/ ‘C IN TH2 HId CON 0’ K. . brcGj,c. DATED TCS H. 30 H DY 05 YJNL, 2998 B ?ciHE THE HON’BLE r..JusTIC.. V,IHG’AL w: IT PrTISION uuzccas:565O/199, 24I92l/1998, 5087/1998, 7945/98, 8056 ‘1998, 8328/98, 14997/98, 7518/98, 8329/98, 17828/98, 18754/98 an 188335/98 ZETW. H :W,P,5650/1998 M/S,Netley B stete, Kanbiiu Village, 3unicoppa Nal, Jom?crort, Kodeu District, rep by its erstwDi1 partr.ar Sri,N,Pananat’. ii 55 ¶rs s/o .riK,t 4 aderajan Che ‘tier, P2TiTIDNR (By ri 4 S,Parthsserethy, Aciv,, for L3ri,b,VijyahaiKar, Ho Ho: i, The sst 0 ornr of Agr1cutura1 Ineorn Tax, Swwaroet, 2, fle State of Knat.ka rep by its Seer t ry, 5rp ofBinance, Gove’mmen of 7 errst k Viohera ouro, Dr,?.rnbodc3r /eed’ui, n’)Iore—1, (By Srrt,S,’ujatbe, HocP) WP,No 419—21/1998 N/S. Bajie Collae CL:VCfl TB No48, Pollibetta—571215, South 0 oor, rep by its Nanao” E&nte”, Sri ,RM Chockalir-am, 40 years s/o iste Zn, ‘ ‘anaswamy P iTtObZP (By Sni,S,, rthes r’th’r, -2— AND: 1, he ASS-c, ‘otmr or Aeracustural Income Tax , Vjjp, 2,Th ttc ofrtaka rep by its Sec:etry Denartment f Fin-n e, Government of Kernt -ka “idhana Soudha Dr.Ambecx r Veedhi Banqalore—560001, (By Smt.S.’ujatha, HOOP). O:5O8719g8 M/3,H,Rcvsnnaeoa & Bros. Cof fee Planters, Madabut 1 state, carsimhr—iapura P/A S771J-44, Chikm-crlur listrlct, rarn(tck rep by its x,Mangin Partn-r, Sri .H .3 ,Rahuveer, mcci bout 37 yars, s/c H,Babnna, PANTICN/ (Fy Sri,S,Par hasartht, Ath.,) 1. h /sst omnr of Auri :lt r 1 income Sax, II Circle, ‘-Nickma tlur, 2, AN- Jo 6 nt ornr, AN Co c 1 pc cjs), Corirorl ox >AfLce, Malnd Jivicion Aaindd, 3,Bh t ofbra k ren by sts -ecretarj Dot f ‘inance, G v(rnment of Karnat-ca Vidrcns oudha, Dr,Ambodc ‘1 BerlANlore. 560001, R;SPONDANTS (By brnt.S/ki;ata, LCGP) W,P,N0, 7945/1998 M/S,Daiouarren st t 0 10—13, 3antarsa Villa 0 It cc Course toaf hettal1i— 571248 MaelKcr: rep by its ersthile :artnr , Sri. ,L,Ala..appari 52 jeers s/c of Srl.RN P.Alagaua. PItITICHEv (By Sri.B.Parathasarathy, Av,,) 1. -he Asot, orrr,, ;f Agricultural Inc’)me Tex, Pflik-ri, 2. The State of IlarnatcKa rep by its Secretar 1 , Dept of inncr, Governjrer- of IKarri tFk, Vi-Ihana SourTha, Pr,Arnbek-r Vnncjh Bancialore—i • B (By Srnt,3.Sujat , H CS’) W,P,b0: 8056/ 998 /S,carralkj te, Boikcre (v a) irdi]<c. ri by its rcw a a V ‘B Ciasu f r 3 etrs /0 Janab Si- k Jhauddin Saheb. P. TI 0N P (By Sri.SPartha r t , 1:0: ‘ The Asst ‘Thn’mr of Arinilcutal :nccme Tax Madik— ri, 2. The State of :arnatjca by its S cretary, Pinrna Dept, Goveromeet of barn talc, Vi’lhana Soudha P J3POND:FTS (By Snt.S.Sujatha, IICCP) O.8328 1998 M/S,Karrie Kollie ‘A’ Es-te, SuntlkoDpa reo by it& ersthile artn Sri- RL eenakshi Sundarrr 33 yrs s/c late L.Rairanethan, Chettiar, (By Sri.S.Parthasarathy, Mv.,) 1, The sst onmr of A-ricuturel IneomeThx, orarpet, 2, The 3tte of <arntaka re by it ec tcry, Dept of GOvernrrent ‘f Karr t ic Vi6hna ou&ia Dr.Ambed’c Veadhi Bdnc lore-’ 560 001. 2 3P0NDNTS (By Smt.S —Sujatha, HCGP) 0,14497/1998 M/S.Wooligooly ‘A’ state. Post Box Ne,31, Suntikoppa 571237 North Koaagu p by its erstwhile :anqing Patnr, 12,H,M,A.A dul Rehmar, 38 y srs s/c l:te H. .Abdui Kasr, (By Sri, S,arthasaath: V.,) , he Camrnr,, of Aorcutiral Inc tre Tax, Sornwarvet, 2, The State of Karntaka ep by i s ecretry Fi ance DeDt Vjdafld ‘oudha 3n lor—1, (By Sxt.ujath HC’P) —5— Si 9fi M/s. Mrosa -stte, K .Chettalli, Madxeri ‘ep by itt erqtwhiie oartnr, Sri .5 ..SV.M.Muthappa Chattier, 65 ycers, 5/0 Sri.Jeican Chettian, PZITICN2. (By cri,S,Parthasarathy, Adv,,) &ND: 1 The Asst Comrnr of Aricuitural Income Tax, Mac3ikeri. 