Case: Commissioner of Agricultural Income Tax, Hyderabad Vs. Rajan Ratan Gopal

The following genealogy will be useful to appreciate the contentions raised by the parties:Maharaja Sir Kishen Pershad(d. in 1940)Khaja Pershad Sultan Kunwar Bibi Kishen Kunwar(d.BibiRaja Ratan Raja Prem Raja RajaGopal Gopal Chamanlal Narenderlal2. After the death of Maharaja Kishen Pershad in 1940, his son, Raja Khaja Pershad, succeeded to his estate and he died on December 25, 1943. On the recommendation of a special commission appointed to ascertain the heirs of Raja Khaja Pershad, His Exalted Highness the Nizam of Hyderabad issued a firman dated December 12, 1948. Under that firman, Raja Ratan Gopal, Raja Prem Gopal, Raja Chamanlal and Raja Narenderlal, the sons of two sisters of Raja Khaja Pershad, were declared to be his heirs and entitled to succeed to his estate. Under the firman each of the four heirs became entitled to 1/4 share in the estate. The estate was under the superintendence of the Nizam Government till the year 1950 when it was handed over to Raja Ratan Gopal with effect from May 1, 1950. During that period each of the heirs was being given 1/4 share of the income of the estate. On May 9, 1950, the Secretary to the Board of Revenue wrote a letter to Raja Ratan Gopal informing him that the four brothers were declared heirs to the estate and they were entitled to the same. Indeed, after the brothers succeeded to the estate, they were filing separate returns of their income under the HyderabadAct and each one of them was individually assessed thereunder. After the abolition of the jagirs, it appears from the certificate of the jagir administrator that the commutation amount was paid to all the four as equal shareholders in the estate. For the assessment year 1359 Fasli, Raja Ratan Gopal filed a return under the Hyderabad AgriculturalAct, 1950 (XIII of 1950), hereinafter called the Act, in respect of his share of the income of O.S. Rs. 20, 426 from the estate. The AgriculturalOfficer rejected the return and assessed him to tax on the total income of the fouron the basis of "association of persons." The total income was ascertained at a sum of O.S. Rs. 3, 75, 218 and the respondent was assessed to a tax of O.S. Rs. 86, 263.3. The respondent preferred an appeal against that assessment to the Deputy Commissioner of Agriculturalon three grounds, namely, (i) he should not have been assessed on the basis of "association of persons" but only on his individual income; (ii) he should have been allowed deduction of expenditure incurred on maintenance of palace buildings and other buildings of the estate, and (iii) he should have been allowed a deduction of the amounts paid to dependents under the terms of the will of the late Maharaja. The Deputy Commissioner allowed the third objection, but rejected the first two. Against the said order the respondent filed a revision before the Commissioner of Agriculturalbut that was dismissed. The respondent thereupon preferred a revision to the High Court of Hyderabad under section 26(3) of the Act. After the formation of the Andhra Pradesh High Court, the said court directed the Commissioner to submit the following two questions for its opinion : (i) Whether in the circumstances of the case the income of the estate can be assessed on the unitary basis as the income of an association of individuals or whether the income of the assessee has to be assessed for the purposes of agriculturalat 1/4th of the income of the estate after deducting the allowables, and (2) Whether the item of expenditure of Rs. 47, 574 being the expenditure for the palace maintenance and other buildings of the estate is not liable to be deducted as admissible expenditure under clause (a) or clause (b) of(5) of section 14 of the HyderabadAct, 1357 Fasli, as expenditure not being private or personal but incurred in connection with the administration of the estate or expenditure compulsory under the law. After the Commissioner stated the case, a Division Bench of the High Court disposed of the same by its order dated December 13, 1960. The High Court gave the following two answers to the questions referred to it:(i) the income of the assessee has to be assessed for the purpose of the Act on his 1/4 share of the income from the estate after deducting the allowables; and(ii) the assessee is entitled to deductions under section 6(e) of the Act and the same should be computed at the time of making an assessment. This appeal has been filed by certificate issued by the High Court against the said order of the High Court. Learned Additionalcontested the correctness of the said two answers given by the High

Court's reasoning:
A combined reading of these two provisions indicates that assessment can be made on an individual or an6. In the present case, the said test is not satisfied. The four nephews of Raja Khaja Pershad succeeded to the estate asand each one of them was entitled to 1/4 share of the income from the estate. They did not form a unit for the promotion of any joint enterprise to earn income, profits or gains. The collection of the entire income from the estate by one of the sharers or even by a common employee will not make that income an income from a joint venture. Each of the sharers gets his income as an individual and not as anIn this view, the High Court was right in answering the first question in favour of the respondentThere are no merits in the second contentionis not clear from the record when the assessment was completed. We shall assume that it was completed before April 1, 1950. Section 51(3) of the Act reads : "Where the assessment of thepayable by an assessee for the year 1359F. under the said Act has not been completed before the 1st day of April, 1950, the tax so payable shall be assessed in accordance with the provisions of the said Act on the assessees agricultural income as defined in this Act of the previous year as determined under the said Act, and appeals from, and all other proceedings arising out of the assessment shall be regulated by this Act."7. This section cannot have any application for the assessment in question, for it was completed before April 1, 1950. The assessment has to be made under the Act and the respondent would be entitled to deductions under section 6(e) of the Act.That apart, even if the assessment was not completed before April 1, 1950, the respondent would not be in a worse position, for there is a corresponding provision in the HyderabadAct, 1357F., which entitles the respondent to the said deduction. Section 14(5)(a) of the said Act allowed the following deduction from the income"all such expenditure, not being in the nature of capital, private or personal expenditure, incurred by the assessee in connection with land or its inhabitants for administration or on works of general improvement and benefit."This court in construing the said provisions held that the expenditure incurred in connection with the land and its administration was deductible under the said provision : see Rajah S. V. Jagannath Rao v. Commissioner ofWhether section 6(e) of the Act applies or section 14(5)(a) of the HyderabadAct, 1357F., applies, the respondent would be entitled to a deduction from his income of the expenditure incurred by him for the maintenance of the palace and other buildings of the estate. The answer given by the High Court to the second question is also correct.