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The State of Tamil Nadu Vs. K.R. and P. Shanmugavel Nadar - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 321 of 1972
Judge
Reported in[1977]39STC391(Mad)
AppellantThe State of Tamil Nadu
RespondentK.R. and P. Shanmugavel Nadar
Appellant AdvocateK. Govindarajan, Adv. for ;the Additional Government Pleader
Respondent AdvocateR. Venkataraman, Adv. for ;C.S. Chandrasekara Sastri, ;C. Venkataraman and ;C. Natarajan, Advs.
DispositionPetition allowed
Cases ReferredDeputy Commissioner of Commercial Taxes v. Palaniappan
Excerpt:
- - 49,876.63. the assessing officer on the ground that the assessee had failed to produce proper accounts, rejected the accounts and assessed the turnover on best of judgment basis. 249 clearly cover the point now at issue against the assessee......not consider and apply an earlier decision of this court reported in s.t. sultan ahmed rowther v. state of madras [1954] 5 s.t.c. 166. with reference to the further submission of the revenue that the turnover of rs. 49,876.63, which was found in the accounts, was not the subject-matter of appeal before the appellate assistant commissioner and that, therefore, the tribunal has no jurisdiction to set aside the assessment of this turnover also, this court made the observation that 'there was no material to find that the tribunal decided the question and the revenue will be at liberty to raise it if it so chooses before the tribunal in the appeal filed by the assessee'. with this observation, the order of the tribunal was set aside and the matter was remanded to the tribunal for a fresh.....
Judgment:

