TMI Blog1967 (11) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... arameswaran Nambudiripad, is a member of Poomuli Mana consisting of a Nambudiri family in Kerala State and the members of the Mana were governed by the Madras Nambudiri Act, 1932 (Act 21 of 1933). Now they are governed by the Kerala Nambudiri Act, 1958 (Act 27 of 1958). The members of the family own considerable items of agricultural lands in Malabar and in the erstwhile Travancore-Cochin State. The area which originally formed the District of Malabar in the Madras State became part of the State of Kerala as and from November 1, 1956. The Travancore-Cochin Agricultural Income-tax (Amendment) Act, 1957 (Act 8 of 1957), amended the Travancore-Cochin Agricultural Income-tax Act, 1950, and extended the same to the whole of the Kerala State including the Malabar area with effect from April 1, 1957. The agricultural income-tax authorities of the State attempted to assess the petitioner who was then the manager of the illom in the status of Hindu undivided family to tax for the assessment year 1957-58 by the assessment order dated February 12, 1958. The assessment order was quashed on November 25, 1958, in O.P. No. 178 of 1958 on the file of this court. On March 30, 1958, all the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking given on behalf of the department by the learned Government Pleader and also contrary to the directions given by this court in O.P. Nos. 340 of 1959 and 750 of 1950 ". The decision of Vaidialingam J. in O.P. No. 31 of 1962 was rendered on December 17, 1963. Section 29 of the Agricultural Income-tax Act, 1950 (before the Amendment Act 12 of 1964), read thus : " 29. Assessment after partition of a Hindu undivided family or Marumakkathayam tarwad.- (1) Where at the time of making an assessment under section 18 it is claimed by or on behalf of any member of a Hindu undivided family, or Aliyasanthana family or branch or Marumakkathayam 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 enquiry 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 enquiry has been served on all the adult members of the family or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty 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 as such, as if no partition had taken place, and each member or groups 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 section 10, be liable for a share of the tax on the incomes so assessed according to the portion of the family property allotted to him or it and the Agricultural Income-tax Officer shall make assessments accordingly on the various members or groups of members in accordance with the provisions of section 18 : Provided that all the members and groups of members whose family 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 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 Aliyasanthana family or branch or Marumakkathayam tarward hith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly such family shall be deemed, for the purpose of this Act, to continue to be a Hindu undivided family. " The above provision was given retrospective effect from April 1, 1958. Based on the above section, a notice dated June 1, 1964, was issued under section 35 of the Act to the petitioner for assessing the agricultural income accrued to the undivided Hindu family during the period from November 1, 1956, to March 31, 1958. The validity of this notice was questioned in O. P. No. 1495 of 1964. During the pendency of the petition the department passed the order of assessment on May 20,1965. A Division Bench of this court quashed the notice and the order of assessment, making the following observations : " One of the submissions of the petitioner is that in the light of the judgments in O. P. No. 759 of 1960 (affirmed in Writ Appeal No. 76 of 1961) and O.P. No. 31 of 1962 it is no longer open to the department to attempt an assessment of the petitioner in any capacity other than that of an individual in respect of the assessment year 1958-59. We are in entire agreement with the submission and, in view of that, it is unnecessary to consider the various other submissions made by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers and that the amendment of section 29 by Act 12 of 1964 cannot cause a reunion among the members to form a Hindu undivided family. On behalf of the respondent the Assistant Secretary (Law), Board of Revenue (Kerala), Ernakulam, has filed a counter-affidavit. While admitting the partition deed dated March 30, 1958, among the members of the Mana it is averred that under section 29(3) of the Agricultural Income-tax Act, 1950, the family shall be deemed, for the purpose of the Act, to continue to be a Hindu undivided family until an order is passed by the Agricultural Income-tax Officer under section 29(1) of the Act recording the partition, and exhibits P-1 and P-3 are, therefore, legal. The points raised by the learned counsel for the petitioner are : (1) that the issue of exhibits P-1 and P-3 is against the undertaking given by the department recorded in the decision in O. P. No. 340 of 1959 and is also against the directions given in the prior decisions of this court in the several petitions filed by the petitioner ; (2) that during the accounting year from April 1, 1960, to March 31, 1961, there was no Hindu undivided family in existence which received the agricultural in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and partly for another, either as owner, trustee, receiver, common manager, administrator or executor or