Citation Codes

Equivalent Citations

citation codes

Case Number

Writ Petitions Nos. 3864 to 3869 of 1975, 2960 of 1975 and 1581, 1948 and 1972 of 1976

Judges

Mohan, J.

Acts

provision of the Income-tax Act, by section 4(b) of the Tamil Nadu Agricultural Income-tax Act,
Nadu Agricultural Income-tax Act, 1955 (V of 1955). The said section 4(b)
Nadu Agricultural Income-tax Act (hereinafter referred to as the Act)
SECTION 10 INCOME TAX ACT
sections 11, 12 and 13 of the Income-tax Act, 1961.
sections 11, 12 and 13 of the Income-tax Act
Income-tax Act, 1961 (Central Act 43 of 1961).
SECTION 10 INDIAN INCOME TAX ACT
section 10(1) of the Income-tax Act,
Nadu Agricultural Income-tax Act,
clauses (a) and (b) of section 11(1)
INCOME TAX ACT
Agricultural Income-tax Act
Act introduced section 4(b),
income.7. Section 11
section 4(b).

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Smart Summary

Summary of Opinion delivered by Mohan, J.

Factual and Procedural Background

These writ petitions (W.P. Nos. 2960/1975, 1581/1976, 1948/1976, 1972/1976 and others) raise a common question about the scope of section 4(b) introduced into the Tamil Nadu Agricultural Income-tax Act, 1955 by Tamil Nadu Act No. 4 of 1973 (with effect from 1 April 1972).

Facts of W.P. No. 2960 of 1975 (concise): The petitioner had been assessed under the Tamil Nadu Agricultural Income-tax Act for 124.50 acres (72.31 standard acres) up to assessment year 1972–73 on a composition basis. The petitioner had settled 50.46 ordinary acres in the name of a private trust called Nagakulam Bungalow Krishna Pooja Trust on 14 May 1955. The Agricultural Income-tax Officer held that the trust could not be treated as a public, religious or charitable trust and that section 4(b) of the Act applied; consequently that extent was clubbed with the petitioner’s holdings from 1973–74 for assessment. The petitioner filed a revision under section 34 which was rejected on 4 February 1975, and then filed Writ Petition No. 2960 of 1975 to quash the assessment order dated 16 October 1974 insofar as it related to 1973–74.

Procedural notes for other petitions: W.P. No. 1581 of 1976 relates to 1975–76, W.P. No. 1948 of 1976 to 1974–75, and W.P. No. 1972 of 1976 to 1969–70. Additional writ petitions (W.Ps. Nos. 3864–3869 of 1975) are also dealt with later in the judgment.

Legal Issues Presented

What is the scope and proper interpretation of section 4(b) of the Tamil Nadu Agricultural Income-tax Act, 1955 (as introduced by Tamil Nadu Act No. 4 of 1973 with effect from 1 April 1972)?
Whether the agricultural income derived by a charitable or religious trust is exempt by reason of reference in section 4(b) to provisions of the Income-tax Act (notably section 10(1)), or whether the amendment intended to subject such agricultural income to tax by incorporating relevant provisions of the Income-tax Act (specifically sections 11, 12 and 13)?
Whether, in the facts of the petitions, the private income of the petitioner can be clubbed with the trust income for assessment under the Act?

Arguments of the Parties

Petitioner's Arguments (as presented)

The petitioner, through learned counsel Mr. R. Kunchithapatham, argued that a careful reading of section 4(b) shows that agricultural income derived by a charitable or religious trust is exempt under section 10 of the Income-tax Act, and because section 4(b) refers to that provision of the Income-tax Act the taxation basis is illegal.
Reliance was placed on the earlier judgment in W.P. Nos. 422 and 423 of 1975 (Rajam Chettiar Annadhana etc., Charities v. Agricultural Income-tax Officer), where that interpretation was accepted.

Respondent / Government's Arguments (as presented)

The learned Additional Government Pleader, Mr. K. Venkataswami, submitted that the earlier judgment in W.P. Nos. 422 and 423 of 1975 requires reconsideration because the amending section 4(b) was enacted with the express object of subjecting agricultural income derived by charitable and religious trusts to tax.
He argued that if only section 10 of the Income-tax Act were incorporated, agricultural income of religious or charitable trusts would remain exempt and that would frustrate the purpose of the amendment. Therefore the relevant provisions to be looked at are sections 11, 12 and 13 of the Income-tax Act (which occur under Chapter III dealing with incomes which do not form part of total income) rather than section 10(1) alone.
He contended that the phrase “income derived from the property held under trust wholly or partly for charitable or religious purposes” in section 4(b) should be read with reference to how income derived from non-agricultural property held by a charitable or religious trust is treated under the Income-tax Act, so as to construe the amendment harmoniously.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
W.P. Nos. 422 and 423 of 1975 — Rajam Chettiar Annadhana etc., Charities v. Agricultural Income-tax Officer	Relied upon by the petitioner to support the view that agricultural income of charitable/religious trusts was exempt by reference to section 10 of the Income-tax Act.	The Court acknowledges that its prior judgment accepted the petitioner's interpretation but holds that that judgment "does not lay down the correct law" and that the interpretation must be reconsidered in the light of sections 11–13 of the Income-tax Act and the object of the amendment to section 4(b).