2, The State of Karn—tks rep by ita Seretsr Finance Department, Covernmant of Karn takc ViIh:na oudha Dr,Ajrb?cik r Veedfl Ban- iore, ECSPCNDENT (frT Smt.S,Sujatha, HCCP 98 M/S,Karrie Koliiè ‘B’Es at, Suntikoppa rep b1 it° r t hue p tor Zr: ,nAIanapoan 43 yers s/b ‘te 3ri,,RM,Ramanathan 0 hetti r, 1 I I !Nt y Sr .5 Partt Csrttly,, Xcv, A113: i. Tie As t, Comir,, f crricu tumil Income Tax, S Tflwarpet. 2, The Ztt of Kari t ka rep by its emietary 5 inence Department, Vidh n Sowma, &anIo a-I • Th ‘PCBDTS (By Th ,S,Sujath , HCG°) — W.P. No.17828/98 M/S,Wooligooly Ftate, Post B x No,31 untikoppa 571237 ‘orth Kodacu rep by its erswhi1e “anacina Partner Mr,HMA Abdul Behrnan 1 38 yrs, s o late tLs.Abtal Ka-3ar. (By Sri,S.Parthasarathy, Ply,,) AD: WtrmTflTrpt’t) 1. The Asst,, Comwr,, of Agricultural IncomeTax, S Drrwarnet, 2. The Ptate of yarnCtnka rep by its SccretEry, 2 in ne epnrtrn nt, Vjdh-.n S udh, Banc 1 €—1, (By Smt,S,Sujatla, HCGP) W.P.NC,1F3754/1 998 RFAPOND’ 5, M/S,Aure n Bo-i±uos and others ‘1i-a ‘B stt’ ollibetta Poe Yo t n 01st, ep oy it par ie Vr,Ivr mirir c , 39 y s/o ‘rJ’icnl Ro5ricus. (tz 7 Sri,, teP5ca APT): PAPI I’NLB 1. The t to cf r na c 0 t Thu - dh rt repo 53 ry 2, Psst Cornrrir of \orl incmvc Tax, Viraoet, Kodau Diet, P (By Sn’,S 3ujatiia, HCC) ii • 2. 15835/95 $arrre ±coilie estate, 10/3, Pottery Road, >ia:ikeri, re by its erstwhile oartner Sri.A.L .RM.Nagapan, 3 s ye ars, i/o .Ab. RtRarnanethan. Chattier. (by Sri. 3.Partnaseratnv, ANy,) Lu) 1, The Asst ,Corarnissioner of Agricultural Income Tax, Medikeri, 2. The State of Kernataka rep. by its Secretary, tm eptof Finance, Govt. of Kern &ake,Vidhanesoudha, Sang alore. RESPONDS Ts, (Ey Smt. Sujatha, HOOP) All these petiti.ons are filed unde:r Articles 226 & 227 of the. Constitution of India praying to declare the explanatIon to 5,26(4) of the Act intro duced retrospectively with ef feet :fro:n I —4 75 )ycr Karnateka Taxation Laws (second Arrendrrent )Ict, 1997 Act. No .uS/97 as ultra vire• a and unenforceaore and Ii h to be struck down i.n sofar as it is contra dictorv and reaugnent to 8,26(4) and 5,2(o) of the Act, Th see petition ii corning on for Pre iimine hearino this oay, toe Court made ens fonios ens: C RD S 5 cvs4<: of Jec-tios 28 (4) and ixelanet ion thereto ci the Kernataka Agricultural inccrne lax —8— Act, 1957 have been assai.ied in all thes• writ petitions. Since the questiai involved is common, these petitions are disposed of by this oommon or.:den 2. The irocisions of Sec.26(4) of the Pot as byE4dN ic/ed they em ist today were sod stituted ‘with eff cot from 1—4—19.75 and are reproduced he .reuit er: (4) there eq. business through whioh agricultural income is received by a compery, firm or associatIon of persons is discontinued or any such firm or association Is dissolved in any year any sum received, after the discontinuance or shall be decried to be income of the recipient end cnargec. to tax accord— ipely in the year of receipt if such sum would have been included in the total income of t.he person who carried on. the busir.ic:Q5 had such sum been received before such dis.contir.uance or dissolution. Explanation: For the removal of doubts, it ir herety declared that