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K. Kunhi Mohammad Hajee Vs. State of Kerala and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberO.P. Nos. 4323 and 4451 of 1969
Judge
Reported in[1974]93ITR193(Ker)
ActsKerala Agricultural Income Tax Act, 1950 - Sections 24
AppellantK. Kunhi Mohammad Hajee
RespondentState of Kerala and anr.
Appellant Advocate C.T. Peter,; T.C. Karunakaran,; P.K. Shamsuddin,;
Respondent AdvocateGovernment Pleader
Cases ReferredBengal Immunity Co. Ltd. v. State of Bihar
Excerpt:
direct taxation - assessment - section 24 of kerala agricultural income tax act, 1950 - petition challenging assessment - petitioner to be assessed as legal representative of deceased for period up to 18.07.1968 (date of death) - for period subsequent to death of a petitioners to be assessed independently as tenants-in-common - held, order assessing legal representatives on entire income liable to be set aside. - - sub-section (1) thereof provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died in the like manner and to the same extent as the deceased......he died on july 18, 1968. after his death, when proceedings for assessment were taken up the legal representatives took the stand that, though the income derived by kunhi bava till the date of his death, namely, july 18, 1968, was liable to be assessed at the hands of the legal representatives, they were liable to be assessed only as tenants-in-common for the period subsequent to july 18, 1968. apparently, the agricultural income-tax officer took the stand that, for the accounting year in which kunhi bava died, the income ought to be assessed as if kunhi bava was alive for the whole of the year and tax was payable as if the income was derived by him during that year. for this, reliance was placed on the decision in commissioner of income-tax v. amarchand n. shroff, [1963] 48 i.t.r......
Judgment:

Subramonian Poti, J.

1. The petitioner in O.P. No. 4323 of 1969 and the petitioners in O. P. No. 4451 of 1969 together constitute the legal representatives of the deceased, P. Kunhi Bava, who was an assesses under the Agricultural Income-tax Act and was being assessed to tax till the assessment year 1963-69. He died on July 18, 1968. After his death, when proceedings for assessment were taken up the legal representatives took the stand that, though the income derived by Kunhi Bava till the date of his death, namely, July 18, 1968, was liable to be assessed at the hands of the legal representatives, they were liable to be assessed only as tenants-in-common for the period subsequent to July 18, 1968. Apparently, the Agricultural Income-tax Officer took the stand that, for the accounting year in which Kunhi Bava died, the income ought to be assessed as if Kunhi Bava was alive for the whole of the year and tax was payable as if the income was derived by him during that year. For this, reliance was placed on the decision in Commissioner of Income-tax v. Amarchand N. Shroff, [1963] 48 I.T.R. (S.C.) 59 ; [1953] Supp. 1 S.C.R. 699 (S.C.). In spite of the objection by the legal representatives to such a course, the Agricultural Income-tax Officer passed the order which is exhibit P-3 in both the cases, assessing the legal representatives on the entire income from the properties of Kunhi Bava as if the entire income was that of Kunhi Bava, and received by him. This is what is challenged in the original petition.

2. Section 24 of the Agricultural Income-tax Act, which corresponds to Section 24B of the Indian Income-tax Act, 1922, since repealed, reads as follows:

'24. (1) Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person, to the extent to which the estate is capable of meeting the charge the agricultural income-tax assessed as payable by such person or any agricultural income-tax which would have been payable by him under this Act if he had not died.

(2) Where a person dies before the 1st June in any year or before he is served with a notice under Sub-section (2) of Section 17 or under Section 35, as the case may be, his executor, administrator or other legal representative shall, on the Serving of the notice under Sub-section (2) of Section 17 or under Section 35, as the case may be, comply therewith, and the Agricultural Income-tax Officer may proceed to assess the total agricultural income of the deceased person as if such executor, administrator or other legal representative were the assesses.

(3) Where a person dies without having furnished a return which he has been required to furnish under Section 17, or having furnished a return which the Agricultural Income-tax Officer has reason to believe to be incorrect or incomplete, such officer may make an assessment of the total agricultural income of such person and determine the agricultural income-tax payable by him on the basis of such assessment, and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the deceased person had he survived, require from the executor, administrator or other legal representative of the deceased person any accounts, documents or other evidence which he might under Section 17 or Section 18 have required from the deceased person.'

3. Section 24(1), in particular, provides that in the case of a deceased person, his executor, administrator or other legal representatives shall be liable to pay the tax from out of the estate and in cases where such tax had been assessed they would be liable to pay such tax as would have been payable by the deceased person under the Agricultural Income-tax Act as if he had not died.

4. Construing the corresponding section, Section 24B of the Indian Income-tax Act, 1922, the Supreme Court in Commissioner of Income-tax v. Amarchand N. Shroff, observed thus:

'... in all the cases enumerated above the language used in Subsections (1), (2) and (3) of Section 24B contemplates that the heirs and legal representatives of a deceased person are liable to pay income-tax out of his estate, (1) where assessment had already been made, and (2) where he dies before the assessment but the income was received before his death or by his heirs and legal representatives after his death which occurs during the previous year. If he dies before the publication of the notice under Section 22(1) or before the service under Section 22(2) or after the service but before he has furnished a return or filed an incorrect or incomplete return then the Income-tax Officer should make an assessment of the total income of such deceased person and determine the tax payable thereon. Section 24B does not authorise levy of tax on receipts by the legal representatives of a deceased person in the years of assessment succeeding the year of account being the previous year in which such person died.'