Court's Reasoning and Analysis

The Court's reasoning proceeds by statutory interpretation of section 4(b) against the legislative object and the scheme of the Income-tax Act:

Background statutory construction: Section 4 (before amendment) defined total agricultural income and, by clause (b) as it stood then, excluded agricultural income derived from property held under trust wholly for religious or charitable purposes (or in part the income applied thereto). The amendment introduced by section 4(b) withdrew that exemption.
Textual focus: The amending proviso uses the phrase “any agricultural income derived from property held under trust, wholly or partly for charitable or religious purposes to the same extent to which income derived from property held under trust wholly or partly for charitable or religious purpose, is not included in the total income for purposes of the Income-tax Act, 1961.” The Court asks what “the income derived from the property held under trust wholly or partly for charitable or religious purposes” means in this context — whether it refers only to non-agricultural income or to agricultural income as well.
Harmonious construction with the Income-tax Act: The Court observes that sections 11, 12 and 13 of the Income-tax Act (Chapter III dealing with incomes not forming part of total income) are the relevant provisions to which reference must be made when construing section 4(b). Section 11 deals specifically with income from property held for charitable or religious purposes; section 12 deals with contributions; and section 13 lays down conditions for exemption.
Principle of interpretation: The Court invokes the principle that special provisions exclude the general (generalibus specialia derogant) and concludes that, when clauses (a) and (b) of section 11(1) refer to “income derived from property held under trust,” that phrase should be read as referring to income derived from non-agricultural property for the purpose of achieving a harmonious construction of the statutes.
Conclusion on prior decision: The Court recognizes that in its earlier decision in W.P. Nos. 422 and 423 of 1975 it had accepted the interpretation urged by the petitioner (that agricultural income remained exempt). However, having considered the government’s submissions and the harmonious construction with sections 11–13, the Court holds that that earlier judgment does not state the correct law.
Application to the petitions: Applying this interpretation to the individual cases, the Court addresses procedural and substantive consequences (see below). For some petitions the statutory appellate remedies were not exhausted and the Court permits appeals to be filed or remits matters to the assessing officer to issue fresh notices and proceed in light of the Court's observations, after affording opportunity to make representations.

Holding and Implications

Core Holding:

SECTION 4(b) OF THE TAMIL NADU AGRICULTURAL INCOME-TAX ACT MUST BE READ WITH REFERENCE TO SECTIONS 11, 12 AND 13 OF THE INCOME-TAX ACT; THE COURT HOLDS THAT ITS EARLIER DECISION IN W.P. NOS. 422 AND 423 OF 1975 DOES NOT LAY DOWN THE CORRECT LAW.

Direct consequences and orders made in this opinion (as stated in the text):

W.Ps. Nos. 1948 and 1972 of 1976: Dismissed with costs. The Court noted that the petitioner in those matters had not exhausted the statutory remedy of appeal to the Tribunal and allowed the petitioner to file the appeals within two weeks; in that event, the plea of limitation cannot be raised. The Court observed that the question of clubbing private income with the trust income can be urged before the Tribunal.
W.P. No. 1581 of 1976: Directed against an order under section 17(4) of the Act — the matter is remitted to the Agricultural Income-tax Officer who is to issue fresh notices and assess or continue the composition in the light of the Court's observations, after affording the petitioner an opportunity to make representations in person or through counsel.
W.P. No. 2960 of 1975: The matter is remitted for the assessing authority to consider whether the private income of the petitioner could be clubbed with that of the trust; the impugned assessments are set aside and the assessing authority will issue fresh notices and proceed to assess or continue the composition in light of the observations made, after affording the petitioner opportunity to make representations in person or through counsel.
W.Ps. Nos. 3864 to 3869 of 1975: Applying the judgment in W.P. No. 2960 of 1975, these writ petitions are dismissed with costs. As these petitions challenge notices under section 16(2) of the Act, the assessing officer is directed to continue the assessment after affording the petitioner an opportunity to file representations (to be filed within six weeks from the date of the judgment).

Broader implications: The Court's opinion changes the legal effect of its earlier decision in W.P. Nos. 422 and 423 of 1975 by holding that that earlier decision does not state the correct law. The immediate practical effect is to remit assessments and require fresh proceedings in the light of the construction that section 4(b) should be read with the provisions of Chapter III (sections 11–13) of the Income-tax Act and to permit prosecuting appeals or assessments accordingly. The opinion does not, on its face, purport to lay down any novel statutory rule beyond this interpretative conclusion; it directs fresh administrative action consistent with that interpretation.

