Citation Codes

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Case Number

Appeal No. 162 of 1942.

Advocates

Mr. M.S Venkatarama Ayyar for Appts.
Messrs. T.V Muthukrishna Ayyar and R. Gopalaswami Ayyangar for Respts.

Judges

Leach, C.J
Wadsworth
Patanjali Sastri, JJ.

Acts

Sub-section (ii) of Section 3, Madras Agriculturists' Relief Act,
Section 3(ii), Madras Agriculturists' Belief Act, 1988,
Madras District Municipalities Act, 1920,
S. (3) (ii) of Madras Act, 4 of 1938.
provision to Section 3 (ii)
Rule 10 of the Rules
INCOME TAX ACT

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Smart Summary

Summary of the Full Bench Opinion

Factual and Procedural Background

This appeal concerns the meaning and effect of Proviso C to Section 3(ii) of the Madras Agriculturists' Relief Act (Madras Act 4 of 1938). The facts and parties are the same as those earlier considered by a Bench composed of Burn and Stodart JJ. in Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942, though that earlier decision (arising under Section 20 of the Act) does not operate as res judicata for the present appeal.

Concisely, the material facts stated in the opinion are:

The respondent owned immovable properties at Mannargudi (annual rental value Rs. 495) and at Tiruvarur (annual rental value Rs. 210).
The municipal assessment register for the Tiruvarur properties retained the name of a former owner, Balasubramania Odayar, who had been dead for many years, due to municipal office negligence.
The respondent was a minor, adopted by his grand-uncle, and represented by his natural mother and guardian, Meenakshi.
Before the relevant period a notice for the first half of 1935–36 (Exhibit R-11) was sent with a covering letter to Meenakshi, without describing her as guardian; the notice nevertheless named the owner as Balasubramania Odayar.
A receipt (Exhibit R-12) shows tax for the second half of 1935–36 was paid by the tenant, Mr. Sambasiva Ayyar, purportedly on behalf of Meenakshi Ammal; that receipt was before the "relevant period" under Proviso C.
During the relevant period further municipal documents and notices (Exs. R-13, R-14, R-15, R-17, R-19) show notices and receipts variously in the name of the deceased owner, served on the occupier, and payments made by the tenant. The tenant gave evidence that he paid the tax under instructions of the guardian.
The earlier Bench in Swaminatha Odayar had held that a person cannot be deemed assessed under Proviso C unless his name appears in the municipal assessment register as owner.

Because of developments in later authorities and the large amount at stake and general importance of the question, the matter was referred to a Full Bench by the court below; the Full Bench answered the referred question in this opinion.

Legal Issues Presented

What is the effect of Proviso C to Section 3(ii) of the Madras Agriculturists' Relief Act — specifically, whether a person is to be treated as "assessed to property or house tax" within the meaning of the proviso only when his name has been entered in the municipal assessment register as owner.
Whether the decision in Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942 is correct in holding that a person cannot be assessed unless the assessment is made in his name in the municipal assessment register.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942	The earlier Bench held that, for the purposes of Proviso C, a person cannot be deemed to be assessed unless his name is inserted in the municipal assessment register as the owner.	The Full Bench examined and rejected this holding as erroneous, answering the referred question by holding that the earlier decision was wrong to require insertion of the owner's name in the register as the sole test of assessment.
Swarnam Iswariah v. Kanappa Chetty ('41) 28 A.I.R. 1941 Mad. 704	The decision emphasises that assessment under the District Municipalities Act is imposed on the property (not the individual) and that the word "assess" has multiple meanings.	The Full Bench relied on this authority to support the proposition that "assessed" need not be confined to an entry of the owner's name in the register, and to show that statutory context and dictionary meanings permit a broader understanding of "assessment."
Commissioner of Income-tax, Bombay v. Khemchand Ramdass ('38) 25 A.I.R. 1938 P.C. 175	The Privy Council drew attention to the fact that the word "assessment" is used in different senses in various parts of the Income-tax Act.	The Full Bench cited this as supporting the view that no single narrow definition of "assessed" can be adopted for Proviso C and that contextual interpretation is required.
Sarveswara v. Umamaheshwara Rao ('41) 28 A.I.R. 1941 Mad. 152	No specific rule or principle was ascribed to this case in the opinion.	The opinion lists this case among subsequent decisions that have shed light on the effect of the provision to Section 3(ii); no specific application beyond that listing is described.
Tirugnanavalli Ammal v. Venugopala Pillai ('41) 28 A.I.R. 1941 Mad. 831	No specific rule or principle was ascribed to this case in the opinion.	Listed as one of the subsequent decisions providing relevant guidance; no discrete use of its reasoning is detailed in the opinion.
Venkatappayya v. Mallayya ('42) 29 A.I.R. 1942 Mad. 410	No specific rule or principle was ascribed to this case in the opinion.	Referenced among later authorities considered to have thrown light on the interpretation of the proviso; the opinion does not extract a particular rule from it in the text.
Namberumal Chetti v. Ramayya Naidu ('42) 29 A.I.R. 1942 Mad. 602	No specific rule or principle was ascribed to this case in the opinion.	Listed as part of the body of later decisions relevant to the question; no individual application is separately described.
Muthiah Chettiar v. Rayalu Aiyer, Nagaswami Iyer & Co. ('44) 31 A.I.R. 1944 Mad. 98	No specific rule or principle was ascribed to this case in the opinion.	Included among authorities (and related appeals A. S. Nos.) that have illuminated the meaning of "assessment" under the relevant enactments; the opinion does not set out distinct reliance upon this single authority.
A. S. No. 328 of 1941; A. S. No. 35 of 1941; S. A. No. 1595 of 1942	No specific rule or principle was set out in relation to these appeal numbers in the opinion.	These appeals are cited as part of the subsequent jurisprudence that influenced the Full Bench's decision that the earlier restricted reading should be reconsidered; no further detail is provided in the opinion.