5. In the same judgment their Lordships said thus:

'By Section 24B the legal representatives have, by fiction of law, become assessees as provided in that section but that fiction cannot be extended beyond the object for which it was enacted. As was observed by this court in Bengal Immunity Co. Ltd. v. State of Bihar, [1955] 6 S.T.C. 446 ; [1955] 2 S.C.R. 603(S.C.) legal fictions are only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond that legitimate field. In the present case the fiction is limited to the cases provided in the three Sub-sections of Section 24B and cannot be extended further than the liability for the income received in the previous year.'

6. The same rule was reiterated in the subsequent decision of the Supreme Court in Commissioner of Income-tax v. James Anderson, [1964] 51 I.T.R. 345, 350 ; [1964] 5 S.C.R. 590 (S.C.) Shah J., referring to the earlier decision, said thus :

'In interpreting that enactment this court held in a recent case, Commissioner of Income-tax v. Amarchand N. Shroff that by the incorporation of Section 24B the legislature has extended the legal personality of a deceased person for the duration of the entire previous year in the course of which he died, and, therefore, the income either received by him before his death or by his hiers and representatives after his death in that previous year becomes assessable to tax in the relevant assessment year, but not the income received in the year subsequent to the previous or account year.'

7. In a recent case before the Supreme Court in Commissioner of Income-tax v. Hukumchand Mohanlal, [1963] 48 I.T.R. (S.C.) 59; [1963] Supp. 1 S.C.R. 699 (S.C.) the question whether a sum of money, received as refund by the assessee after the death of her husband, on account of amounts which had been paid by the husband but found liable to be refunded, was liable to Income-tax arose. The amount was received not in the accounting year in which the husband died but in the subsequent year. The wife was sought to be proceeded against as if Section 41(1) of the Income-tax Act, 1961, would apply to such a case. It was found that that section would be of no application. Incidentally, reference was made to Section 159 of the Income-tax Act, 1961, which deals with the liability of legal representatives and also Section 24B of the Indian Income-tax Act, 1922. Dealing with this question, the Supreme Court said thus:

'The only provision which relates to the liability of the legal representative is Section 159 of the Act. Sub-section (1) thereof provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died in the like manner and to the same extent as the deceased. The corresponding provision in the Indian Income-tax Act, 1922, was Section 24B, In Commissioner of Income-tax v. Amarchand N. Shroff, it was laid down by this court that Section 24B did not authorise the levy of tax on receipts by the legal representative of a deceased person in the year of assessment succeeding the year of account being the previous year in which such person died. The assessee had ordinarily to be a living person and could not be a dead person. By Section 24B the legal personality of the deceased assessee was extended for the duration of the entire previous year in the course of which he died. The income received by him before his death and that received by his legal representative after his death but in that previous year became assessable to income-tax in the relevant assessment year. Any income received in the year subsequent to the previous year or the accounting year could not be called income received by the deceased person. Thus, the provisions of Section 24B did not extend to tax liability of the estate of a deceased person beyond the previous or the accounting year in which that person died. To the same effect is the decision in Commissioner of Income-tax v. James Andersen, [1964] 51 I.T.R. 345; [1964] 5 S.C.R. 590 (S.C.). Indeed, the learned counsel for the revenue did not and could not rely on the provisions of Section 159 of the Act in the present case nor was any reliance placed on any other Section in the Act apart from Section 41(1).'

8. These decisions, no doubt, lay down the rule that the legal representatives are liable to be assessed as if the deceased was alive not only in respect of the income received by the deceased person up to the date of his death, but also the income received by the legal representatives during that year but not in any subsequent year. It is on this that reliance is placed by counsel for the revenue. According to him these decisions must be read as laying down the rule that if the legal representatives derived any income out of the property of the deceased during the previous year in which the death took place they are liable to be assessed on that income in addition to the income of the deceased up to the date of his death under Section 24 of the Agricultural Income-tax Act, 1950. We do not think that this is the purport of the decisions of the Supreme Court. The language of Section 24 of the Act appears to us to be clear. It indicates that what is permitted to be assessed under Section 24 is the income of the deceased person and what is allowed to be recovered is the tax that would have been payable by the deceased. It is for that purpose and that alone that Section 24 has provided for the fiction of continuance of the deceased person. Even if he is deemed to have not died, the income from his estates actually due to and received by his heirs could not have been his income unless it be there is a further fiction that he was to be deemed to have received such income. There is no scope for any such assumption. There is no compelling reason to assume so, keeping in view the limited objective of the fiction created in Section 24 of the Agricultural Income-tax Act, 1950.

9. The cases before the Supreme Court to which we have adverted are all cases where income that was sought to be assessed in the hands of the legal representatives represent the income of the deceased person, accrued due before his death, but received by the legal representatives after his death. That is not the case here. We cannot read the observations in the decisions to which our attention has been drawn by counsel for the revenue in such a manner as to alter the apparently plain meaning of Section 24 which we have already adverted to.

10. In these circumstances, the proper course would be to assess the petitioners as legal representatives of the deceased, Kunhi Bava, for the period up to July 18, 1968, and independently as tenants-in-common for the period subsequent to the death of Kunhi Bava. The assessment as made cannot, therefore, be sustained. Hence, exhibit P-3 orders (same in both the petitions) are quashed. This does not preclude the agricultural income-tax authorities from proceeding against the petitioners by way of assessment afresh in accordance with law. The original petitions are disposed of as above. We direct the parties to suffer costs.


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