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M. Vs. S. Kathirvelu Nadar V. Commissioner of Agricultural Income-tax Madras. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Cases Nos. 184 to 187 of 1965 (Revisions Nos. 88 to 91 of 1965) and Writ Petition Nos. 4543 to 4
Reported in[1968]68ITR786(Mad)
AppellantM.
RespondentS. Kathirvelu Nadar V. Commissioner of Agricultural Income-tax Madras.
Cases ReferredOfficer. Seshadrinathan v. State of Madras
Excerpt:
- .....in the tax cases, the correctness of the charge on the income from the entire extent of 410 acres is questioned, but an objection for revenue is taken to the maintainability of these tax cases under section 54 of the act.so far as the objection to the maintainability is concerned, it seems to us that it is well founded. the order of the commissioner against which the tax cases have been filed merely declined to interfere with the orders of the agricultural income-tax officer. seshadrinathan v. state of madras has held that such an order is not one prejudicial to the assessee within the meaning of section 54. that was decided by a full bench of three judges and it is certainly binding on us. apart from that, one of us was a party to that decision and we still think that is the.....
Judgment:

VEERASWAMI J. - These matters have been heard together because of common points. The tax cases relate to the assessment years 1958-59 and 1959-60 and the writ petitions to the years 1961 to 1965. M. V. S. Kadirvelu Nadar of Tuticorin obtained in 1941 from the Government a lease of certain forest lands of a total extent of 410 acres, of which 310 are situate in Papanasam Hills and the rest in the Ambasamudram range. The lease were for a fixed period of 25 years, but eligible to renewal. In about 1944, the lessee entered into a partnership with W. P. A. R. Chandrasekaran and his two brothers, Ramamurti and Rajagopalan, in respect of 310 acres. This partnership would appear to have been reduced in writing by a document dated May 10, 1954. For the year 1957-58, the lessee was assessed on the total income from the entire extent of 410 acres. For the following assessment year, the assessee claimed to have entered into a partition with effect from August 17, 1957, said to have been confirmed by a registered document dated August 1, 1958, by which the extent of 310 acres was partitioned as between himself and his four sons and a portion of the land was allotted to his wife too, not as for share, but on account of the fact that she had advanced certain moneys in consideration of which the allotment was made. On the basis of this partition, the sharers applied individually for composition under section 65 of the Madras Agricultural Income-tax Act. The position was reiterated for the subsequent years also up to 1964-65, but with the same result that the department consistently declined to recognise the partition. Whether this stand taken by the department is correct is the question in the writ petitions. In the tax cases, the correctness of the charge on the income from the entire extent of 410 acres is questioned, but an objection for revenue is taken to the maintainability of these tax cases under section 54 of the Act.

So far as the objection to the maintainability is concerned, it seems to us that it is well founded. The order of the Commissioner against which the tax cases have been filed merely declined to interfere with the orders of the Agricultural Income-tax Officer. Seshadrinathan v. State of Madras has held that such an order is not one prejudicial to the assessee within the meaning of section 54. That was decided by a Full Bench of three judges and it is certainly binding on us. Apart from that, one of us was a party to that decision and we still think that is the correct view to take. It is, however, contended for the assessee that the orders of the Commissioner contain certain observations which are prejudicial to the assessee and that, therefore, the ratio of the Full Bench decision is inapplicable. The main question the Commissioner had to decide was as to the factum of the partition asserted by the assessee. In the course of deciding that question, the Commissioner made certain stray remarks to the effect that leasehold interest in the entire extent of 410 acres, which was the subject-matter of the lease, belonged to him personally. It is apparently in view of this observation the Agricultural Income-tax Officer, in making the assessment subsequently, treated the assessee as an individual, instead of a joint family. We do not think that the Agricultural Income-tax Officer was justified in doing so, particularly on the view we are inclined to take in the writ petitions as to the effect to be given to the partition. Nowhere in the order of the Commissioner has he indicated that he was interfering with the orders of the Agricultural Income-tax Officer. He never directed in his orders that the assessee should be assessed in the status of an indivisual. All that he held in his orders was that the partition was a make-believe transaction. Following the Full Bench decision, we dismissed, the tax cases.

