of the appellants-firm. Payments were made to the firm. There were both debit and credit entries each year-Interest was calculated at the rate of 12% per annum on the appellant's overdraft and deducting counter-interest at the same rate on the payments made by the appellants, the amount of the interest was entered on the debit side of the account and a balance was then struck, such balance bearing interest at the same rate during the next year. The appellants contended that they were agriculturists within the meaning of the Madras Agriculturists' Relief Act and that if the debts due to the respondents were scaled down in accordance with the provisions of the Act, practically nothing would be found payable. It was not disputed that the appellants were agriculturists; but their contention that all the accrued interest should be deemed to be discharged under Section 8 of the Act was not accepted by the trial Court. In appeal, the High Court observed;

'It will be seen that the mode of dealing adopted by the parties is what is usually followed between banker and customer; and it is well established that the effect of this system is to capitalize the interest at the end of each year and treat it as a fresh advance by the bank; in other words, according to the usage prevailing between bankers and customers, it is an implied term of their dealing that the banker is to be treated as having made an advance to the customer at the end of each year or half year as the case may be, of a sum equivalent in amount to the interest accruing during that period, so as to enable the customer to discharge the interest, increasing the principal of his debt by a corresponding amount. As pointed out in (1931) 2 KB 81, this usage which has been adopted by the bankers in England for over a century had its origin as a device to secure compound interest by circumventing the usury laws under which agreements for charging compound interest were usurious and illegal; and though the usury laws were subsequently repealed and the necessity for such mode of dealing disappeared, the usage which ascribes to it, as a matter of implied term of contract, the effect referred to above has remained'.

The High Court held that the above principle would be applicable to the case and that interest accruing due each year should be deemed to have been paid and discharged and to be no longer outstanding to be wiped out under Section 8 (1) of the Madras Agriculturists' Relief Act.

7. The contention of the appellant is that what was done in the present case was only to follow the above practice of bankers and that there was no adding of interest as such to the principal every three months for calculating interest for the subsequent quarter.

8. In order to appreciate the reasoning and also the principles involved, reference may have to be made to some of the cases wherein the above referred practice has been recognised by the Courts in England. The case Inland Revenue Commrs. v. Holder, (1931 (2) KB 81) arose in connection with the Income-tax Act. Under Section 36 of the Income-tax Act of 1918, a claim could be made for repayment of income-tax upon sums paid to banks in respect of interest out of taxed profits without deduction of tax. The person by whom interest was paid was entitled to on proof of the facts to the satisfaction of the Special Commissioners, payment of tax on the amount of the interest. In the case under reference the appellants were interested in a company which had been for many years indebted to its bankers. The appellants gave guarantees to the bank to secure the company's indebtedness. In accordance with the usual custom of the bankers, interest on the amounts owing to the bank from time to time was debited half-yearly to the company's capital account with bank. Payments were made by the company into the account from time to time. On an examination of the bank accounts, it was found that interest was added at half-yearly rests. The appellants contended before the Income-tax Authorities that he was entitled to deduction of the tax on the amount of interest. The question arose as to whether in the light of the accounts maintained by the bankers, there was payment of interest which was a condition precedent for adjustment of the tax on the amount of interest. It was in this connection that the particular practice among the bankers of making advances for payment of interest was adverted to Romer, L. J. observed that having regard to the method in which, with the concurrence of the company, the account was kept by the bank, the company must be deemed to have paid each half-year the accruing interest by means of an advance made for that purpose by the bank to the company. There was an appeal from the above decision; but the appeal was disposed of on other grounds, as is seen from the decision in Holder v. Inland Revenue Commrs., 1932 AC 624.

9. The identical question, however, came up for consideration in the case reported in Paton (Fenton's Trustee) v. Inland Revenue Commrs., 1938-1 All ELR 786. In the particular case, F borrowed a large sum from a bank in respect of which the bank opened a separate loan account. Each half-year interest at an agreed rate, and without deduction of tax was placed to the debit of the account, and the aggregate amount was treated as principal for the following year. When deduction for interest paid was claimed it was held that in the circumstances of the case, there was no ground for holding that interest was in fact paid by F. 'The invariable practice of the bankers' of adding the interest to the principal periodically is referred to at page 795:

'My Lords, the origin of this agreeable fiction whereby debts are to be deemed to be paid, without payment may be traced historically to the ingenuity of lenders in devising a method of obtaining compound interest without contravening the usury laws. It was illegal by an antecedent contract to stipulate for the payment of compound interest, but, in the words of Lord Eldon. L. C., in Ex parte Bevan, (1803) 9 Ves 223; 35 Digest 200, 270 at p. 224;

........ if you agree to settleaccounts at the end of six months, that not being part of the prior contract, and then stipulate, that you will forbear for six months upon those terms (i.e., that the interest shall carry interest for the subsequent six months) that is legal.