This summary is confined to the materials and statements present in the provided opinion and does not add outside facts or commentary.

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His Holiness Silasri Kasivasi Muthukumaraswami Thambiran And Another v. Agricultural Income-Tax Officer, Kumbakonam, And Others

The Judgment of the Court was delivered by

W.P Nos. 2960175, 1581176, 1948/76 and 1972/76

Mohan, J.:— All these writ petitions raise a common question of law as to the scope of section 4(b) introduced in the Tamil Nadu Agricultural Income-tax Act, 1955 (V of 1955). The said section 4(b) came to be introduced by the Tamil Nadu Act No. 4 of 1973 with effect from April 1, 1972.

2. Suffice it for me to note the facts of W.P No. 2960 of 1975. The petitioner had been assessed under the Tamil Nadu Agricultural Income-tax Act (hereinafter referred to as “the Act”) for an extent of 124.50 acres equivalent to 72.31 standard acres up to the assessment years 1972–73, on a composition basis. The petitioner had settled an extent of 50.46 ordinary acres in the name of a private trust called Nagakulam Bungalow Krishna Pooja Trust on May 14, 1955. Since the Agricultural Income-tax Officer was of the view that this trust cannot be a public or religious or charitable trust and as it would attract section 4(b) of the Act, the extent was clubbed in the holdings of the petitioner from 1973–74 for the purpose of assessment.

3. The petitioner filed a revision petition before the Commissioner of Agricultural Income-tax under section 34 of the Act. After hearing the advocate for the petitioner, it was rejected on February 4, 1975. Aggrieved by this order, the petitioner has preferred this writ petition to quash the order of the Agricultural Income-tax Officer made in GIR. No. 108.A-73-74 dated October 16, 1974, in so far as it relates to the year 1973–74.

4. W.P No. 1581 of 1976 relates to 1975–76, while W.P No. 1948 of 1976 relates to 1974–75 and W.P No. 1972 of 1976 relates to 1969–70. It is the contention of the learned counsel for the petitioner, Mr. R. Kunchithapatham, that a careful reading of section 4(b) of the Act would disclose that the agricultural income derived by a charitable or religious trust like the petitioner trust is exempt under the Income-tax Act, in view of section 10 of the Income-tax Act, and, therefore, inasmuch as reference is made to that provision of the Income-tax Act, by section 4(b) of the Tamil Nadu Agricultural Income-tax Act, the very basis of taxation is illegal. In support of this contention, reliance is placed upon my judgment in W.P Nos. 422 and 423 of 1976 (Rajam Chettiar Annadhana etc., Charities v. Agricultural Income-tax Officer).

5. Mr. K. Venkataswami, the learned Additional Government Pleader in meeting this submission states that my judgment in W.P Nos. 422 and 423 of 1975 (Rajam Chettiar Annadhana, etc., Charities v. Agricultural Income-tax Officer) requires reconsideration, since when the amending Act introduced section 4(b), it was with the avowed object of subjecting agricultural income derived by a charitable and religious trust to tax. All the more so, when the very purpose of the Act, namely, the Tamil Nadu Agricultural Income-tax Act, is to levy tax on agricultural income. Therefore, if section 10 of the Indian Income-tax Act alone got incorporated, the agricultural income held by a religious or a charitable trust would be exempt. That would frustrate the very amendment. Consequently, what have to be looked into are sections 11, 12 and 13 of the Income-tax Act, 1961. Having regard to the language of section 4(b) of the Act, namely, “to the same extent to which income derived from property held under trust wholly or partly for charitable or religious purposes”, it should have reference only to the non-agricultural income. In other words, what has to be found out is how under the Income-tax Act, income derived from non-agricultural property held by a charitable or religious trust is taxable, to the same extent agricultural income would be taxable under section 4(b) of the Act. Any other interpretation would lead to utter confusion. It would amount to attributing un wisdom to the legislature, as if the legislature was not aware of section 10(1) of the Income-tax Act, which confers a specific exemption as far as the agricultural income is concerned.

