C V MULK Vs. COMMISSIONER OF AGRICULTURAL INCOME TAX

JUDGEMENT

(1.) These references are under S.60 of the Agricultural Income Tax Act, made by the Kerala Agricultural Income Tax Appellate Tribunal, Additional Bench, Kozhikode at the instance of the assessee. The assessment years are 1969-70 and 1970-71. For the earlier year the assessee filed a return of agricultural income declaring his share at Rs. 1,611 from Messrs Koravampady Estate. For the year 1970-71 he declared his share of the loss from the same Estate at Rs 1,685.46. During both the years in question, he was the Managing Partner of the Estate, entitled to draw a salary of Rs. 6,000 per annum for his services as the Managing Partner of the firm, besides his share of the income under agreements dated 26th July, 1966 and 10th February, 1970. Clause.6 to the earlier agreement and Clause.7 of the latter one, provided for the payment of remuneration to the Managing Partner. The returns were rejected by the Income Tax Officer. In assessing to tax, the Assessing Officer took into account the salary received by the assessee as the Managing Partner of the firm, as the assessee's agricultural income. On appeal by the assessee, the Appellate Assistant Commissioner relying on the decision of this Court in P. P. Kuriakose and P. P. Varghese v. Commissioner of Income Tax 71 ITR 109 directed the Income Tax Officer to exclude the amount of salary received by the assessee as Managing Partner of the estate from his net agricultural income. From the orders of the appellate authority, the State preferred a further appeal, and the Income Tax Appellate Tribunal allowed the appeal and held that the remuneration paid to the Managing Partner was not liable to be excluded in assessing the assessee's agricultural income. At the instance of the assessee the following questions of law have been formulated and referred to this court for our determination and opinion.

(2.) The decision relied upon by the Tribunal in support of its conclusion is R. M. Chidambaram Pillai v. Commissioner of Income Tax 77 ITR 494. a Full Bench decision of the Madras High Court, rendered in relation to the Indian Income Tax Act, 1922. Two sections therein are material; one is, S.10(4) (b) which corresponds to S.40(b) of the Act of 1961 and the other is S.16(1)(b) corresponding to S.67(1) and (4) of the Act of 1961. There was a prior decision of the Madras High Court in Mathew Abraham v. Commissioner of Income Tax 51 ITR 467. Referring to the decision, the Full Bench said:

(3.) Counsel for the assessee further contended that the decision was rendered with respect to the provisions of the Income Tax Act, 1922, and the provisions of S.40(b) prohibiting the payment of remuneration to a partner of a firm and S.67(2) ordaining that the nature of the income derived from an agricultural estate shall be of the same character as the estate itself, in the 1961 Act, would make a difference. On an examination of the decision of the Supreme Court and the decision of the Full Bench of the Madras High Court, which it affirmed, we find that the decisions were rested both on jurisprudential grounds as well as on the provisions of the Partnership Act and the general principles of partnership law. We do not think that we would be justified in accepting the assessee's contention based on the two provisions of the Income Tax Act on which he relies. We may note that there was no provision in the 1922 Act corresponding to S.67(3) of the 1961 Act.