where before the diocontinuar..ce of such business or dissolution of a firm or association: hitherto assessed as a firm or association, or as the case may be, on the company, the crop Is hr.. rvested and dinoed of, but ful.i ptYThE.nt las rut been received for such crop, or the crop: is harvested end not d isporud of, the inceee frorri such crop shell, notw ithst and —. In. the c1sconoJnLaenct or dissolu— tIior c deemed to do fic nee of the company, firm or association for the yrsr or years in which it is received or receivable and tJie firm or association shell be deemed to be in existence, for such year or years end sudo income shell be. assessed as the income of the corrsanv, fi.rm or a r.o; lotion accord— r ic L115 regularly employed ov it immediately oaf ore such a iscont ru once or c iesu lution Earlier section 26(4) was in existeru e with more or less the sarre langue.ge except that. the entity old comparp.r, firm or association of persons w.as st:e oere ton arc ss ab oacccm— ti nuance pe rrnvfl’ t(.t l 3, Cabse 2 (p) definl.ng person. was also amended end for the words cds of income from ds — a fIrm thich irS. dissolved or whi.ch has/continued the. no siness through wh lcd agricultural inc.om.e is ream ived , *Jn rord.s a. rec*tpknof one cue hem a fc cc amsccrao cI onronna rcon rJs1conei £0— Os. which has discontinued the busicess throuph which agricultural income is d” were silt stituted with effect from 1—4—19754/ rtie original c.fin.i.tion of ¶person* before its amendment was under : it () •ruses 11 means any individual or association of inceviouass, owing or holding flronty our himse if or for any other or partly for his own benefit and :artiy for another, either as owner, trustee, receiver conuson manager, administrs:tor or executor or in any capacity recognised by law, and includes Cm individual Hindu Mitakshara family, an Aliyasan— thana fa.mily or branch, a Narumatha— ttaysm termed or a tavazhi possessing separ ate ropart is a, or 5 Nastucri or other family to whicn the rule of impartibility apeli.es, a firm or came .pany, an associat ion of individuals., whether incorporated or not, rscepdiant of income rrom a rarm wnacn as d:assolved or wnacn nas a is.continueb me Due me ss through Agricutur l income is received and any institut iou caaable of hol dug property 8 4. The statementot otjects and reasons wart tne Bill are as stated hereunder: ‘ Ia r c. a os —zi;r 2art of icarna..a-a ir 2 #,/z .gsa,a ctner oon’-ctea :-at.rs, j e aS nc -ssary to ze tr.e Fax— gri’zt rae. 2az t. ii £ XO’ . tf fr “ LI e irioci. recsiv Lt r tZ.C -t d t.t. Vt. tiGUfl 2’. tIlt t.L c,x ..a:’. sssot.;.ert the fszu StW 4) 4. g. - • . d Cat*3,=L’ib3 ca .—-i7 1,&7 ..7 ..- 444., t..t ,.CVa.s::.; c: s...x t4. t:.. •-. • •- r, w .Lt n.sa. t a. •1 0 1• t 4 •. Lb • - t.Th- -. ae.s’qt .r t.4 Lit t I —r •fl:t c tr: L:_; t;en c : z n ‘ ‘- • —a — ea. 4 — _p .4. ae —. 5 — • a - ‘..-:‘ .- £ I a—a t .1 rt — 1 .r )— 4.,’ .. • —. .4 • a— —a — . — — t*%. — • a, ,i able - — !,V,.jt. :: — —- ;. tJn. O%1. t-c .t.t_r r ; ft •t*. S r a 12 a time of the assessment, the firm has stood dissolved. This fiction cannot be extended to a case where the income is received after the dissolution of the firm by the erstwhile partners. 