On this principle, it was held in Eaton v. Bell, (1821) 5 B & Ald 34; 3 Digest 245, 706 that bankers who, with the knowledge of, and without objection by their customers, debited them with interest with half-yearly rests in accordance with their general practice did not offend against the usury laws. This method of dealing with loan accounts, which became common from among bankers, survived the abolition of the usury laws, and is well established as the ordinary usage prevailing between bankers and customers who borrow from them and do not pay the interest as it accrues'.

10. The decision in Holder's case proceeded on the footing that periodical interest must be held to have been paid when placed to the debit of the account as an additional advance by the bank for the convenience of the pbligants. This view was not accepted in Baton's case, (1938) 1 All ER 786 -- Lord Maugham observed at page 799;

'In accordance with the usual practice of bankers in this country, the system adopted by the bank was that each half-year the accrued interest was added to the amount advanced (including therein any interest previously added to the original amount), and the total sum was carried forward into the next half-year as one capitalised sum. This is a mere matter of entries in the books of the bank, and the result is to give the bank compound interest on the amount due. ............ In particular, I agree that there is nothing in the cases which can lead us to the conclusion that the customer has paid the interest in the circumstances we are considering.'

11. Reference may be made here to the observations of Lord Sterndale, M. R., in Re Morris, (1922) 1 Ch 126: 28 Digest 72:

'I think the word 'capitalisation' used in many of the books quoted is a convenient word, but for the purposes for which it has been used in the argument before us it is a fallacious word, because it is taken as referring to capitalisation for all purposes, income-tax and otherwise. I do not think that is the meaning of the word. In my opinion -- not to beg the question -- when these sums of interest come to be paid at the end of the time when payment is made, although interest has been charged upon them, and although as a matter of book keeping, they have from time to time been added to capital, they do not cease to be interest of money -- that is to say, they are overdue interest upon which interest has been paid.'

Whether there was payment of interest when interest was added to capital in the case of a mortgage was considered by the House of Lords in Inland Revenue Commr. v. Oswald, 1945-1 All ER Annotated 641. Lord Simonds observed:

'The question in the simplest terms is whether, when the mortgagee capitalises interest, the mortgagor pays it; and the answer, in terms as simple, is that the mortgagee capitalises it just because the mortgagor does not pay it, It is not a form of payment; it is not a substitute for payment; the interest remains unpaid, but it is impressed with a new quality, viz., that it carries interest as if it were capital'.

12. Incidentally, we may extract the reference made by Lord Atkin to the case Ex parte Bevan in Paton's case which would throw more light on the practice of bankers already mentioned:

'Ex parte Bevan was a case of a petition in bankruptcy to be allowed to prove. One objection made was 'that in settling accounts half-yearly interest had been turned into principal'.

At that time the Usury Act, 1713 (12 Ann. Stat. 2. c. 16) was in force, which made illegal a contract to pay interest at a rate higher than 5 per cent, per annum.

It does not appear from the report what was the nature of the debt or what were the occupations of either petitioner or debtor. Lord Eldon, L.C., said, at page 224:

'As to the question of compound interest, it is clear, you cannot a priori agree to let a man have money for twelve months, settling the balance at the end of six months; and that the interest shall carry interest for the subsequent six months; that is, you cannot contract for more than 5 per cent.; agreeing to forbear for six months. But, if you agree to settle accounts at the end of six months, that not being part of the prior contract, and then stipulate, that you will forbear for six months upon those terms, that is legal.'

There is here not a suggestion of payment The only question for Lord Eldon, L.C., was the supposed illegality. An antecedent (a priori) agreement for half-yearly rests and interest upon the balance would be void, but if one settles, i.e., agrees, the balance at the end of 8 months, there is nothing to prevent one from making a fresh start with the total debt, which no doubt includes interest, and agreeing to forbear from suing for the whole debt at a rate of interest meantime.'

13. A re'sume' of the aforesaid English decisions would show the following:--

(1) The practice of bankers settling accounts every six months commenced at a time when the Usury laws were prevailing in England,

(2) Under the Usury laws an antecedent agreement to Pay compound interest at half-yearly rests was void,

(3) The device of settling accounts every half-year and making a fresh start with the principal and the interest outstanding and treating it as a new debt was employed to get over the Usury laws and to evade it.

(4) The practice did not involve any advance in fact or actual payment of interest utilising such advance but amounted only to a system of accounting and book-keeping whereby an advance by the bank and a payment of interest outstanding were deemed to have been made and

(5) Such deemed payments are not taken as actual payments for the purpose of statutes which refer to payment of interest.

