TMI Blog1995 (11) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... after holding an enquiry as required under section 30(1) of the Act accepted the partition by his order dated August 20, 1983 (annexure " A "). Accordingly, the three co-parceners were subjected to separate assessments in respect of agricultural income derived by them out of the portion of the family property falling to their share for the assessment years 1981-82, 1982-83 and 1983-84 on the basis of returns submitted by each of them showing their status as " individual ". According to the petitioners in the said returns, they also included their respective shares in the coffee back-pool payments which had been received subsequent to the date of partition relating to the coffee sold by the erstwhile Hindu undivided family to the Coffee Board during the periods anterior to the date of partition. The assessment orders for the years 1981-82 and 1982-83 were passed on June 22, 1983, and that for the year 1983-84 was passed on March 22, 1984. During the previous years pertaining to the said assessment years, the coparceners had respectively received Rs. 1,76,765.19, Rs. 33,922.43 and Rs. 21,207.80 as " back-pool payments " from the Coffee Board as consideration of coffee crops sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment after partition of a Hindu undivided family, as it originally stood read as under : " Section 30. Assessment after partition of a Hindu undivided family.--(1) Where at the time of making an assessment under section 19, it is claimed by or on behalf of any member of a Hindu undivided family, or branch, an Aliyasanthana family or a Marumakkattayam tarwad or tavazhi hitherto assessed as undivided that a partition or maintenance division has taken place among the members or groups of members of such family, branch, tarwad or tavazhi, the Agricultural Income-tax Officer shall make such inquiry thereinto as he may think fit, and if he is satisfied that there has been a partition or maintenance division of the property by metes and bounds among the various members or groups of members and separate enjoyment by them 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, branch, tarwad or tavazhi entitled to the property as far as may be practicable or in such other manner as may be prescribed. (2) When such an order has been passed, the Agricultural Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment that could be made on the undivided family, even though it was divided at the time of making the assessment, is in respect of the income derived or accrued to the Hindu undivided family as such, i.e., the income derived up to the date of division and that is to be assessed in the hands of the Hindu undivided family. Section 30 of the Act, being in similar terms, its purpose is also the same." Possibly, as a result of the said judgment the authorities under the principal Act found it difficult to bring to tax the coffee back-pool payments and the like receipts received after the partition of the family in the hands of the Hindu undivided family. Accordingly, to fill up the said lacuna, an Explanation to section 30(2) of the principal Act was inserted by section 6 of the Karnataka Agricultural Income-tax. (Amendment) Act, 1985 (Act 23 of 1985), with a declaration that it shall deemed always to have been inserted. The Amending Act came into force on April 1, 1985. The said Explanation read as under : " Explanation. --- For the removal of doubts, it is hereby declared that where any crop is harvested but not disposed of before the partition of a Hindu undivided family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Thus, the conclusion is irresistible that the proviso has no application to the instant case at all." The judgment in the case of H. Kenche Gowda [1988] 174 ITR 389 (Kar), once again prompted the Legislature to substitute the Explanation to section 30(2) of the principal Act by another Explanation to cover up the lacuna pointed out by this court. Accordingly, by the Karnataka Agricultural Income-tax (Amendment) Act, 1989 (Act 19 of 1989), a new Explanation was substituted for the earlier one by which the Legislature incorporated in the Explanation the expression ". . . . the crop is harvested and disposed of, but full payment has not been received for such crop or the crop is harvested and not disposed of ". The Explanation so substituted read thus : " Explanation. --- For the removal of doubts, it is hereby declared that where before the partition of a Hindu undivided family or branch or an Aliyasanthana family or Marumakkattayam tarwad or tavazhi hitherto assessed as undivided the crop is harvested and disposed of, but full payment has not been received for such crop or the crop is harvested and not disposed of, the income from such crop shall, notwithstanding the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re before the partition of a Hindu undivided family or branch or an Aliyasanthana family or Marumakkattayam tarwad or tavazhi hitherto assessed as undivided the crop is harvested and disposed of, but full payment has not been received for such crop or the crop is harvested and not disposed of, the income from such crop, shall, notwithstanding the partition, be deemed to be the income