Court's Reasoning and Analysis

The Full Bench conducted a contextual and purposive analysis of Proviso C to Section 3(ii) of the Madras Agriculturists' Relief Act:

The Bench observed that the earlier decision (Swaminatha Odayar) had confined "assessment" under the proviso to the physical insertion of the owner's name in the municipal assessment register. The Full Bench disagreed with the stronger criticism contained in that earlier opinion that the Subordinate Judge's contrary view was "perverse." The Full Bench found the Subordinate Judge's view to be correct.
The court emphasised that under the District Municipalities Act the assessment is imposed on the property rather than as a personal imposition on an individual. The statutory scheme (specifically sections 82, 83 and 84 and the taxation rules in Schedule 4 of the Act) was cited as supporting the proposition that "assessment" is properly regarded in relation to the property.
The Bench relied on authorities (including Swarnam Iswariah v. Kanappa Chetty) that show the word "assess" is susceptible of multiple meanings: to fix the amount of the tax, to determine and impose the tax upon an individual, to impose a tax upon an individual, or to estimate officially a value for taxation. The Privy Council's observation in Commissioner of Income-tax v. Khemchand Ramdass that the term "assessment" is used in different senses in statutory contexts was used to underscore that no single verbal definition should be mechanically applied.
Given the multiplicity of meanings and the statutory context, the court considered it necessary to construe the proviso as a whole and in light of the scheme and purpose of the Act. The evident purpose of Proviso C, the court held, was to prevent persons from claiming agriculturist relief when they owned property of annual rental value not less than Rs. 600 that had been assessed to property or house tax within the two years preceding 1 October 1937.
The Bench rejected a formalistic outcome whereby a clerical error (e.g., failure to insert the true owner's name in the register) would entirely defeat the object of the proviso. The court noted that such consequences would make the proviso nugatory and would be contrary to its intended purpose.
The court referred to Rule 10 of the Rules framed under the Act, which provides that where a person in whose name an assessment has been made proves he was not the owner during the period mentioned in the proviso, the assessment alone shall not exclude him from the category of "agriculturist." The Bench treated that rule as indicative that mere insertion in the register is not the decisive factor for the proviso's operation.
Synthesising these points, the Full Bench formulated a tripartite test (drawn directly from the opinion) for when a case falls within the operation of Proviso C:
1. there is property whose annual rental value is not less than Rs. 600;
2. the property has been assessed to house or property tax for the two years immediately preceding 1 October 1937; and
3. the municipality demands or recovers the tax from the owner or otherwise treats him as liable to pay the tax.

On this basis the Full Bench concluded that the earlier narrow holding in Swaminatha Odayar was erroneous and should not be followed.

Holding and Implications

Holding:

The Full Bench held that the decision in Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942 is erroneous in holding that a person cannot be assessed within the meaning of Proviso C unless the assessment is made in his name in the municipal assessment register.

The Full Bench answered the referred question by rejecting the register-entry-only test and by setting out the three-factor test (annual rental value threshold, assessment within the two-year period, and municipal demand/recovery or treatment of liability).

Direct consequences and implications (as set out in the opinion):

The narrow rule requiring actual inscription of the owner's name in the municipal register as the sole criterion for being "assessed" under Proviso C has been disapproved by the Full Bench.
The Court clarified the criteria under which a person will fall within Proviso C (the three factors listed above), directing that the municipal demand/recovery or treatment of the person as liable is a material element.
The costs of the reference were ordered to be made costs in the appeal.

The opinion does not purport to state further, broader policy or administrative consequences beyond these rulings in the case and the costs order; the Full Bench framed its conclusion as correcting the prior restricted reading and clarifying the proper test to be applied under Proviso C.