6. Man grows wiser by experience; and this principle is aptly illustrated in this case. In my judgment in W.P Nos. 422 and 423 of 1975 (Rajam Chettiar Annadhana, etc., Charities v. Agricultural Income-tax Officer) the aspect which is now put forth by the learned Additional Government Pleader was not ever urged. By stating so, I do not propose to disown the responsibility for my judgment. In fact, the interpretation sought to be placed by the learned counsel for the petitioner found acceptance at my hands as a result of which I held that the agricultural income would be exempt. By such an interpretation, the very object and the purpose of section 4(b) of the Act got thwarted. As rightly contended by the learned Additional Government Pleader, the object of the Agricultural Income-tax Act is to tax agricultural income. Such an income derived from a charitable or religious trust was exempt till the amending Act 4 of 1973. It was this exemption which was sought to be withdrawn so that, that income also would become liable for taxation. Could it be said, under those circumstances, that the Tamil Nadu legislature looked at section 10(1) alone and wanted to incorporate that provision of the Income-tax Act ? If that be so, how could this purpose be achieved? Of course, it may be possible to contend that, however well intentioned it might have been, it was not carried out in effecting the amendment. In fact, that is the contention urged on behalf of the petitioner. I am unable to accept this contention since it would lead to not only frustrate the object of the section but it does not even appear to be a good construction. As to why I held so will be evident from the following. Section 4 defines the scope of total agricultural income. Originally, all agricultural income derived from land situated within the State, which is received by the assessee or which accrued to him within or without the State was assessable. But that income did not include, in view of clause (b) as it stood then, any agricultural income derived from property held under trust or other legal obligation wholly for religious or charitable purpose, and in the case of property so held in part only for such purpose, the income applied thereto. This exemption is withdrawn by the amending section 4(b). That amendment reads “any agricultural income derived from property held under trust, wholly or partly for charitable or religious purposes to the same extent to which income derived from property held under trust wholly or partly for charitable or religious purpose, is not included in the total income for purposes of the Income-tax Act, 1961 (Central Act 43 of 1961)”. What does “the income derived from the property held under trust wholly or partly for charitable or religious purposes” mean ? Is it to mean only non-agricultural income? Otherwise, the legislature could have either said agricultural income or, to avoid redundancy, such income, meaning thereby agricultural income and this is spoken to in the beginning of this clause. If this is the interpretation, reference to section 10(1) of the Income-tax Act was not in contemplation. What then are the sections of the Income-tax Act that are sought to be incorporated ? It is where sections 11, 12 and 13 of the Income-tax Act require to be looked at. These sections occur under Chapter III which deals with incomes which do not form part of the total income.

7. Section 11 deals with income from property held for charitable or religious purposes. Obviously, therefore, it is this section to which reference by incorporation will have to be made, since the well-accepted principle of law is, special excludes the general (generalibus specialia derogant). Section 12 deals with income of trusts or institutions from contributions. Section 13 lays down the conditions for exemption. Having exempted the agricultural income derived by a charitable or religious trust under section 10(1), could it be said that the same income is sought to be taxed under sections 11 to 13 ? On the contrary, when both clauses (a) and (b) of section 11(1) say income derived from property held under trust, it could only mean the income derived from non-agricultural property. This is the only way to construe harmoniously all the sections. Therefore, the learned Additional Government pleader is well-founded in his submission. Consequently, I hold that my jugdment in W.P Nos. 422 and 423 of 1975 (Rajam Chettiar Annadhana, etc., Charities v. Agricultural Income-tax Officer) does not lay down the correct law.

8. As regards individual cases, in W.Ps Nos. 1948 and 1972 of 1976, the petitioner has not still exhausted the statutory remedy to appeal to the Tribunal; and it is well open to him to urge that the clubbing of his private income with that of the trust is not warranted under the provisions of the Act. The petitioner will file the appeals within two weeks from to-day before the Tribunal in which event the plea of limitation cannot be put against him. I am sure this question will be considered in its proper perspective. Hence W. Ps. Nos. 1948 and 1972 of 1976 are dismissed with costs. Counsel's fee Rs. 200 (one set).

9. W.P No. 1581 of 1976 is directed against the order under section 17(4) of the Act. The matter will stand remitted to the Agricultural Income-tax Officer who will proceed to issue fresh notices and assess or continue the composition in the light of the observations made above after affording the petitioner an opportunity to make representations either in person or through counsel.

10. W.P No. 2960 of 1975: The matter will stand remitted to consider the question whether the private income of the petitioner could be clubbed with that of the trust and assessment made. Therefore, the impugned assessments are hereby set aside and the assessing authority will proceed to issue fresh notices and assess or continue the composition in the light of the observations made above, after affording an opportunity to the petitioner to put forth his representations either in person or through counsel.

W. Ps. Nos. 3864 to 3869 of 1975

11. Applying my judgment in W.P No. 2960 of 1975, these writ petitions will stand dismissed with costs. Counsel's fee Rs. 500 (one set). Since these writ petitions are directed against notices under section 16(2) of the Act and inasmuch as I have dismissed these writ petitions, the assessing officer will proceed to continue this assessment, however, after affording an opportunity to the petitioner to file his representations either in person or through counsel. The said representations will be filed within six weeks from this date before the assessing authority.

His Holiness Silasri... v. Agricultural Income-...