V. Ramaswami, J.

1. The assessee is a dealer in coconuts. For the assessment year 1963-64, he submitted a total and taxable turnover of Rs. 49,876.63. The assessing officer on the ground that the assessee had failed to produce proper accounts, rejected the accounts and assessed the turnover on best of judgment basis. He was of the view that the lease amount for the year was Rs. 33,471.86 and that an addition of 100 per cent to the lease amount would be a proper determination of the taxable turnover. Accordingly, he determined the taxable turnover at Rs. 66,943.72. The assessee preferred an appeal questioning the addition of Rs. 17,172.09. The Appellate Assistant Commissioner, agreeing with the assessing authority, held that the accounts maintained by the assessee cannot be taken as correct and complete and that, therefore, the assessing officer has rightly rejected the accounts. The Appellate Assistant Commissioner also confirmed the addition on the ground that there were details available to the effect that dealers in this line of business in the area had a turnover of more than twice the lease amount. Accordingly, he confirmed the assessment. The assessee preferred a further appeal to the Tribunal in which he disputed only the addition of Rs. 17,172.09. But when the matter was pending before the Tribunal, the assessee filed a petition seeking to raise an additional ground to the effect that the entire assessment was illegal as the assessee was only a lessee of a coconut thope and the realisations were only in the nature of an agricultural produce and, therefore, exempted under Section 2(r) of the Act. Even without ordering this petition, the Tribunal seems to have gone into the question and allowed the appeal by its order dated 6th December, 1967 and set aside the entire assessment in the view that the realisations by the assessee were in the nature of agricultural produce and, therefore, exempted under Section 2(r). The revenue preferred a revision to this court in T.C. No. 199 of 1968. This court allowed the revision petition on the ground that the Tribunal did not consider and apply an earlier decision of this court reported in S.T. Sultan Ahmed Rowther v. State of Madras [1954] 5 S.T.C. 166. With reference to the further submission of the revenue that the turnover of Rs. 49,876.63, which was found in the accounts, was not the subject-matter of appeal before the Appellate Assistant Commissioner and that, therefore, the Tribunal has no jurisdiction to set aside the assessment of this turnover also, this court made the observation that 'there was no material to find that the Tribunal decided the question and the revenue will be at liberty to raise it if it so chooses before the Tribunal in the appeal filed by the assessee'. With this observation, the order of the Tribunal was set aside and the matter was remanded to the Tribunal for a fresh consideration. When it was again taken up for hearing by the Tribunal, the Tribunal thought that since on the earlier occasion-the petition filed by the assessee seeking to raise the additional grounds-the revenue did not file any counter and even in the original grounds of revision to this court in T.C. No. 199 of 1968, the revenue did not question the jurisdiction of the Tribunal to permit the assessee to raise the additional grounds, justice and equity required that the assessee should be allowed to raise the additional grounds and, accordingly, the Tribunal permitted the assessee to raise the same. On the merits, though many of the lease deeds in respect of the coconut trees were not in the name of the assessee, considering that they were all benami transactions, the Tribunal held that the leases were in favour of the assessee. The Tribunal also gave a finding that the leases were for a period of three years and that the assessee had expended on nurturing and safeguarding the coconut trees. This, according to the Tribunal, showed that the assessee had an interest in the leasehold land. Relying on the decisions in K.M. Jamal Mydeen v. State of Madras [1968] 22 S.T.C. 45 and Arumugha Vettian v. Angamuthu Nattar (1965) 1 M.L.J. 170 and distinguishing the decision reported in S.T. Sultan Ahmed Rowther v. State of Madras [1954] 5 S.T.C. 166, the Tribunal came to the conclusion that the entire turnover of Rs. 66,943.72 is in the nature of agricultural produce and that, therefore, is exempted under Section 2(r). Accordingly, it set aside the assessment order itself. The revenue has preferred this revision petition against this order of the Tribunal. The learned counsel for the revenue first contended that the Tribunal erred in allowing the assessee to raise additional grounds for the first time to agitate a fresh turnover which was not in question either before the assessing officer or before the Appellate Assistant Commissioner. This was on the ground that the Tribunal had no jurisdiction to permit an assessee to raise a dispute with reference to a turnover which was not disputed before the Appellate Assistant Commissioner. In support of this contention the learned counsel for the revenue relied on the decisions reported in India Pistons Limited v. State of Tamil Nadu [1974] 33 S.T.C. 472 and State of Madras v. Spencer and Co. Ltd. [1974] 34 S.T.C. 249 These two decisions are direct authorities for holding that the Tribunal had no jurisdiction to permit the assessee to raise an additional ground and dispute a turnover which was not disputed by the assessee before the Appellate Assistant Commissioner. The Tribunal tried to distinguish the decision reported in India Pistons Limited v. State of Tamil Nadu [1974] 33 S.T.C. 472 on the ground that the assessee in that case had succeeded before the Appellate Assistant Commissioner in respect of the turnover disputed by him before the Appellate Assistant Commissioner and that, therefore, he was held to be not entitled to file a further appeal before the Tribunal in respect of the total turnover. That is not a distinction at all. Though factually that was the position, the ratio of the decision is that if a turnover had not been disputed before the Appellate Assistant Commissioner and if it is disputed for the first time before the Tribunal, it is as if an appeal is preferred to the Tribunal directly from the assessment order in so far as that turnover is concerned and that is not permitted by law. The Tribunal also had no inherent power to permit the raising of an additional ground which was not the subject-matter of appeal before the Appellate Assistant Commissioner. Even this distinction is not available in the decision reported in State of Madras v. Spencer and Co. Ltd. [1974] 34 S.T.C. 249 These two decisions are binding and conclude the issue. But the learned counsel for the assessee purported to rely on the decision rendered under the Income-tax Act in Commissioner of Income-tax, Madras v. Mahalakshmi Textile Mills Ltd. : [1965]56ITR256(Mad) , which was confirmed in appeal by the Supreme Court in Commissioner of Income-tax, Madras v. Mahalakshmi Textile Mills Ltd. : [1967]66ITR710(SC) .Apart from the fact that the provisions of the Income-tax Act are not in pari materia and we could not rely on the decision rendered under that Act, we are also unable to agree with the learned counsel that the decision in any way strikes a different principle. In that case, the assessee claimed development rebate and extra depreciation in respect of an expenditure of Rs. 93,215. The Income-tax Officer disallowed the development rebate and extra depreciation on the ground that part of the expenditure was incurred only for the expansion of existing machinery and was not for the installation of new machinery. On an appeal, the Appellate Assistant Commissioner gave a finding that the entire expenditure of Rs. 93,215 was of a capital nature and, in that view, confirmed the order of the Income-tax Officer. When the assessee preferred a further appeal, he not only disputed the disallowance of the development rebate and extra depreciation, but also contended that the entire expenditure of Rs. 93,215 was a revenue expenditure. When the revenue objected to the raising of this alternative plea that the entire expenditure was of a revenue nature, this court held that in the finding given by the Appellate Assistant Commissioner that the expenditure was of a capital nature, there is a finding of denial of the claim of the assessee that the expenditure can come under the head of revenue expenditure. This view was upheld by the Supreme Court. From the facts it can be seen that this court was of the view that the question whether the expenditure of Rs. 93,215 was a revenue expenditure or a capital expenditure was before the Appellate Assistant Commissioner also and that, therefore, the Tribunal could have dealt with it. Therefore, even on the merits, this decision could not help the learned counsel for the assessee.

