Kailasam, J. - (1.) This appeal is by the State of U. P. by special leave granted by this Court against the judgment and order of the High Court at Allahabad in Special Appeal No. 978 of 1962.
(2.) Two companies, the Raza Sugar Co. Ltd. and the Buland Sugar Co. Ltd., were incorporated under the Rampur State Companies Act, 1932. Messrs. Govan Brothers (Rampur) Ltd. were the common managing agents of the two companies. On 10th May, 1933 the Raza Ltd. and on 11th December, 1934, the Buland Ltd. entered into agreements with the erstwhile State of Rampur. The agreements provided that the Rampur State should grant to the companies leases of agricultural land with adequate irrigation facilities suitable for cultivation of sugarcane. The companies were required to pay fair and equitable land revenue which was to be agreed upon by the companies and the Rampur State. On 5th May, 1935, a partnership deed was executed by the Raza Ltd. and the Buland Ltd. constituting a partnership firm of the two companies in equal shares known as the Agricultural Company, Rampur. In the year 1939 the Rampur State leased 2,000 acres of land and in the year 1946 another 2,000 acres of land to the Agricultural Company, Rampur. In 1949 the State of Rampur acceded to the Union of India and was merged with the State of Uttar Pradesh with effect from 1st December, 1949. The Rampur State had agreed to exempt the Raza Ltd. and the Buland Ltd. from all taxes for a period of 15 years from the date of commencement of their business.
(3.) The U. P. Agricultural Income-tax Act was applied to the areas which formed part of the erstwhile State of Rampur on 1st July, 1950. The Assessing Authority issued notices under Section 16 (4) of the U. P. Agricultural Income-tax Act to the Raza Ltd. and the Buland Ltd. for furnishing returns of their agricultural incomes for the years 1357 F. to 1361 F. It may be noted that the notice was not issued to the Agricultural Company, Rampur. The Raza Ltd. and the Buland Ltd. submitted their returns. The Assessing Authority assessed the two companies to agricultural income-tax for the years concerned. The companies preferred an appeal against the assessment to the Commissioner, Rohilkhand Division, and also filed writ Petition No. 2385 of 1959 in the High Court of Allahabad challenging the assessment orders. On 17th April, 1961 the writ petition was allowed and the order of assessment was quashed with a direction that fresh assessments may be made. The Commissioner also directed the Assessing Authority to make fresh assessments in the light of the observations made by the High Court in its judgment dated 17th April, 1961, allowing the writ petition No. 2385 of 1959.;