Case: Raja Jagadambika Pratap Narain Singh of Ayodhya, Dist. Faizabad, U.P Vs. Deputy Commissioner (Assessing Authority) Faizabad

KHANNA, J. 1. The short question which arises for determination in this appeal by certificate against a Full Bench decision of Allahabad High Court is, whether a person who owns some agricultural land can be assessed to tax under U.P. Agricultural Income-tax Act, 1948 (hereinafter referred to as the Act) in respect of agricultural income derived from land which was no longer held in the assessment year or previous year. The High Court answered this question in the affirmative. 2. The appellant was a talukedar of an estate consisting of several villages in the districts of Faizabad, Gonda, Sultanpur, Barabanki and Lucknow. On July 1, 1952 the major part of the estate belonging to the appellant vested in the State of Uttar Pradesh by virtue of a notification issued under the U.P. Zamindari Abolition and Land Reforms Act. What remained with the appellant were parts of some villages within the municipal limits of Faizabad and Gonda. 3. During the years 1360, 1361 and 1363 Fasli the appellant realised arrears of rent in respect of that part of his estate which had ceased to belong to him. The arrears represented the rent due to the appellant for the year 1359 and prior to that. The appellant was assessed in respect of the arrears of rent received during the relevant previous years 1360, 1361 and 1363 corresponding to the assessment years 1361, 1362 and 1364 Fasli. The appellant went up in appeal against the assessment orders. The Commissioner allowed the appeals and directed the assessing authority to make fresh assessments. During the pendency of the assessment proceedings subsequent to the remand order the appellant raised objection before the assessing authority to the effect that as he had been divested with effect from July 1, 1952 of the land in respect of the agricultural income from which he was being assessed, he could not be deemed to be person in respect of that land. This objection was rejected by the assessing authority. The appellant thereupon challenged his liability to be assessed in respect of the agricultural income for the years 1360, 1361 and 1363 by means of a petition under Article 226 of the Constitution before the High Court. 4. The petition was referred to a Full Bench in view of the conflict of views expressed by Division Benches of the High Court. The Full Bench as mentioned earlier held that the appellant was liable to be assessed to agricultural income-tax for the income derived by the appellant even though the land in respect of which the income was realised by the appellant had vested in the State Government. The petition filed by the appellant was consequently dismissed. 5. In appeal before us Mr. Manchanda on behalf of the appellant has assailed the judgment of the High Court and has contended that as the appellant did not hold or own the land on account of income from which he is being assessed in the assessment years or previous years in question, he cannot be deemed to be a person and as such liable to be taxed. 6. Before dealing with the above contention it would be appropriate to reproduce the relevant provisions of the Act. Section 2(1) of the Act defines agricultural income to have the same meaning as is assigned to it in Indian Income-tax Act, 1922. Agricultural income tax means, according to clause (3) of Section 2, to be tax payable under the Act and includes super-tax. Clause (11) of Section 2 defines a person as under : "person" means an individual or association of individuals, owning or holding property for himself or for any other, or party for his own benefit and partly for that of another either as owner, trustee, receiver, manager, administrator or executor or in any capacity recognised by law, and includes an undivided Hindu family, firm or company but does not include a local authority. Previous year according to clause (13) of Section 2 means the twelve months ending on June 30 preceding the year for which the assessment is to be made. Total agricultural income has been defined in clause (16) of Section 2 to mean the aggregate of the amounts of agricultural income of the different classes specified in Sections 5 and 6 determined respectively in the manner laid down in the said section and includes all receipts of the description specified in clauses (a), (b) and (c) of sub-section (1) of Section 2. Section 3 of the Act is charging section. According to sub-section (1) of that section, with which we are concerned, agricultural income-tax and super-tax at the rate or rates specified in the schedule shall be charged for each year in accordance with and subject to the provision of this Act and rules framed under clauses (a), (b) and (c) of sub-section (2) of Section 44 on the total agricultural incomes of the previous year of every person. Section 5 provides the mode of determination of agricultural income while Section 6 deals with the computation of agricultural income. 7. An amendment was made in the Act by amending Act XIV of 1953. The amendment reads as under : Whereas doubts have arisen as to the liability of a person to assessment of Agricultural Income Tax under the Principle Act whether such person while owning or holding property in the previous year has ceased to own or hold it subsequently, it is hereby declared that the words owing and holding property in clause (11) of Section 2 of the principal Act shall be deemed never to have required such person to continue to own or hold the property in the year for which the tax is to be charged. 