Decided on July 25,1963

AITO Respondents

Cited Judgements :-



- (1.)This is an instance, it appears to me, of the taxing authorities as well as the assessee groping in the dark without knowing each other's rights in regard to the assessment. The assessment order impugned is Ext. P1 and is for the years 1959-60 and 1960-61 and has imposed agricultural income tax and supertax as well as surcharge on the supposed Hindu undivided family of the petitioner who is said to be its head. It appears to me that the members of this family unequivocally decided to effect a severance of interest among themselves (that is the contention of counsel for the petitioner) and it is said it is evidenced by a written agreement by which agreement the question of division of the properties by metes and bounds was left to arbitrators. Somehow, this agreement was not implemented and, therefore, it is said, some of the members of the family filed a suit for partition. A receiver was appointed in that suit and he took possession of the properties on 12-9-1960. The fact of there being a suit is admitted and it was also not denied that the properties are in the possession of the receiver from 12-9-1960. However, a preassessment notice dated 5-1-1962 was issued to the petitioner as the head of the family and that notice indicated the basis on which the assessing authority proposed to assess the Hindu undivided family. The petitioner objected to this procedure and contended that there was no family, that the unit was not the Hindu undivided family, that the family had become disrupted, that the members attained the status of tenants in common and that, therefore, the proposal to assess the unit as a Hindu undivided family was unwarranted. This contention specifically raised in the objection dated 27-11-1962 has not been adverted to, much less considered, by the authority who passed Ext. P1 order. No doubt, S.29 of the Agricultural Income Tax Act reading as under
"29. Assessment after partition of a Hindu undivided family or Marumakkathayam tarwad.-- (1) Where at the time of making an assessment under S.18, it is claimed by or on behalf of any member of a Hindu undivided family, or (Aliyasantana family or branch or Marumakathayam, tarwad) hitherto assessed as undivided that a partition has taken place among the members or groups of members of such family or tarwad, the Agricultural Income Tax Officer shall make such inquiry thereinto as he may think fit, and if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to that effect:

Provided that no such order shall be recorded until notice of the inquiry has been served on all the adult members of the family or tarwad entitled to the property as far as may be practicable or in such other manner as may be prescribed.

2. Where such an order has been passed, the Agricultural Income Tax Officer shall make an assessment of the total agricultural income received by or on behalf of the family or tarwad as such, as if no partition had taken place, and each member or group of members shall, in addition to any agricultural income tax for which he or it may be separately liable, and notwithstanding anything contained in clause (a) of S.10, be liable for a share of the tax on the income so assessed according to the portion of the family or tarwad property allotted to him or it and the Agricultural Income Tax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of S.18:

Provided that all the members and groups of members whose family or tarwad property has been partitioned shall be liable jointly and severally for the tax on the total agricultural income received by or on behalf of the family or tarwad as such up to the date of the partition.

(3) Where such an order has not been passed in respect of a Hindu family, or (Aliyasantana family or branch or Marumakkathayam tarwad) hitherto assessed as undivided, such family or tarwad shall be deemed for the purpose of this Act to continue to be an undivided family or tarwad."

may not apply. This is so because there has been no division admittedly by metes and bounds. But this is not sufficient, I think, to negative the contention that the family should not be assessed as a unit. At any rate it has been contended by counsel for the petitioner that the assessment must be on the basis of S.3(5) which enacts:

"In the case of persons holding property as tenants in common and deriving agricultural income, the tax shall be assessed at the rate applicable to the agricultural income of each tenant in common"

If the members of the family have, therefore, become tenants in common, the rate that will be applicable will be only the average rate applicable to a member of the family. This is not the manner in which the assessment has been made. As I said earlier, there has been no investigation on this question and it is essential that this matter should be enquired into before the assessment is finalised.

(2.)In this connection, I may refer to the decision of this Court in Srilalan v. Inspecting Asst. Commissioner of Agrl. Income Tax and Sales Tax (1958 KLJ 435), which proceeds on the basis that even if S.29 is not applicable, the assessment should be on the basis of S.3(5). The assessing authority will take note of this decision in future "proceedings.
(3.)In any view of the matter, the imposition of supertax on this family is not warranted in view of the fact that the total income is only Rs. 50,000 and assuming that it is S.3(3) and not S.3(5) that should be applied, even then the share of the income of five members and the rate applicable thereto for supertax will be nil. I therefore quash Ext. P1 and make it clear that in any view of the matter, no supertax or surcharge thereon can be imposed on this family.

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