Case: Commissioner of Agricultural Income Tax, U.P Vs. M. L. Bagla (And Others Cases)

A common question arises in this group of appeals. One Bhagwati Prasad was the owner of an extensive area of land. By a deed dated January 21, 1941, he granted a lease for agricultural purposes of 316.3 acres of land to Puran Mal Jaipuria, and by another lease dated April 20, 1942, he granted a lease for agricultural purposes of 326.1 acres of land to M. L. Bagla. For the Fasli years 1356, 1357, 1358 and 1359, the two lessees appointed a common manager for cultivation of the land. The manager maintained a common account of expenditure and income, kept the profits joint and later divided them between the two lessees according to their respective area. In the proceeding for assessment of the income received by the lessees to agriculturalit was claimed by the two lessees that the income was their separatewas liable to be assessed separately. TheOfficer upheld the plea and separately assessed the tax. The Commissioner of Agriculturaldisagreed with that view and assessed the income of the two lessees as income of an association of individuals. That order of the Commissioner was confirmed by the Board of AgriculturalU.P. The following question was then referred by the Board to the High Court " Whether, on the facts and in the circumstances of the case, the two owners can be assessed as an association of individuals on the income of the entire area under their joint cultivation ? "The same was answered by the High Court of Allahabad in the negative. These appeals are preferred by special leave against the judgments recording the answers

Reasoning: In our view, these observations of the High Court are not supported by the findings recorded by the Board of AgriculturalThe only facts found by the Board are that the lessees had appointed a common manager, that common accounts were maintained, and that the net profits, after deducting from the receipts, expenditure for management of the lands under the two leases, were divided. In our view, the conclusion recorded by the High Court that the lessees as an association of individuals were holding land cannot be justified. It is, in the circumstances, unnecessary to consider the third question on which the High Court recorded a conclusion against the State, viz., whether the land must be held in any of the capacities mentioned in the definition, namely, as owner, trustee, receiver, manager, administrator or executor or any other capacity recognised bytax officer did not assess the manager ; he assessed the two individual lessees, and the only question was whether the individual lessees constituted themselves into an association of individuals, holding propertyOn the view we have taken, the two lessees cannot be regarded, even granting that they constituted themselves as an association of individuals, as an association of individuals holding property for the purpose of the definition given in section 2(11) of the U.P. AgriculturalAct. On that ground, the answer recorded by the High Court must be confirmed, though on different grounds