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P.K Kutty Anuja Raja And Another v. State Of Kerala And Another
Factual and Procedural Background
The Agricultural Income-tax Officer assessed agricultural income tax of Rs 84,788.78 on the estate of Raja Manavikraman for the period 1-11-1956 to 31-3-1958. Two successors to the estate partially satisfied the demand by paying Rs 18,069.75 on 12-10-1960 and Rs 21,000 on 23-12-1960. In O.P. No. 2413 of 1965, the Kerala High Court, by judgment dated 1-1-1968, quashed the assessment and limited tax liability to a 1/693 share of the estate.
In 1974 the successors filed Suit O.S. No. 197 of 1974 seeking refund of the sums paid. The trial court decreed the suit in 1976, but the Kerala High Court, in A.S. No. 74 of 1976 (judgment dated 4-1-1977), reversed the decree on the ground that the claim was time-barred. The present appeal to the Supreme Court was preferred by special leave against that finding.
Legal Issues Presented
- Does the limitation period for a suit to recover money paid under a quashed tax assessment commence on the date of the High Court’s judgment quashing the assessment (1-1-1968) or on the later date when the Supreme Court dismissed the State’s appeal (5-10-1971)?
- Does the mere pendency of an appeal against the judgment that quashed the assessment suspend or extend the running of limitation under the Limitation Act, 1963?
Arguments of the Parties
Appellants' Arguments
- The “mistake” in paying the tax was discovered only on 5-10-1971 when the Supreme Court dismissed the State’s appeal; hence time began to run from that date and the 1974 suit was within the three-year period.
- Reliance was placed on STO v. Kanhaiya Lal Makund Lal Saraf, in which limitation for a refund was reckoned from the date of the Supreme Court’s decision that first revealed the mistake of law to the taxpayer.
No specific arguments of the respondents are recorded in the opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| STO v. Kanhaiya Lal Makund Lal Saraf, AIR 1959 SC 135 (1958) 9 STC 747 | Limitation for a refund claim may start from the date a party first acquires knowledge of the mistake of law through a final court judgment. | The Court held the precedent inapplicable, noting that the appellants themselves procured the High Court’s judgment on 1-1-1968 and thus had knowledge of the mistake from that date. |
Court's Reasoning and Analysis
The Supreme Court held that limitation began on 1-1-1968—the day the High Court quashed the assessment—because:
- Section 3 of the Limitation Act mandates dismissal of suits filed after the prescribed period unless saved by Sections 4-24.
- No provision in Sections 4-24 applied; in particular, pendency of an appeal does not, by itself, suspend the running of limitation.
- Once limitation starts to run it “runs its full course” unless an order of court expressly interrupts it; no stay of the High Court judgment was obtained.
- The appellants were parties to the High Court proceedings and thus aware of the mistake on 1-1-1968; extending time until 5-10-1971 would contradict the statute.
- The precedent relied upon concerned a different factual scenario where knowledge of the mistake arose only after a later judgment; here, knowledge coincided with the High Court’s decision.
Accordingly, the three-year period expired on 1-1-1971, rendering the 1974 suit time-barred.
Holding and Implications
APPEAL DISMISSED. The suit for refund is barred by limitation.
Implications: The appellants cannot recover the sums paid toward the quashed tax assessment. The decision applies settled principles of the Limitation Act and sets no new precedent beyond reaffirming that pendency of an appeal does not toll limitation absent a specific statutory or court-ordered suspension.
Order
1. This appeal by special leave arises from the judgment and decree of the High Court dated 4-1-1977 made in AS No. 74 of 1976. The Division Bench of the High Court of Kerala had held that the limitation to lay the suit started for the appellants on 1-1-1968 when the High Court had earlier delivered the judgment quashing the assessment of agricultural income tax upon the estate of Raja Manavikraman and his estate is liable only to the extent of 1/693 share of that estate. The facts are not in dispute. The Agricultural Income Tax Officer has made an assessment of the agricultural income tax to the tune of Rs 84,788.78 for the period between 1-11-1956 to 31-3-1958. It is not necessary to dilate all the facts but suffice it to state that for recovery thereof when demand was made, the succeeding Raja made payment in part discharging their liability. On 12-10-1960 a sum of Rs 18,069.75 was paid and another successor on 23-12-1960 paid a sum of Rs 21,000. As stated earlier, ultimately in OP No. 2413 of 1965 by judgment and order dated 1-1-1968, the High Court set aside the assessment and the liability to recover the tax was confined only to the extent of 1/693 share of the estate of Raja Manavikraman.
2. The civil suit for recovery of the amounts paid by the successors was filed in 1974. The suit (OS No. 197 of 1974) was decreed by the trial court in 1976. But on appeal, as stated earlier, the Division Bench held that it was barred by limitation. Thus this appeal by special leave.
3. Shri A.S Nambiar, learned Senior Counsel appearing for the appellants, contended that the appellants had discovered the mistake on 5-10-1971 when this Court dismissed the appeal filed by the State against the orders passed in OP No. 2413 of 1965 and that, therefore, the limitation begins to run from that date. Therefore, the suit was filed within three years and as such was not beyond time. The High Court was wrong in holding that the suit was barred by limitation. We are unable to agree with the learned counsel. It is not in dispute that at his behest the assessment was quashed by the High Court in the aforesaid OP on 1-1-1968. Thereby the limitation started running from that date. Once the limitation starts running, it runs its full course until the running of the limitation is interdicted by an order of the Court. Section 3 of the Limitation Act gives a power of entertaining the suit which says that:
“Subject to the provisions contained in Sections 4 to 24 (inclusive), every suit instituted, … after the prescribed period shall be dismissed although limitation has not been set up as a defence.”
4. Therefore, if any period of limitation is to be excluded from the prescribed period of limitation, the party necessarily has to satisfy any of the appropriate provisions in Sections 4 to 24 of the Limitation Act, 1963. This is not one of such cases. Under those circumstances, the limitation having begun to run from 1-1-1968, it stood expired by efflux of time after three years. Therefore, from 2-1-1971, the right to recover stood barred by limitation. The pendency of the appeal, unless the operation of the judgment is suspended by this Court, does not amount to suspend the operation of running of the limitation. We do not find any such plea raised by the appellants in this case in that behalf. Therefore, the High Court was right in its finding that the suit was barred by limitation.
5. It is contended that in STO v. Kanhaiya Lal Makund Lal Saraf AIR 1959 SC 135, (1958) 9 STC 747, (1959) 1 MLJ (SC) 35 (AIR at p. 142) that when knowledge was acquired by the party for the first time before the judgment was rendered by this Court in previous litigation, the claim for refund would start from the judgment rendered by this Court. We do not have that fact situation in this case. The appellant is a party to the proceedings and at his instance the assessment of agricultural income tax was quashed as referred to hereinbefore and having had the assessment quashed the cause of action had arisen to him to lay the suit for refund unless it is refunded by the State. The knowledge of the mistake of law cannot be countenanced for extended time till the appeal was disposed of unless, as stated earlier, the operation of the judgment of the High Court in the previous proceedings were stayed by this Court. The suit, therefore, is barred by limitation.
6. The appeal is accordingly dismissed. No costs.
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