2. The learned counsel for the assessee next relied on the decision in T.V. Sundaram Iyengar & Sons (P.) Ltd. v. State of Madras [1970] 25 S.T.C. 160. That was not a case where a different turnover was questioned for the first time before the Appellate Tribunal. When the assessee wanted to raise an alternative plea with reference to the same turnover, which he disputed before the Appellate Assistant Commissioner, this court held that it was open to the assessee to raise such a new plea with reference to the same turnover which he disputed before the Appellate Assistant Commissioner and the Tribunal. That decision is therefore of no assistance to the learned counsel for the assessee. We are accordingly of the view that the decisions in India Pistons Limited v. State of Tamil Nadu [1974] 33 S.T.C. 472 and State of Madras v. Spencer and Co. Ltd. [1974] 34 S.T.C. 249 clearly cover the point now at issue against the assessee. The Tribunal has, therefore, erred in permitting the assessee to raise the question of taxability in respect of the turnover of Rs. 49,876.63 disclosed in his accounts.

3. It was next contended by the learned counsel for the assessee that a sum of Rs. 17,172.09 was the subject-matter of appeal before the Appellate Assistant Commissioner and the Tribunal and that, therefore, in respect of that turnover, he could raise the question that it is an agricultural produce and, therefore, is exempted under Section 2(r). The appeal in so far as Rs. 17,172.09 is concerned could not be disposed of by the Tribunal on the ground that it had no jurisdiction to entertain. That was the subject-matter of appeal before the Appellate Assistant Commissioner and it was also the subject-matter before the Tribunal and, therefore, the Tribunal was entitled to go into the question on merits.