in any capacity recognised by law, and includes a Hindu undivided family, a firm or a company, an association of individuals, whether incorporated or not, and any institution capable of holding property " Hindu undivided family " defined in section 2(kk) of the Act " includes an undivided Marumakkathayam tarwad or tavazhi, an undivided Aliyasanthana family or branch, a family governed by the law applicable to Namboodiris and an undivided Mitakshara family ". A Hindu undivided family is, therefore, an unit of assessment under section 3(1) of the Act. If a Hindu undivided family has to be assessed, the assessment can only be on the total agricultural income of the previous year received by the Hindu undivided family. Exhibit P-1 has called upon the petitioner to submit a return of the agricultural income "of your family properties which you held as its karta in the previous year beginning on April 1, 1960, and ending on March 31, 1961, and chargeable to tax for the assessment year 1961-62 ". In view of the partition deed of March 30, 1958, there was no Hindu undivided family in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax, the Federal Court, speaking with reference to the Income-tax Act, 1922, observed : "The liability to pay the tax is founded on sections 3 and 4 of the Income-tax Act, which are the charging sections. Section 22, etc., are the machinery sections to determine the amount of tax. " Their Lordships of the Supreme Court observed in Kalwa Devadattam v. Union of India : "Under the Indian Income-tax Act, liability to pay income-tax arises on the accrual of the income, and not from the computation made by the taxing authorities in the course of assessment proceedings ; it arises at a point of time not later than the close of the year of account. " The position is the same under the Kerala Agricultural Income-tax Act, 1950. Sub-section (1) of section 29 only prescribes the procedure whereby members of a family hitherto assessed in the status of a Hindu undivided family or which is being assessed for the first time as a Hindu undivided family may obtain an order that they may, because of the division of the joint family property in definite portions, be assessed as separate members. The essence of the section is that the income must in the first instance be received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner in the status of a Hindu undivided family are valid. It is true that an order can be recorded under section 29(1) of the Act only when there is a disruption of the joint family coupled with a partition of all the family properties in definite portions, even though under Hindu law the joint family will cease to exist if there is a division in status among the members without a division of the joint family properties by metes and bounds. In Hindu law when there is severance of joint status the joint family ceases to exist as an entity, although the properties are not partitioned. As far as section 29 of the Act is concerned, the joint family, although its status has been severed, continues to exist till all the properties of the family are completely and finally partitioned. But we do not think that this can in any way support the contention of the learned AdvocateGeneral. It is to be remembered in this connection that what has got to be assessed under sub-clause (2) of section 29 is the total income of the joint family. The Income-tax Officer has, therefore, to ascertain for the purpose of the assessment under section 29 what is the total income of the joint family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the filing of a suit for partition may have this effect though it may take years before the shares of the various parties are determined or partition made by metes and bounds. Meanwhile the family property will belong to the members as it does in a Dayabhaga family in effect as tenants-in-common. Section 25A provides that if it be found that the family property has been partitioned in definite portions, assessment may be made, notwithstanding section 14(1), on each individual or group in respect of his or its share of the profits made by the undivided family, while holding all the members jointly and severally liable for the total tax. If, however, though the joint Hindu family has come to an end it be found that its property has not been partitioned in definite portions, then the family is to be deemed to continue--that is to be an existent Hindu family upon which assessment can be made on its gains of the previous year. " Venkatarama Iyer J. in Lakshmichand Baijnath v. Commissioner of Income-tax observed : " Now, when a claim is made under section 25A, the points to be decided by the Income-tax Officer are whether there has been a partition in the family, and if so, what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of members in definite portions, he must record an order to that effect and thereupon notwithstanding anything contained in sub-section (1) of section 14 of the Act each member or group of members is liable in addition to any income-tax for which he is separately liable, for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it. But even after this apportionment of liability for the tax assessed on the total income of the joint family, the members of the family or groups thereof remain jointly and severally liable for the tax assessed on the total income received by the family as such. If no order is recorded under sub-section (1) of section 25A, by virtue of sub-section (3) the family shall be deemed, for the