5 • It was held that under Sec 27 dissolved fiat could rt be deemed to be in existence for the purpose of assessment in respect of the income derived 4tIL the date of dissolution. It was further observed : “ There is ncthing in this provision to indicate that where the firm is dissolved and some income is received after the dissolution in respect of agricultural produce supplied by tne firm netore its dissolution, the firm itself could be assessed in the year of receipt of income notwithstanding its dissolution. ven in UDDAPPA G0.4DA’ s case referred to above, the Division Bench dealing with the explanaa tion tc Section 30(2) w?iich had been added by means of an amendment has held that no where the explanation creates a fiction about the Hindu undividad family Deing in existence for the purpose of the said income deemed to have been received by it and that in the absence of such a secific provision it was not possible for the Court to supply the omission, since the statute in question is a taxing provision. In the instant case also a legal fiction regarding —Li — - even aster its ni saolution to rn.e purpose of assessing it ifl respect oz fnc one race i.ved 3ft cr the date oi Its d.lssolutlnn cannot be- aielt out from Sect Inn 16(4), The a.:undmant eftecten by Act IC) oi 2.957 hes not in any C ha.n gad the I. age. 1 poe it ion a ith re to the point et .iseue end the Agricu— turei income ten Officer could not nave relied on tne amended section 15 to eseese the dissolved S irs .ai ocr it-s dissolution in re soe.ct of t7ie .income received from t.n e Coffee Soar 0 tbougt... it related to the supply oi agricul ture I .rr:-h1rc oaf ore in. 5 of 5 lesion, in the I Ioht of t n i-s conc .lu— s ion Sect ion 1.3 or h.ct lC or I ii7 al — in g with validat ion. cannot be of any help to the resondent an 4 .- .4 effect, 7, lOse contention of the learned Counsai for rats as tialoner i. Is that the rets-ose active atrienhmant ultra vlre s of the - 0 -on rbtts ion an-h that SXii-han a— tion ro ie-c,zo hi i is contrary to tna main sectico, Than on her the daf Inition of nerson unde.r Sac .2 (n) me see sesea for as as a a t .1. e V a It V F t d a z r on C. t It II ‘I. ti I IF . d I V. —15 a provisions of explanation are beyond the scope of the main section and an uncertainty regarding the person a whom tax has to be levied has been created. 10. The Apex Court in the ccse of GCSVIND SARAN GANGASARAN vs. COMMISSIONER OP SAL&S flX& ORs. 41985. 60 SIt page 1) have made the following observations s The compnents wnicn enter into the concept of a tax are well known. The first is the character of the imposi tion known by its nature which pres cribes the taxable event attracting the levy, the second is a cle indica tion of tne person on sihom the levy is imposed and ‘ho is obliged to pay the tax, the third is tre race at whiSz the tax is imposed, ad the fourth is the ebsure or value to which the rate will be applied for computing the tax liabi lity. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative schema defining any of those components of the levy will be fatal to its validity. If the contention of the learned counsel for the petitioners is examined intht lit of the above 9(7 -w ej6a Judgnent. then it has to be seen that there should be a clear indication of the person on whom the levy of tax is sought to be imposed. Section 3 of the Act is the diarglng section which fixes the liability of tax on agricultural income of the previous year a every person. The definition of ‘person’ has been given in claise 2(p) as reproduced aoove. This definition of ‘person’ takes within its aitit individual or association of persons and enlarging the scopby using the words and md tides firm company, association of mdi— v iduals whether incor 1 iorated or not have been inc luded therein.’ The recipient of income from a firm or association of persons which is dissolved or which has discontinued the busirass through which agricultural income is received is also deemed to oe ‘person.’ The agricultural operations were carried on during the time when the firm was in existence but the full payment of the crop were mt received daring its existence. Such payments now are sought to be recovered by this amendment of 1997, by Act 18/97. The Act has validated assessments as well. The word rectpient’ in Section 26(4) has to be read with its qualifying words “ 1* the total income of the f — 17 — person who carried. on the bus.iness had such sum been received before such discontinuance or dissolution,” If the entire language is taken into considerations ti en even Sec. 26(4) has contemplated asse ssment of that di ssoived firm. It :7 also be added tnat explanation has only ciarlriec tne main crovasion ama nave rot gone be..yond the scope of Se.ction 26(4), The scope ci explanation was ccnsidered by the Apex Court In S., STJINJDdePJsI PILLAI vs. V,R. PAPELdIRA-hAN (AIR 1985 85C,5S2) as un.der The object of an Explanation to Statu tory prowl sic n ls: to € rv ta 1ta1u ard sntard— mant or tnt .wot itseit. inj:nere t acre is a.n cosicurv 01. vagueness in the main enact sent *r’ ma cidL&y At :;A;ttt it ceasisten t with the dominant or;ject wnicn it seams to subserve. (c) to proof de an additional suppcrt the dominant object of 85m Act in order to make It meanIngful and uurposerui. an Exalsnitian cannot In anna way interfere with or ch ange the enact— fluent or any part thereof but where scam gap is left which is relumant f or the uuracsc of the :rvJr. at ion n order to suppress the mischief ;.a ajvance tnt. ozject 3f t1e aCt it cr • ti .ut Interj.retir. t.e trtt ;.UroZt afls i ‘r ii a tt ‘ta r , .1 rgnt data macn n, sccn unOer a ot..t4te ae be°n C.bO’ ‘ca or tat at nciuçht tin. aozctnt of an nc.t b oe:c.tinc an lnn.rarct in tr- 1 ntsr- a norta tat.’ Ft s.C OfC.*.A8RNU$v C .L I aatg KvrLCf . & %-a. U9bI— ,i Ita 42 tne aLstsr 4 e a U) ..s i . Ct,, •tatt.rt. SGL tLCfl 4 tta’z f±rc co 1 .J1e- ar it .s heiI .Sad. tric :z r i.;., itCa) )t ps Squat 1 SB a ar a a . Er a a t - ac ii .aUiait3’. a—. It a..•aSa...%.%....t .S aAmi. n......tfln vs. 1% a Lu. .) tan j C 6 t , t.: tss...L.ticr. ,t SSSCCi. tic:- -ra...r ., aer’ice ± ....öO O a ‘1 tt.w t: .t art z ....aute • irt. it • :- erzo’ce ...i: QtL’ar ;.tt0:a -o rr r-.t scr7e. :t a i a r. a t 4 p jt ....C caS’Z..2tJ.s. re..ti.uJ ;rc.r t3 ic d..tr. c f.OteO ta.. .ads.S.. 0 ibe :eittlg a’.. srtr-ir asssaei • itret .eir wcrLs ..t t.1 azc.atz..i. rz tL. 1 .Z’ 6 t ‘a i. i. 19 — ounlic able for asse sure nt• of income of esnoc Ia— tion 5 if it hh contanueo® The cont€rntion tiat the ot.her members had not received the notice was not ac.. eteo® The charging rovi— son has creet.ed the liability end itwes only wczr’mce of the interpretation which have been taken by this Court earlier that. a. dissolveo firm is not liable to assessment afte.r its dissolution in resoect of the income of the pre-dissolved