8. Section 3 of the Act referred to above imposes liability on a person for payment of agricultural income-tax and super-tax on his total agricultural income for the previous year. It is not disputed that the income in respect of which the appellant is sought to be assessed under the Act was part of his total agricultural income of the previous year. The point of controversy between the parties is as to whether appellant can be considered to be a person in respect of that income. Person, according to the definition reproduced above, includes an individual owning or holding property for himself. The appellant during the previous years as also the corresponding assessment years in question undoubtedly held property in the shape of agricultural land. As such he answered to the description of person as defined in the Act. The definition does not lend support to the view that an individual would constitute a person in respect of one item of agricultural income in the previous year and would not be a person in respect of other item of agricultural income. Such splitting of the personality of the individual, as defined in the Act, is not warranted by the language of the statute. Once the individual is a person his liability to pay agricultural income-tax and super-tax would arise, subject to other conditions with which we are not concerned, and would extend to the entire total agricultural income derived by him during the previous year. 9. It is significant that the liability of a person to pay agricultural income-tax or super-tax which has been created by the Act is in respect of his total agricultural income for the previous year. There has to be one single integrated assessment for all items of agricultural income, the aggregate of which constitutes total agricultural income. It is not contemplated by the Act that there should be separate assessments in a year for each item of agricultural income derived from different areas of agricultural land. Nor would the fact that the part of the agricultural land, income from which is included in the total agricultural income, was not owned or held by the assessee in the previous year justify its exclusion from the total agricultural income of the previous year, if such income was in fact received by the assessee during that year. 10. The explanation inserted (sic) by the amending Act of 1953 does not, in our opinion, lend any assistance to the appellant. The explanation sought to clarify the doubt which had arisen as to the liability of a person to assessment of agricultural incomes under the Act, in case such a person while owning or holding property in the previous year had subsequently ceased to own or hold that property subsequently. It was declared by the explanation that the words "owning or holding property" in the definition of the person contained in clause (11) of Section 2 of the Act should be deemed never to have required such a person to continue to own or hold the property in the year for which the tax was to be charged. The explanation is an enabling provision and the effect of it is that even if a person ceased to own or hold property in the year for which the tax is to be charged he would still liable provided other conditions are fulfilled. 11. Reliance has been placed by Mr. Manchanda upon the case of Nalinikant Ambalal Mody v. S.A.L. Narayan Row, C.I.T., Bombay City I (61 ITR 428 : 1966 Supp I SCR 295 : AIR 1967 SC 193 ) with a view to show that liability to pay tax is subject to the provisions of the statute. The above dictum cannot be of much assistance to the appellant in this case because the liability for payment of tax in respect of his total agricultural income which is sought to be fastened upon the appellant is in accordance with the provisions of the Act. 12. The Act is a local enactment of which the provisions applied only to Uttar Pradesh. The weight of authorities of Allahabad High Court is against the appellant. Leaving aside the decision in the case of F. P. Sahai v. Dy. Commissioner (Assessing Authority) (1961 ALJ 880) which was affirmed on appeal by Division Bench, we find that three decisions of Division Bench, two decisions of Single Bench and one decision of the Full Bench (which is the subject-matter of the present appeal) have taken the view against that canvassed on behalf of the appellant. The three Division Bench decisions are : 1. Kunwar Trivikram Narain Singh v. State of Uttar Pradesh (1959 ALJ 796) 2 . Raj Laxmi Devi v. State of Uttar Pradesh (Misc. Case (A.I.T.) 299 of 1959 decided on April 22, 1966 (All) 3. Raja Anand Brahmn Shah v. State (Agricultural Income-tax Reference 9 of 1965 connected with Agricultural Income-tax Reference 10 of 1965 decided on January 2, 1969 (All) The two Single Bench decision are : 1. Kishwar Jahan Begam widow of Mohammad Badrul Hasan Khan v. Agricultural Income-tax Officer, Pilibhit (1955 ALJ 322 2. Radhey Shyam v. Agricultural Income-tax Officer (1955 ALJ 325)

Decision reasoning: 1[ds]10. The explanation inserted (sic) by the amending Act of 1953 does not, in our opinion, lend any assistance to the appellant. The explanation sought to clarify the doubt which had arisen as to the liability of a person to assessment of agricultural incomes under the Act, in case such a person while owning or holding property in the previous year had subsequently ceased to own or hold that property subsequently. It was declared by the explanation that the words "owning or holding property" in the definition of the person contained in clause (11) of Section 2 of the Act should be deemed never to have required such a person to continue to own or hold the property in the year for which the tax was to be charged. The explanation is an enabling provision and the effect of it is that even if a person ceased to own or hold property in the year for which the tax is to be charged he would still liable provided other conditions are fulfilled11. Reliance has been placed by Mr. Manchanda upon the case of Nalinikant Ambalal Mody v. S.A.L. Narayan Row, C.I.T., Bombay City I (61 ITR 428   : 1966 Supp I SCR 295 : AIR 1967 SC 193  ) with a view to show that liability to pay tax is subject to the provisions of the statute. The above dictum cannot be of much assistance to the appellant in this case because the liability for payment of tax in respect of his total agricultural income which is sought to be fastened upon the appellant is in accordance with the provisions of the Act.