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G. Srinivasa Ayyar And Others v. T.S Swaminatha Odayar And Another

1. This appeal raises a question regarding the effect of Proviso C to S. (3) (ii) of Madras Act, 4 of 1938. The parties to this appeal and the facts affecting the decision of the question under Proviso C are precisely the same as those dealt with by a Bench composed of Burn and Stodart JJ. in Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942, though that decision arising out of an application under Section 20 of the Act will not operate as res judicata. Briefly the facts are these. The respondent was assessed to property tax in respect of properties at Mannargudi, the rental value of which is Rs. 495 per year. He was also the owner of properties in Tiruvarur, the rental value of which was Rs. 210. The municipal assessment register regarding the Tiruvarur properties retained during the relevant period the name of a former owner who had been dead for many years, Balasubramania Odayar. The respondent was a minor adopted by his grand-uncle and his guardian was his natural mother Meenakshi. In respect of the property tax on the Tiruvarur properties for the first half year of 1935-36 a notice, Ex. R-11, was sent with a covering letter to Meenakshi, without any description of her as the guardian of the minor owner, and the owner of the property at the head of the notice was stated to be Balasubramania Odayar. Exhibit R-12 is a receipt for the tax in the second half year of 1935-36 paid by the tenant Mr. Sambasiva Ayyar on 7th September 1935, who states that he paid it on behalf of Meenakshi Ammal and her name is written at the head of the receipt. This receipt is, however, before the relevant period under Proviso C. During the relevant period we have the following documents. Exhibit R-13 relates to the second half year of 1985-36. The notice of demand goes in the name of the deceased owner Balasubramania Odayar. It bears a receipt showing that the tax was paid by Mr. Sambasiva Ayyar who produced the document. It does not appear that the notice was otherwise served on anybody. Exhibit R-14 is a notice for the first half year of 1986-87. It purports to have been issued to the occupier as such. The English portion of the notice recites, "that the tax remains unpaid by the owner, although the time allowed after the service of the notice on him has expired," but in the tamil translation which forms part of the notice this passage is. scored out. Exhibit R-15 shows that the tax was paid by Mr. Sambasiva Ajjyar on 28th January 1937. Exhibit R-17 is the notice regarding the second half year of 1986-37. The notice runs in the name of the deceased Balasubramania, Odayar. At the foot it is noted that "occupier notice was served" and there is a receipt in the name of Balasubramania Odayar. Exhibit R-19 is a notice for the tax for the first half year of 1937-38 served on the occupier, Mr. Sambasiva Aiyer on 19th February 1938. It thus appears that the name of the owner Swaminatha Odayar who was a minor is not found in any of the records, though his guardian was served before the relevant period with a notice demanding the tax. During the relevant period the tax was paid by the tenant and he has given evidence that he was paying it under the instructions of the guardian of the owner.

2. The Bench which decided the case already referred to held that this was a case in which the owner had escaped assessment, not a case in which he had been assessed to property tax. Since that decision was pronounced there have been numerous other decisions which have thrown light on the effect of provision to Section 3 (ii) in cases in which tax was demanded and paid from persons standing in a representative capacity and there has been a good deal of light thrown on the question whether the term "assessment" denotes merely the writing of the name in the assessment register or whether it denotes primarily the demand and payment of tax. For convenience of reference the following cases may be quoted: Sarveswara v. Umamaheshwara Rao ('41) 28 A.I.R. 1941 Mad. 152, Swarnam Iswariah v. Kanappa Chetty ('41) 28 A.I.R. 1941 Mad. 704, Tirugnanavalli Ammal v. Venugopala Pillai ('41) 28 A.I.R. 1941 Mad. 831, Venkatappayya v. Mallayya ('42) 29 A.I.R. 1942 Mad. 410, Namberumal Chetti v. Ramayya Naidu ('42) 29 A.I.R. 1942 Mad. 602, Muthiah Chettiar v. Rayalu Aiyer, Nagaswami Iyer & Co. ('44) 31 A.I.R. 1944 Mad. 98, A. S. NO. 328 of 1941, A. S. NO. 35 of 1941 and S. A. NO. 1595 of 1942. It seems to us that the decision in Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942 may require reconsideration in the light of subsequent decisions. As the amount at stake in the present case is very large and the matter is one of considerable general importance we refer the following question to a Full Bench : "Whether the decision in Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942 is correct in that it holds that a person cannot be assessed unless the assessment is made in his name in the municipal assessment register." The papers will be placed before the Honourable the Chief Justice.