period, the: present amendments were made® The charce anion nets b€-en created by Se:ction 3 of the Act has to be implemented 01 the m.ninery section 26 (4?. The:ref ore it nsa to be rorsOereby toe dissolved fun assecietion of’ persona’ which is made liable after its dissolution in ras:oect of its ore— d issolved agrico ltura.l operation, the income of which was not r’eoeived luring its exir”tence, The cefinition or inerson’ also does non no contrary to the obser’ratiors made above and the anna rectatent’ was aLso socoat to interareted as dissolved/discontinued firm or association, Learned counsel for tie petitioners nave not been able. to chant out a sinola case ha ere tie assessments have been made ii- th’e hands of recicient oth er than dissodved/d iscontinced I Ct • 1 .. .. () r : (. 1 g H % 7 4 1 — I t F’ .. ‘( C) t 1) CI C I : I I- c: c’ e ( (j t1 t C •.a’WlCfl . 41J a b I I C 4 4 3 0 I I • I . L Ia (‘ ti__’ !‘ r p to 11 , Ib w .. — I. fF4 I I 1 W’ lb - I om z 4 t- t’ a a .n P . bd .. In L 03 0 C’ 1’ 4. P t (I) p 4. a U (( ? U 4 .. 1, 4 P 4.. h t, •1 - •.,“ k n • 4 I,, I’ C I e S ‘ lab r ‘ (1 I—’ Ii) 1.’ C. • I. C,. t. I” 1 p. 4. a (. It P r :— 1?. 1. (F Ia. C? ct Ce , I 3 •1 $ a C 0 I. .. 1 •. L. 1 in .— I— t. r 4 ‘ Cl. 3 (P I. L C £ a C. . ‘if 4 V ) P b’ £ ) j I Q 3. f, (. Ia p. CI ) 4 1. • ‘ I I C% L ‘• I: Pt)I— t U C) p • o— Wa’ ..r a I‘ Xue,L.h ( . • 3$ •. r•lI ‘ 1131) C) C 6$. I ) ..s$J : it I I 3 • 1 F 4 P I • . • C •1 0 ‘ I—. ‘tIC I . ) — Ci I-’t ft liLt i-c ‘ ç - —‘ III • ,i iT a C - t . , I. Ct: (4 -. ft a Ii. -‘ 4..; ,c (PC Go Ci I q C of, •. I. • I I • ) I 1 — 1—- • 1 I-” t I. (Iii %.fl c’ p-’ C’ 1 4 4? C., . 1 4, ta • to t • 1 4)1 (If C S I” • • I a. •1 — •): it• 4 ; i; pg.. q g I—’Ca 4.t ) C ) • I. toI I-. d ‘ fl C ‘ a 0) .‘ ,‘ a) • t • CV. • I I • a I’ I.’ I • C t. f ( at P 31 1 • ii I..n[l 6 P - j a” ‘04 - a ‘. • • M L• $ . • F. 1r •- 4. a •‘ I c.I . • • r. C.. • 4. L’ 0-1 1 4 • r I C 6 C i — -. c.. r. I 11 0 11 1 p. C, Ii ( I, q — 22 — The validity of the explanation was uj2ield. The rotore, tais contention also has no force. 13. This case has also taken into considera-’ tion tae decision given y this Court in C.R. UECAPPA GOtiDA vs. SPATE OF KMNATAKA (.iP.Nos.16845 to 16847/87— 174 Ifl 389) where it was pointed out that there was ru machinery under the Act for tne purpose of bLinging to tax the supplementary receipts in the hands of the erstwhile HUF after partition. It was con tended tnat the amended Explan tion to Sec.30(2) of the Act is in conflict with Section 26(4) of the Act and even the procedural formalit-is have not been properly resorted to by the Assessing Autnority in terms of section 30(2) of the Act. 14 • lithe resent case the defect as pointed out in i.?. CAALXZWs case were kept in view to bring the amendment as mentioned in the statement of objects and reasons and therefore the ruling of the Division Bench is directly applicable to the facts of the present case. 15. It is mentioned that the persons who are following mercantile system are not affected by this aaenánent and it is only those persons wno have follavsed cash system have been liable A — Li for i.ts retro snect ive ace nri:ms nt Tb Is conten — those persons who are follow iflg: ate rrercanti is it em h ave sIr e n.y ne tea en re S ca; t Or tt ii eases sea - ii lb is oni.y. in the c sac of: caSh system accounts tni. 5