Though Holder's case is referred to in P. Mudaliar v. N. Ayyar, AIR 1943 Mad 157, Paton's case is not seen brought to the notice of the Court. It is evident from the ruling that in actual practice the bankers did not as a matter of fact advance any loan and what was being done was to adopt a particular mode of book-keeping. Therefore, from the mere fact that there was a settlement of accounts every six months, it cannot be said that there was actual payment or discharge of the prior obligation and the parties contracted to a new obligation. It is also seen that whatever be the practice among the bankers, the English decisions referred to have no application to an antecedent agreement to pay compound interest or to settle interest at half-yearly or quarterly rests. In the instant case, the appellant's claim is based on a written agreement. That one of the parties is a bank and that a particular form of book-keeping and accounting is followed in banks are not matters to be taken into consideration in construing such an agreement.

14. In Raghunandan Prasad Singh v. Commr. of Income-tax, 37 Cal WN 570 = (AIR 1933 PC 101), the Privy Council held that when a debtor renews his debt so that interest, from the date of such renewal, becomes part of the principal, he does not actually pay the interest and the transaction is not in essence a realisation of principal and interest. In Antony v. Mala Catholic Union Bank. (35 Cochin 542), a document stipulating for interest on lines similar to Ext. A-1 came up for consideration. The theory of an implied agreement that the bank should be considered to have made an advance to the customer at the end of each quarter, of a sum equivalent to the interest accrued within that quarter so as to enable the customer to discharge the interest pertaining to that period was not accepted. The Court remarked:

'That is an absolute fallacy. There is no such implied term nor is there evidence of the existence of such a term. The terms of the agreement are quite clear. What the relevant terms in the agreement amount to is this. The bank is allowed to charge compound interest with a rest of three months period.'

The same is the position with regard to Ext. A-1 in this case.

15. It is then argued that the first respondent having signed Exts. A-13 and A-14 confirming the correctness of the amounts as entered in the accounts of the bank has admitted his liability to pay interest at the rate stipulated in Ext. A-1and there has been a waiver of the right if any under the Usurious Loans Act. No such admission of liability or waiver of the reliefs under the Usurious Loans Act express or implied can be inferred from the mere fact of signing the confirmation slips. Even assuming that Exts. A-13 and A-14 amount to settlement of accounts and admission of the balance due, Section 3 of the Usurious Loans Act empowers the Court to reopen transactions and relieve the debtor of the liability to pay excessive interest.

16. The aforesaid discussion makes it clear that the stipulation in Ext. A-1 is for payment of compound interest. The appellant being an agriculturist. Act 8 of 1937 (Madras) applies. The court should, therefore, presume that interest is excessive. No circumstances are made out to rebut the presumption. Interest being excessive, the transaction was substantially unfair. The District Judge, Kozhikode, therefore, rightly held that the rate of interest fixed under Ext. A-1 required interference. Interest at the rate of 9% per annum till 1-10-1965 and thereafter at 12 per cent, per annum allowed by the trial court is reasonable on the facts and circumstances of the case. The appeal thus fails and is dismissed with costs.

17. In the Cross-appeal filed by the first respondent, the only point pressed is that he is an agriculturist entitled to relief under Act 31 of 1958. There is no case that the respondent is entitled to relief in respect of the transaction under Ext. A-1 where the loan was admittedly more than Rs. 1,500/-. But in respect of the second transaction the loan amount was only Rs. 1,000/-. If the first respondent was an agriculturist on the relevant date otherwise entitled to relief under Act 31 of 1958, the above debt falls under the category of debt which can be scaled down. The trial Court held that being a person possessed, of a large extent of agricultural property where rubber and other trees are grown the first respondent should be deemed to be a person paying agricultural income-tax and, therefore, he is not entitled to relief under the Act. The first respondent would, however, contend that the conclusions arrived at by the trial court are without any basis. There are no materials in the case which go to show that the first respondent was paying agricultural income-tax during the concerned period. There is also no evidence to the effect that the income of the property during the relevant period was such that he would have been in the usual course assessed to agricultural income-tax. On the other hand, it is the admitted case that the first respondent possessed only the property mentioned in Exts. A-1 to A-3. The pattom fixed under Ext. A-3 is only Rs. 1,500/-. If this was the sole agricultural income the first respondent was getting during the relevant period, it could not be said that he was liable to pay agricultural income-tax. The appellant has not adduced any evidence to show that the income from agricultural properties which the first respondent was getting exceeded Rs. 5,000/- per annum. In the circumstances, there are no justifiable grounds for disallowing the first respondent relief under Act 31 of 1958 which has been now replaced by Act 11 of 1970. The Cross-appeal is, therefore, allowed to the above extent. The parties will bear their respective costs.


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