purposes of the Act, to continue to remain a Hindu undivided family. Section 25A merely sets up a machinery for avoiding difficulties encountered in levying and collecting tax, where since the income was received, the property of the joint family has been partitioned in definite portions, while at the same time affirming the liability of such members or group of members, jointly and severally to satisfy the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scheme of section 25A is therefore clear: a Hindu undivided family hitherto assessed in respect of income will continue to be assessed in that status notwithstanding partition of the property among its members. If a claim is raised at the time of making an assessment that a partition has been effected, the Income-tax Officer must make an inquiry after notice to all the members of the family and make an order that the family property has been partitioned in definite portions, if he is satisfied in that behalf. The Income-tax Officer is by law required still to make the assessment of the income of the Hindu undivided family, as if no partition had taken place and then to apportion the total tax liability and to add to the separate income of the members or groups of members the tax proportionate to the portion of the joint family property allotted to such members or groups of members and to make under section 23 assessment on the members accordingly. If no claim for recording partition is made, or if a claim is made and it is disallowed or the claim is not considered by the Income-tax Officer, the assessment of the Hindu undivided family which has hitherto been assessed as undivide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no Hindu undivided family as understood in Hindu law in existence in the accounting year and the assessment proceedings are started against a member of the family on the ground that he was the manager and the income of the family properties received by all the members is joint family income, there is no scope for applying section 29(1) and, as a result, section 29(3) cannot be invoked. Section 29(3) cannot be read independent of section 29(1). It is controlled by sub-section (1) of section 29 of the Act. The learned Advocate-General relied on the well known dictum of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council : " If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it...The statute says that you must imagine a certain state of affairs ; it does not say that having done so, you must permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. " The Supreme Court in Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31, 1961, and chargeable to tax for the assessment year 1961-62 and also to restrain him from proceeding further in pursuance of exhibit P-3 notice issued under section 17(4) of the Act. The petitioner was the karta of Poomulli Mana, a Namboodiri family, governed by the Madras Namboodiri Act, 1933. On November 1, 1956, the District of Malabar in which the illom is situate became part of the Kerala State. The concerned Agricultural Income-tax Officer of the Kerala State assessed the illom to agricultural income-tax for the assessment year 1957-58 by an order dated February 12, 1958. This was resisted by the petitioner and he filed O. P. No. 178 of 1958 to quash the order of assessment. The O. P. was allowed by this court giving the department freedom to assess the agricultural income derived from the lands of the illom in the erstwhile Travancore-Cochin area. The members of the illom, it is alleged, entered into a partition on March 30, 1958, by a registered document. It is claimed by the petitioner that under the document all the properties in the direct possession of the illom were divided by metes and bounds and the rent payable in respect of the properties in the possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been served on all the adult members of the family 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 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 sub-section (1) of section 10, be liable for a share of the tax on the incomes so assessed according to the portion of the family 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 section 18 : Provided that all the members and groups of members whose family 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 as such up to the date of the partition. (3) Where such an order has not been passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the family as individuals for the purpose of assessment has become res judicata by reason of the decisions of this court in the previous writ petitions, that at any rate the fundamental assumption on the basis of which the assessments were made for the years 1959-60 and 1960-61 was that the family had attained a status of division, and, therefore, the respondent could not have issued the notice for re-assessing the petitioner in the status of manager of a Hindu undivided family for the year 1961-62, and that the provisions of section 29 are ultra vires the Constitution in that they offend article 14 of the Constitution. It was argued for the petitioner that, under the charging section, section 3(1) of the Act, a person alone is chargeable to tax, that the family which attained a status of division by the execution of the partition deed was not a unit of assessment, that an essential condition for applying section 29 was that a Hindu undivided family must have received income in the accounting year, and since the family became disrupted even before