of the Hindu undivided family or branch or the Aliyasanthana family or the Marumakkattayam tarwad or the tavazhi for the year or years in which it is received or is receivable, and the Hindu undivided family or branch or the Aliyasanthana family or the Marumakkattayam tarwad or tavazhi shall be deemed to be in existence for such year or years, as such income shall be assessed as the income of such family or branch or Aliyasanthana family or Marumakkattayam tarwad or tavazhi according to the method of accounting regularly employed by it immediately before such partition." " (4) Notwithstanding anything contained in section 32A, 34, 35, 36, 37 or 55, in cases where before the partition of a Hindu undivided family or branch or the Aliyasanthana family or the Marumakkattayam tarwad or tavazhi, hitherto a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional Government Advocate, appearing for the respondents. Keeping in view the importance of the rival contentions advanced at the Bar, those need to be considered in a little greater detail. Under the Constitution of India " taxes on agricultural income " is a State subject being entry 46 in List II of the Seventh Schedule to the Constitution. Article 366(1) of the Constitution defines " agricultural income " to mean agricultural income as defined for the purposes of the enactments relating to Indian income-tax. Section 2(1)(a) of the principal Act as substituted by the Karnataka Act 14 of 1983 and clause (q) thereof defines the agricultural income and plantation crop as under : " 2. Definition. --- (1) In this Act, unless the context otherwise requires, (a) ' agricultural income ' means (1) any rent or revenue derived from land situated in the State of Karnataka and used for growing plantation crops ; (2) any income derived from such land by,--- (i) agriculture, or .... (q) ' plantation crop ' means cardamom, coffee, linaloe, orange, pepper, rubber or tea ; ....." Therefore, the State Legislature has the competence to levy tax on agricultural income derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to exist on the date on which assessments and/or collection of tax is sought to be made. Such eventualities can arise by death of the individual or dissolution of the firm or association or disruption/partition of the Hindu undivided family. Sections 25 and 26 take notice of some other eventualities like the transfer of land and consequent tax liability in the hands of transferor or transferee with reference to a particular previous year in which transfer takes place. Similarly, section 26 provides for assessment and collection of tax in case a company or firm or association of persons, though surviving, discontinues the business through which agricultural income is received. Though there appears some overlapping in sections 26 and 27 of the principal Act to the extent both sections refer to consequences of discontinuation of business by firm or association of persons, for the present it is not necessary to enter into its consequences, since none of these sections has any thing to do with the liability of Hindu undivided families. So far as the making of assessments and the realisation of tax pertaining to income of the Hindu undivided family after its partition is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture, it is necessary to determine as to how the income derived out of sale of coffee to the Coffee Board has to be determined and assessed keeping in view the provisions of the Coffee Board Act, 1942. This question, in my opinion, has been conclusively answered by the Supreme Court in the case of State of Kerala v. Bhavani Tea Produce Co. Ltd. [1966] 59 ITR 254 ; AIR 1966 SC 677, with reference to the Madras Plantations Agricultural Income-tax Act (5 of 1955) as extended to the State of Kerala. The provisions of the principal Act and that of the Madras Act are almost in pari materia. On examining the scheme of the Coffee Board Act, it has been held by the Supreme Court that as soon as planters deliver coffee to the Coffee Board there is a sale by operation of law in favour of the latter. But the liability to pay agricultural income-tax on the income arising out of such sale depends upon the system of accounting employed by the assessee-planter. It has further been held that if the system of accounting is cash in nature, the income would be taxable when it is actually received but in the mercantile system it would be taxable in the year in which the relevant entry is made about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question is whether these payments which comprised income within the meaning of the principal Act could have been brought to tax in the hands of a person, namely, the Hindu undivided family, which had already disrupted on the date on which such payments were received. To seek an answer to the question posed above, I may usefully refer to section 30(2) of the principal Act which in substance provides that after recording an order accepting partition under sub-section (1) of the said section, the Agricultural Income-tax Officer shall make assessment of the total agricultural income received by or on behalf of the family as if no partition had taken place, and each member shall, apart from his personal liability, be