Opinion of the Full Bench

3. Proviso C to Section 3(ii), Madras Agriculturists' Belief Act, 1988, states that a person shall not be deemed to be an agriculturist if he has, within the two years immediately preceding 1st October 1937, been assessed to property or house tax in respect of buildings or lands, other than agricultural lands, under the Madras District Municipalities Act, 1920, or under any of the other Acts specified, if the aggregate annual rental value of the lands and buildings, whether let out or in the occupation of the owner, is not less than Rs. 600. In Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942 a Bench of this Court (Burn and Stodart JJ.) held that a person cannot be deemed to be lawfully assessed within the meaning of this proviso unless his name has been inserted in the assessment register as the owner of the property. The correctness of this decision has been doubted and the doubt has led to this reference. The parties in Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942 were the same as the parties in the present case and the facts were the same. The respondent owns immovable properties at Mannargudi and Tiruvarur which are assessed, and for many years have been assessed, to property tax. The respondent is a minor represented by his mother Minakshi. The former owner of the Tiruvarur properties was one Balasubramania Odayar, who died over 40 years ago. As the result of obvious negligence in the office of the municipality his name remained in the assessment register as the owner of the Tiruvarur properties. The evidence in the ease however leaves no room for doubt that the municipal officials knew who was the actual owner of the properties at all times material. In respect of the tax payable for the first half of the year 1935-36 a notice was sent to Minakshi and since then the tax has been paid by the tenant of the properties under her instructions.

4. The learned Judges who decided Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942 were not content with holding that the essential factor was the entry in the municipal register of the name of the owner of the property. They went so far as to describe as perverse the opinion of the Subordinate Judge that the words "assessed to" meant only "taxed in respect of" and not that the person's name should actually* be found in the assessment register. In our judgment there was no justification for the statement that the Subordinate Judge's opinion was perverse. In fact we consider that the Subordinate Judge was right and the learned Judges were wrong in holding that there could be no assessment under proviso C unless the name of the owner of the property were actually inserted in the assessment register. Under the District Municipalities Act the assessment is imposed not on the individual but on the property, as was pointed out in Swarnam Iswariah v. Kanappa Chetty ('41) 28 A.I.R. 1941 Mad. 704. The provisions of sections 82,83 and 84 and the taxation rules set out in Schedule 4 of the Act leave no room for doubt that this is so. In Swarnam Iswariah v. Kanappa Chetty ('41) 28 A.I.R. 1941 Mad. 704, it was also pointed out that the word "assess" is one which is susceptible of several different meanings and that according to the dictionary it may mean "to fix the amount of the tax" or "to determine the amount and impose the tax upon an individual" or merely " to impose a tax upon an individual" or "to estimate officially the value for purposes of taxation." In Commissioner of Income-tax, Bombay v. Khemchand Ramdass ('38) 25 A.I.R. 1938 P.C. 175 the Privy Council had occasion to draw attention to the fact that the word "assessment" was used in different senses in various parts of the Income-tax Act. Therefore no precise definition can be given to the word "assessed" in proviso C in Sub-section (ii) of Section 3, Madras Agriculturists' Relief Act, and to discover what is meant by the proviso the Court must have regard to the wording as a whole and to the scheme of the Act. When this is done we consider that it is manifest that the proviso was inserted to prevent a person claiming relief under the Act as an agriculturist when he owns property of an annual rental value of not less than Rs. 600 and that property has within two years preceding 1st October 1937 been assessed to property or house tax.

5. If the argument accepted by Burn and Stodart JJ. were to be carried to its logical conclusion, it would mean that an error on the part of a clerk in entering in the assessment register the name of the owner of a property liable to the tax would render the proviso entirely nugatory. This is a position which we are certainly not prepared to accept. Moreover, Rule 10 of the Rules framed under the Act states that where a person in whose name an assessment to property or house tax has been made in terms of the proviso proves that he was not the owner of the property or house assessed at any time during the period mentioned in the proviso, the assessment shall not by itself have the effect of excluding him from the category of "agriculturist" as defined in the section. This rule in itself is enough to indicate that the insertion in the assessment register of the name of true owner of the property is not the deciding factor.

6. We hold that a case comes within the proviso when these factors are present: (1) There is property which has an annual rental value of not less than Rs. 600; (2) the property has been assessed to house or property tax for two years immediately preceding 1st October 1937; and (3) the municipality demands or recovers the tax from the owner or otherwise treats him as liable to pay the tax. Accordingly we answer the question referred by saying that the decision in Swaminatha Odayar v. Srinivasa Aiyer ('39) 26 A.I.R. 1939 Mad. 942 is erroneous in that it holds that a person cannot be assessed within the meaning of the proviso unless the assessment is made in his name in the municipal assessment register. The costs of this reference will be made costs in the appeal.

G. Srinivasa Ayyar And Others v. T.S Swaminatha Odayar And Another

Summary of the Full Bench Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

G. Srinivasa Ayyar And Others v. T.S Swaminatha Odayar And Another

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