the accounting year and no income was received by a Hindu undivided family, the notice was bad. Section 29, before it was ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of section 25A is very clear. It is only when not only the status is severed but also all the properties have been partitioned that the order contemplated by section 25A(1) can be applied for and made, and till such an order is made, for the purposes of income-tax, the joint family continues to exist as a unit although its status may have come to an end. Sub-clause (2) provides for the mode of assessment after the order has been made. It provides that after the order has been made as contemplated by the first sub-clause the tax has got to be apportioned to the shares of the different members of the joint family but the tax has got to be assessed on the total income received by the joint family or on behalf of it. But what has got to be remembered is that under sub-clause (2) of section 25A what has got to be assessed is the total income of the joint family......It is true that although the joint family has ceased to exist in the eye of the Hindu law still it may continue in the eye of the Income-tax Act, and, till all the properties have been partitioned, the income received by the karta from the properties still not partitioned will still be the income of the joint family. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed to tax, unless an order recognising a partition is made under section 29(1), I see no reason why the legislature cannot create a fiction and direct the assessment of a disrupted family for the first time as if the family has not been disrupted. To put it differently, if by a fiction the legislature could treat a disrupted family as a " Hindu undivided family " and, therefore a unit of assessment for the purpose of making assessments in subsequent years, if the family was once assessed as a Hindu undivided family, unless and until an order is passed recognising a partition under sub-section (1) of section 29, one fails to understand why it is not open to the legislature to create a fiction and treat a family which has been divided in status as a Hindu undivided family for the purpose of assessing it for the first time. By amendment to section 29 the legislative fiction was extended to a family which is being assessed for the first time. The expression " hitherto assessed as a Hindu undivided family " does not necessarily indicate that the family should have remained undivided in status under the Hindu law. If that status was broken after the first assessment on a Hindu undivid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment is being made on a Hindu undivided family and since in this case ex hypothesi the family was divided in status, the fiction treating the family as a Hindu undivided family for the reason that no order recognising a partition has been passed for the purpose of assessing it for the first time is unreasonable. The opinion of this court that the fiction is an unreasonable one has nothing to do with the power of the legislature to enact it. The wisdom or the policy in creating the fiction is not the concern of this court. If the legislature has power, there is an end of the matter. I think, in effect, what the respondent says to the petitioner is this If you do not prove that all the properties of the family have been divided in definite portions the legislature by sub-section (3) of section 29 has bidden me to treat the family as a Hindu undivided family and assess it as a Hindu undivided family." It is possible to whip up the imagination and conjure up a picture of an Income-tax Officer going about like a knight errant and issuing notice to all erstwhile members of Hindu families which long ago divided their properties by metes and bounds, proposing to assess them as Hin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he United States Constitution, said : "..............It is apparent that a constitutional prohibition cannot be transgressed indirectly by the creation of a statutory presumption any more than it can be violated by direct enactment. The power to create presumptions is not a means of escape from the constitutional restriction. And the State may not in this way interfere with matters withdrawn from its authority by the Federal Constitution........" I think, the proper course is to recognise that a State Legislature can do whatever it sees fit to do upon a matter within its power unless it is restrained by some express prohibition in the Constitution, and that courts should be careful not to frustrate the object of the legislature by importing into the construction of a statutory provision their own conceptions of reasonableness or of public policy. It was argued that there were several previous attempts to assess the family as a Hindu undivided family, and the family was actually assessed to tax in that capacity for the year 1958-59 and that, therefore, it cannot be said that the family is being assessed to tax for the first time as a Hindu undivided family within the meaning o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, assessment to tax. In other words, there was no contention that any step short of completed assessment would be sufficient to bring a family within the expression " hitherto assessed as a Hindu undivided family ". And, when the legislature used the words " which is being assessed for the first time as a Hindu undivided family " in the latter part of the sub-section, the aim was to indicate a family which has