liable for a share of tax on the income so assessed according to the portion of the family property allotted to him. Therefore, it was possible to construe that the back-pool payments which had been received by the members on behalf of the family after its partition relating to the sales effected by the family during its subsistence could have been brought to tax in the hands of the Hindu undivided family and the tax so assessed was to be borne by the respective membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of the judgments of this court in the case of Kenche Gowda [1988] 174 ITR 389 and Uddappa Gowda. It has been submitted that the retrospective operation of the provisions violates articles 14 and 19(1)(g) of the Constitution of India since it speaks of arbitrariness and unreasonableness on the part of the Legislature. So far as this assailment is concerned, as already noticed above, the impugned Explanation has been inserted and successively amended only to make the machinery provisions more explicit so that a Hindu undivided family which had already earned the liability to tax under the principal Act can be effectively assessed. This provision neither creates any charge by itself nor prescribes or alters the rate of tax. By now it is well-settled that the Legislatures in India, if they are otherwise competent to legislate on a topic, can make laws prospectively as well as retrospectively (see Tata Iron and Steel Co. Ltd. v. State of Bihar [1958] 9 STC 267; AIR 1958 SC 452 (paragraph.17)). The second objection raised on behalf of the petitioners is based on sub-section (4) of section 30 as inserted by the Karnataka Act 18 of 1994. This sub-section, inter alia, provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax. They do not create an exemption in favour of the assessee or grant an absolution on the expiry of the period. The liability is not enforceable but the tax may again become exigible if the bar is removed and the ' taxpayer ' is brought within the jurisdiction of the said machinery by reason of a new power. This is, of course, subject to the condition that the law must say that such is the jurisdiction either expressly or by clear implication. If the language of the law has that clear meaning, it must be given that effect and where the language expressly so declares or clearly implies it, the retrospective operation is not controlled by the commencement clause." (emphasis supplied). The aforesaid decision has been followed with approval by the Supreme Court in its latter judgment in the case of S. S. Gadgil v. Lal and Co. [1964] 53 ITR 231 ; AIR 1965 SC 171. By following this judgment, in J. P. Jani's case [1969] 72 ITR 595 (SC), by construing the provisions which were there before their Lordships, it was held that the new statute did not disclose in express terms or by necessary implication that there was a revival of the right of the Income-tax Officer to reopen the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x in the hands of the Hindu undivided family itself. Therefore, there cannot be any question of taxing the said income twice over. Secondly, even otherwise it is always competent on the part of the assessing authorities to assess the income in the right hands. If the said income has been wrongly taxed in the hands of the person who is not liable to be taxed for the said income, he can always have his remedy under the provisions of the Act either by way of appeal or revision or rectification. But this fact by itself cannot be taken as a ground for not bringing the income to tax in the hands of the right person. Therefore, this contention is also rejected. Coming to the last contention, it has been submitted that the impugned demand notices have been issued without undertaking the process of assessment envisaged under section 30(5) read with section 18(2) of the principal Act. So far as this aspect is concerned, as noticed above, the assessment orders dated September 17, 1991, had already been passed on following the procedure prescribed under the Act. But the same were set aside by this court keeping in view the deficiencies pointed out in V. R. Uddappa Gowda's case. The Legislatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to stand under the re-enacted law. Sometimes the Legislature gives its own meaning and interpretation of the law under which the tax was collected and by legislative fiat makes the new meaning binding upon courts. The Legislature may follow any one method or all of them and while it does so it may neutralise the effect of the earlier decision of the court which becomes ineffective after the change of the law. Whichever method is adopted it must be within the competence of the Legislature and legal and adequate to attain the object of validation. If the Legislature has the power over the subject-matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions. The validity of a validating law, therefore, depends upon whether the Legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the validating law for a valid imposition of the tax." By relying with approval on the aforesaid judgment, the Supreme Court again in the case of Hindustan Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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