4. The learned counsel for the assessee relied on the decisions reported in K.M. Jamal Mydeen v. State of Madras [1968] 22 S.T.C. 45 and Arumugha Vettian v. Angamuthu Nattar (1965) 1 M.L.J. 170 in support of his contention that the sale proceeds of coconuts harvested by him in the instant case are in the nature of agricultural produce and, therefore, could not be included in the taxable turnover. The learned counsel purported to rely on the decisions in K. M. Jamal Mydeen v. State of Madras [1968] 22 S.T.C. 45 and Arumugha Vettian v. Angamuthu Nattar (1965) M.L.J. 170. Both these judgments are rendered by single Judges of this Court. K.M. Jamal Mydeen v. State of Madras[1968] 22 S.T.C. 45 purported to follow the decision in Arumugha Vettian v. Angamuthu Nattar (1965) 1 M.L.J. 170. A Division Bench of this Court to which one of us was a party in Deputy Commissioner of Commercial Taxes v. Palaniappan & Co. [1973] 31 S.T.C. 387 following another decision of this court in P. V. Palaniappa Pillai v. Deputy Commercial Tax Officer [1971] 28 S.T.C. 502 held that the sale proceeds of coconuts are taxable turnover and the return of the assessee was not in the nature of agricultural produce. In so holding, this court specifically dissented from the judgment in K.M. Jamal Mydeen v. State of Madras [1968] 22 S.T.C. 45. This was also the view expressed in S.T. Sultan Ahmed Rowther v. State of Madras [1954] 5 S.T.C. 166. But the learned counsel for the assessee tried to distinguish S.T. Sultan Ahmed Rowther v. State of Madras [1954] 5 S.T.C. 166 and the decision in Deputy Commissioner of Commercial Taxes v. Palaniappan & Co. [1973] 31 S.T.C. 387 on the ground that in those cases the leases were annual in nature and that there was no finding that the assessee had an interest in the leasehold land itself and that, therefore, they are not applicable to the instant case. He also, in particular, relied on the finding of the Tribunal that, in the instant case, the leases were for a period of three years and the spending of the money for the maintenance and nurturing of the thope amounts to an interest in the land itself. We are unable to agree with this contention of the learned counsel for the assessee. Even in S.T. Sultan Ahmed Rawther v. State of Madras [1954] 5 S.T.C. 166, after consideration of a number of decisions, it was held that merely because a right of entry was given to the lessee to enter into the land and harvest the crop and also an obligation on the part of the assessee to water the plant and maintain the thope, would not amount to an interest in the land itself. There is no dispute in this case that the coconut trees leased to the assessee were yielding even during the time when it was leased out. The lease itself was only for a period of three years. Therefore, the coconut trees could not have been planted and reared by the assessee and the lease is only a lease of the usufructs and not an agricultural lease for cultivation of coconut plants. We are, therefore, unable to agree with the Tribunal that merely spending money for preservation of the thope or nurturing the plant would amount to an interest in the land itself. If there is no interest in the land and the lease was only a lease of the usufructs, there can be no doubt on the basis of the decision in S.T. Sultan Ahmed Rowther v. State of Madras [1954] 5 S.T.C. 166 and the decision in Deputy Commissioner of Commercial Taxes v. Palaniappan & Co [1973] 31 S.T.C. 387 that the entire turnover would be liable for assessment.

5. It was next contended by the learned counsel for the assessee that since the Tribunal held that the entire turnover was not liable to be assessed, it did not go into the question as to whether even on the assumption that the rejection of the accounts was proper, the addition of Rs. 17,172.09 was called for and that, therefore, the matter would have to be remitted to the Tribunal for reconsideration of this question. The learned counsel is correct in stating that the Tribunal did not go into the question of addition in view of the fact that it was of the view that the entire turnover was not liable to be assessed. But since the assessment relates to 1963-64 and since it had come to this court twice by way of revision, we do not think it necessary to remand the matter for a fresh consideration to the Tribunal itself. The rejection of the accounts was on the ground that the assessee only produced pattials rendered by the selling agents showing the number of coconuts received and the expenses incurred and the sale amount and he did not produce the harvesting account or the account of commission given to the selling agents. The rejection of the accounts was therefore correct and does not call for any interference. The addition of 100 per cent to the lease amount was made on the basis that there were materials to the effect that dealers in this line of business in the area have a turnover of more than twice the lease amount. It might be that in similar trade the assessees had submitted returns of more than twice the lease amount. But that itself could not prove that every lessee should get a turnover of twice the lease amount. It would depend on the age of the trees and the varieties of coconuts in the thope. There is no evidence relating to the same. Since we have said that rejection of the accounts was proper, an addition is called for. Though we also do not have any positive material to fix the addition, we think that the assessee, on the facts and circumstances of this case, could be given a benefit of reduction of 50 per cent of the addition made by the assessing officer. Therefore, the addition will be restricted to one half of Rs. 17,172.09. The assessment will be revised accordingly. Since the revenue had succeeded on the substantial question, the revenue will be entitled to its costs. Counsel's fee Rs. 250.


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