not been previously assessed to tax as a Hindu undivided family and which, therefore, is being assessed for the first time. As it is admitted that all the notices and the orders of assessment on the family were quashed either in original petition or appeal, they are non est at the time when a claim would be put forward by a member that there has been a partition in definite portions. So, the family is being assessed for the first time as a Hindu undivided family. But it was said that the expression " which is being assessed for the first time as a Hindu undivided family " connotes a present-continuous, that the grammatical construction of the expression is all that is relevant, that if there were any previous attempts to assess the family, let alone the order or orders of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch only for grammatical sense of the words was laid down by Lord Wensleydale in Grey v. Pearson : " In construing wills and indeed statutes and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no further. " A canon of construction which postulates that the meaning of a statute is to be gathered from its words as they stand and which confines the process of interpretation to the determination of the grammatical or literal meaning of the text must necessarily restrict the opportunity of the judge to apply the theory underlying the rules in Heydon's case. The notion that the function of the court is simply to construe the words, as they stand, together with the theory that a decision on one particular set of facts results in establishing a rule to be applied in resolving subsequent questions as to the meaning of a statute, is principally responsible for the prevailing complaint that the attitude o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be read like that, but the statute did not mean every syllable it contained " (see " How far is a judge free in rendering a decision "--" The Spirit of Liberty ", page 79 at 82). Justice Holmes said : " The legislature has the power to decide what the policy of the law shall be, and if it has intimated its will, however indirectly, that will should be recognised and obeyed " (see Johnson v. United States.' quoted in Columbia Law Review, volume 47, at page 1264). I think, we can best reach the meaning of the amendment of the section by recourse only to the underlying purpose, and with that as guide by trying to project upon the occasion how we think persons actuated by such a purpose would have dealt with it if it had been presented to them at the time. And when I look at the circumstances which promoted the legislature to make the amendment, I think the expression, " which is being assessed " for the first time, can only mean a family which has not previously been assessed to tax as a " Hindu undivided family " and, is therefore, being assessed to tax for the first time. The next point for consideration is whether the orders passed by the concerned Agricultural Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Society of Medical Officers of Health v. Hope by Lord Radcliffe. And there may well be a difference between a case where an issue was in fact decided in the earlier case and a case where it was not in fact decided because the earlier judgment went by default or was founded on an assumption. Indeed, I think that some confusion has been introduced by applying to issue estoppel without modification rules which have been evolved to deal with cause of action estoppel, such as the oft-quoted passage from the judgment of Wigram V. C. in Henderson v. Henderson. But it is unnecessary to pursue that matter because in the present case the issues with regard to which the respondents plead estoppel were fully litigated in the West German court. " The House of Lords had to consider the question of applicability of the principle of res judicata in rating cases in the case of Society of Medical Officers of Health v. Hope. They held that the position of a valuation officer is that of a neutral official charged with the recurring duty of bringing into evidence a valuation list, and he cannot properly be described as a party so as to make the proceedings lis inter partes. In coming to the concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te opinion in the present case. " I do not think that the respondent is estopped from taking proceedings to assess the petitioner as the karta of the family for the reason that the petitioner and the other members of the family were assessed in the status of individuals for the assessment years 1959-60 and 1960-61 ; see the decision in Sundar Singh Majithia v. Commissioner of Income-tax, Bansidhar Dhandhania v. Commissioner of Income-tax, Waman Satwappa Kalghatgi v. Commissioner of Income-tax and Commissioner of Income-tax v. Purushottam Das Rais. If there is double taxation of the same income, the department would make the necessary adjustment, but that would not preclude the department from assessing the right unit under the law on its income (see Income-tax Officer, Lucknow v. Bachu Lal Kapur). The next argument which is closely related to the one adverted to above was that, by virtue of the orders passed by this court in O.P. No. 750/1960, O.P. No. 31/1962 and O.P. No. 1495/1964, the question of the status of the petitioner has become res judicata and the department is precluded from assigning to the petitioner the status of the karta of a Hindu undivided family and assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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