TMI Blog1989 (2) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... mployed for dividing the income and to reduce the impact of the tax. Governments, when alert and dynamic, used to intervene, to protect the interests of the Revenue, even by the amendatory process in relation to the existing statutes found deficient in some way or the other. The result is race between the assessee and the Revenue, where each one plays the part carefully and calculatedly, swiftly and intelligently. A tax question, where the husband and wife were in receipt of income as partners of the same firm, arises in these writ petitions, in the setting of an assessment under the Kerala Agricultural Income-tax Act, 1950. The facts are few and simple enough. Pambra Coffee Plantations is run under the auspices of a firm. There are many partners therein. Mr. Joseph George is one among the partners. His wife, Achamma George, is also partner. The firm had been assessed to tax for the assessment year 1978-79. The accounting period was July 1, 1976, to June 30, 1977. The share of income allocable to Joseph George and his wife were clubbed together on the basis of the statutory provision under section 9(2)(1) of the Act. Joseph George was assessed in respect of the aggregate of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xing system. The scheme of our Constitution envisions the basic requirements of the rule of law, namely, fairness, rationality and reasonableness. An interpretation which would create an unfair,' irrational or unreasonable result, should, if possible, be avoided, and the statutory provision salvaged by giving the enacted section subdued, and subordinate content, but one which is fully constitutional. This basic approach should influence the court in the interpretational exercise to be adopted in relation to a fiscal statute too. It is not as though a receipt of money, or the possession of an asset, cannot, in theory, be subjected to a multiplicity of taxes. Depending upon the taxable event, the man who earned income, or amassed the wealth can be squeezed to the very marrow, by the forceful fist of the State. That theoretical possibility had been demonstrated by the Supreme Court in the Buckingham and Carnatic Mills'case. For obvious reasons, including promotion of self-interest in the facile collection of share of Revenue due to the State, taxing statutes have not raged with revenge on an enterprising assessee. The vedic concept of tax collection -of a butterfly perching on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (4), as the case maybe (a) in the case of a registered firm, the sum payable by the firm itself shall not be determined but the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed, and the sum payable by him on the basis of such assessment shall be determined: Provided that, if such share of any partner is a loss, it shall be set off against his other income or carried forward and set off in accordance with the provisions of section 12 : Provided further that, when any of such partners is a person not resident in the State, his share of the income, profits and gains of the firm shall be assessed on the firm at the rates which would be applicable if it were assessed on him personally, and the sum so determined as payable shall be paid by the firm ; and..." The contention of the State is that the proviso occurring after subclause (f) applies not merely to sub-clause (f), but also to other clauses, and consequently the ceiling provided for such exemption operates in relation to the exemption covered by section 10(1)(d) as well. In other words, what is argued is that the income received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue relatable to the land from which income is received, interest payments, repairs, depreciation, and the like come within this category. Section 6 deals with special situations where agricultural income is derived from the properties partly within the State and partly without. Section 7 pertains to the procedural area and deals with method of accounting. The position in relation to the Court of Wards, Receiver, Administrator, etc., is dealt with in section 8. Section 9(2) is aimed at spouses conniving together to escape altogether or reduce the incidence of tax due in respect of the agricultural income derived by both of them. It creates a statutory fiction as it were, by including the income of a wife or a minor child as the income of the husband. We are not concerned with the case of the minor child and the provisions in that regard need not be referred to. Two types of income received by the wife and reckoned by ordinary law as the income of the wife, are deemed by the statute to be part of the total income of the husband : (1) The income of the wife arising directly or indirectly from the membership of the wife in a firm of which her husband is a partner, and (2) inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as regards her share of income from the firm. If that is the net result, it would be impermissible for the assessing authorities to tax that income, taking the stand that the wife continues to have such an income. What has been evaporated by a statutory sunshine, would be unavailable for the State which has stood by and had benefited from the evaporation process. Additionally, it has to be noted that section 10(1) is not the charging section. It is a section granting an exemption as the very title "exemption from assessment of income-tax" indicates. The historical background of the legislation and the statutory provision (which had been unearthed after somewhat strenuous effort in that behalf), has led to a comfortable conviction about the conclusion. The progress of taxation statutes in this field could be traced cautiously so as to watch the junction at which the conclusion is set in. The Agricultural Income-tax Act, 1950, was initially intended to have territorial application over the former Travancore-Cochin portion of the State. The Travancore-Cochin Agricultural Income-tax (Amendment) Act, as the Act was originally named soon after it had been framed, was itself an atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation in Attorney-General v. London County Council [1907] 5 TC 242 (HL) at page 260. A later case in the same volume of the Law Reports, Stevens (Surveyor of Taxes) v. Durban-Roodepoort Gold Mining Co. Ltd. [1909 ] 5 TC 402 (KB), indicated a complementary proposition, that double taxation is permissible, if the Legislature distinctly taxes it. These ideas have been reflected in Indian decisions too : of the High Court of Allahabad in Joti Prasad Agarwal v. ITO [1959] 37 ITR 107, and later, of the Supreme Court itself in CIT v. Murlidhar Jhawar and Purna Ginning and Pressing Factory [1966] 60 ITR 95. Some of the other decisions which have discussed legal principles of allied concepts are CIT v. B. N. Bhattachargee [1979] 118 ITR 461 (SC), K. P. Varghese v. ITO [1981] 131 ITR 597 (SC), CIT v. J. H. Gotla [1985] 156 ITR 323 (SC) and Bhag Mat v. Parbhu Ram, AIR 1985 SC 150. Wading through the various provisions of the Act, it is difficult to locate a conscious intention on the part of the Legislature to bring in the agricultural income of an assessee to subject it to double taxation. Thus, on a consideration of all the relevant provisions of the Act, survey of the historical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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