As to the partition, we have carefully gone through the terms of the document. The Agricultural Income-tax Officer took the view that the partition was not meant to be given effect to and was designed to evade tax. In support of that finding he has given seven reasons, most of which have either no factual foundation or are incorrect in law. One of the reasons is that the partition deed only dealt with 310 acres out of 410. An ancillary reason is that the other properties including buildings have not been divided. This statement does not appear to be correct. The terms of the partition deed do show that practically the entire properties of the family of the assessee have been subject-matter of the partition deed, though, of course, the residue of the property after specific allotments to each sharer, has fallen to the share of the assessee himself. Another reason relied on by the Agricultural Income-tax Officer is that the members of the family are still living together in the same way as they had done before partition. The fallacy underlying this reason is that a partition is inconsistent with members of the family living together. No doubt, commensality may be a test of jointness, but a division is not negatived by the members of the family living together. In fact, we do not see how the members of the family can help living together, for the family consisted of the husband and wife and four sons, of whom three happened to be minors. So far as the major son is concerned, it is not possible from the circumstance of his living with the father to draw the inference that the division, if otherwise true, has not been given effect to. Yet another reason of the Agricultural Income-tax Officer is that the wife has been given a share, though she is not a member of the joint family. The explanation of the assessee is that what we have referred to, namely, she has been allotted some properties in consideration of the moneys due to her. There is no reason to disbelieve this explanation.

When a question like this arises, the relevant evidence will have to be scrutinised without any bias and on its merits. There is no presumption that the alleged partition has not taken place. On the other hand, when there is a document showing division of family properties, it is but reasonable that it should, prima facie, be taken to be true and has been acted upon. The motive of the transaction does not matter, even if it be that it is designed to get over taxation, provided the means adopted are legitimate and within the limits of the law. What is necessary is to bring to bear upon the alleged division and the relevant evidence an objective and dispassionate judgment without preconceived notions or reservations of the mind. The transactions which do not throw any suspicion have necessarily to be taken on their face value, for otherwise no business in the commercial world can possibly or conveniently be carried on. A perusal of the Agricultural Income-tax Officers order, particularly its preamble, calls for these observations, for we cannot help feeling that the officer should keep an open mind in approaching the materials and not proceed on the basis that, once the partition was not accepted the assessee must stand committed of it and accept the position. The true position is that the assessee is entitled to reiterate the question every year because the assessment is repeated every year and a year is the unit for that purpose. There is no question of res judicata in the matter. In our opinion, none of the reasons given by the Agricultural Income-tax Officer appear to be valid and the partition is not shown to be a make-believe transaction. The question is no doubt one of fact, but a finding in that regard should be arrived at by making a correct approach to and applying the proper principles of law. If there is a misdirection on the part of the assessing officer in law in arriving at the finding, that we think is an error apparent on the face of the order which justifies the exercise of certiorari jurisdiction. There is one other fact which we should like to refer to, and that is, the Government themselves, though in a different context, have recognised the partition. No doubt, the question before the Government in that connection was whether the partition involved a transfer which would require under the statutory provisions previous sanction of the Collector. The Government took the view that there was no such transfer involved in the partition. But we find that following the orders of the Government, the Collector recognised the allotment of shares to each of the members under the partition deed. We should expect that in the same revenue department which deals with agricultural income-tax too, there should be co-ordination. If one wing of the Government takes a particular view on a certain transaction, it does not appear to be proper that the same wing, while dealing with another branch of its business, should contradict itself and come to a different conclusion, which causes discomfiture to the assessee.

As we said, the tax cases are dismissed, but the writ petitions are allowed. There will be no order as to costs in any of them.


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