Case: State Of U.P. And Others Vs. Sri Narain

that R. 8A makes it mandatory for the Agricultural Income-tax Officer to realise the agricultural income-tax due from the compensation payable and that compensation continues to be payable till the Bonds are actually encashed. 10. Section 6(d) of the Act, as originally enacted, did not provide, among the consequences of the vesting of the estate in the State, that arrears on account of Agricultural income-tax might be realised by deducting the amount from the compensation money payable to the intermediary under Chapter III. An amendment was made in this clause (d) by S. 3 of U.P. Act XVI of 1953, with retrospective effect from July 1, 1952, and the relevant portion of the provision after amendment reads, thus: an arrear of revenue. . . . . . . , or an arrear on account of tax on agricultural income assessed under the U.P. Agricultural Income-tax Act, 1948 for any, period prior to the date of vesting shall continue to be recoverable from such intermediary and may, without prejudice to any other mode of recovery be realised by deducting the amount from the compensation money payable to such intermediary under Chapter III. 11. Rule 8A was added to the rules by Notification No. 3266/I-A-1056-1954 dated August 17, 1954 and its relevant portions read; 8-A. Without prejudice to the right of the State Government to recover the dues mentioned below by such other means, as may be open to it under law : (1) all arrears of land revenue in respect of the estates which have vested in the States Government as a result of the notification under section 4 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 (Act I of 1951) and of tax on agricultural income assessed under the U. P. Agricultural Income-tax Act 1948 (U. P. Act III of 1949) due from an intermediary for any period prior to the date of vesting shall be realised: (a) in the case of an intermediary who was assessed to land reveune of Rs. 10,000 or more from the amount of interim compensation due to him, and (b) in the case of an intermediary who was assessed to a land revenue of less than Rs. 10,000 per annum by deduction from the amount of compensation payable to him; It is clear from the above provisions that neither S. 6(d) nor R. 8A provide that Bonds must or can be accepted in payment of tax on agricultural income 12. It has been held by this Court in Collector and Deputy Commr. of Sultanpur v.Raja Jagdish Pratap, Civil Appeal No. 1014 of 1963, dated 5-11-1964: (AIR 1965 SC 909 ) that the provisions of S. 6(d) of the Act would apply to arrears on account of agricultural income-tax assessed in 1360F on the basis of agricultural income during the year 1359F and that the provisions of R. 8A are mandatory. 13. It is not urged for the appellant that R. 8A is inconsistent with the provisions of S. 6(d) which provides that arrears of tax may be realised from the compensation payable and therefore appears to give a discretion to the authorities to realise the arrears of tax from the compensation payable. 14. We do not agree with the contention for the respondent that the compensation payable to the intermediary continues to remain payable even after the compensation Bonds had been delivered to him. Section 68 of the Act provides that the compensation under the Act shall be payable in cash or in bonds or partly in cash and partly in bonds as may be prescribed. It is clear therefore that the delivery of Bonds to the intermediary is in payment of the compensation. The claim for compensation is thus satisfied when the compensation had been paid in accordance with the provisions of S. 68. This is also clear from the relevant rules for the payment of compensation. 15. Rule 62, as it stood prior to November 29, 1956, provided that the compensation would be paid in negotiable bonds which would be described as Zamindari Abolition Compensation Bonds. Rule 63 as it them stood provided that the Bonds would be issued in specified denominations and would bear interest at the specified rate on the principal that had become payable calculated from the date of vesting. Rule 64 provided that interest together with the principal of a Bond would be paid in equated annual instalments except for the last, as described in Appendix IV during the period of 4o years beginning from the date of vesting, provided that any Bond might be redeemed at an earlier date at the option of the Government. Rule 65 provided that the instalments due on a Bond from the date of its entacement would be payable on presentation from and after July 1st next after the delivery of the Bend to the intermediary. 16. These rules show that the compensation does not remain payable after the delivery of the Bonds and that the Bonds could not be cashed before the due date for their encashment. 17. The fact that the, Bonds are negotiable does not make them legal tender does not make it obligatory on anyone including Government, to accept them in payment of any dues. The only result of their being treated as negotiable instruments is that the owner of them Bonds can transfer them to any person who is agreeable to purchase them. 18. When the compensation payable to an intermediary has been paid in the form of cash or Bonds, that compensation ceases to be payable. Section 6 (d) of the Act and R. 8A of the rules do not, as already stated, provide for the receipt of agricultural income-tax in the form of Bonds. 19. We are therefore of opinion that the Collector cannot be said to be in error in not accepting the Bonds which had been delivered and which were not even cashable at the time, in payment of the arrears of agricultural income-tax payable under the Agricultural Income-tax Act.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]13. It is not urged for the appellant that R. 8A is inconsistent with the provisions of S. 6(d) which provides that arrears of tax may be realised from the compensation payable and therefore appears to give a discretion to the authorities to realise the arrears of tax from the compensation payable14. We do not agree with the contention for the respondent that the compensation payable to the intermediary continues to remain payable even after the compensation Bonds had been delivered to him. Section 68 of the Act provides that the compensation under the Act shall be payable in cash or in bonds or partly in cash and partly in bonds as may be prescribed. It is clear therefore that the delivery of Bonds to the intermediary is in payment of the compensation. The claim for compensation is thus satisfied when the compensation had been paid in accordance with the provisions of S. 68. This is also clear from the relevant rules for the payment of compensation15. Rule 62, as it stood prior to November 29, 1956, provided that the compensation would be paid in negotiable bonds which would be described as Zamindari Abolition Compensation Bonds. Rule 63 as it them stood provided that the Bonds would be issued in specified denominations and would bear interest at the specified rate on the principal that had become payable calculated from the date of vesting. Rule 64 provided that interest together with the principal of a Bond would be paid in equated annual instalments except for the last, as described in Appendix IV during the period of 4o years beginning from the date of vesting, provided that any Bond might be redeemed at an earlier date at the option of the Government. Rule 65 provided that the instalments due on a Bond from the date of its entacement would be payable on presentation from and after July 1st next after the delivery of the Bend to the intermediary16. These rules show that the compensation does not remain payable after the delivery of the Bonds and that the Bonds could not be cashed before the due date for their encashment17. The fact that the, Bonds are negotiable does not make them legal tender does not make it obligatory on anyone including Government, to accept them in payment of any dues. The only result of their being treated as negotiable instruments is that the owner of them Bonds can transfer them to any person who is agreeable to purchase them18. When the compensation payable to an intermediary has been paid in the form of cash or Bonds, that compensation ceases to be payable. Section 6 (d) of the Act and R. 8A of the rules do not, as already stated, provide for the receipt of agricultural income-tax in the form of Bonds19. We are therefore of opinion that the Collector cannot be said to be in error in not accepting the Bonds which had been delivered and which were not even cashable at the time, in payment of the arrears of agricultural income-tax payable under the Agricultural Income-tax Act.