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1997 DIGILAW 435 (MAD)

S. P. Bhansali v. State of Tamil Nadu

1997-03-27

ABDUL HADI, N.V.BALASUBRAMANIAN

body1997
Judgment :- A. ABDUL HADI J. These tax revisions have been preferred under section 54 of the Tamil Nadu Agricultural Income-tax Act, 1955, against the order passed by the Commissioner under section 34 of the Act, which provides for suo motu revision by the Commissioner. T. C. Nos. 212, 213, 285, 368 and 374 of 1985 relate to the same assessee by name S. P. Bhansali while T. C. Nos. 426 to 428 of 1985 relate to another assessee, M. K. Bhansali T. C. No. 212 of 1985 relates to the assessment year 1978-79 ; T. C. No. 213 of 1985 relates to the assessment year 1974-75 ; T. C. No. 285 of 1985 relates to the assessment year 1977-78 ; T. C. No. 368 of 1985 relates to the assessment year 1975-76 ; and T. C. No. 374 of 1985 relates to the assessment year 1976-77. T. C. No. 426 of 1985 relates to the assessment year 1978-79 ; T. C. No. 427 of 1985 relates to the assessment year 1977-78 and T. C. No. 428 of 1985 relates to the assessment year 1976-77 Since a common question is involved in all these tax cases (revisions) they are all disposed of together. The following facts are necessary to understand the point involved. The above said S. P. Bhansali was a partner having a particular share in three different firms which were having agricultural income. They were : (1) Warwick Estate Syndicate ; (2) Kairbetta Estate Syndicate ; and (3) Kesaria Nilgiris Hills Tea Plantations. Further, he was also the karta of a Hindu undivided family, hereinafter referred to as "HUF". According to learned counsel for the applicant, the said S. P. Bhansali threw his said interest in two of the above referred to three firms, viz., Warwick Estate Syndicate and Kairbetta Estate Syndicate, into the common hotchpot of the abovesaid family in 1969, and thereafter after such blending, the abovesaid Hindu undivided family alone was assessed to tax in respect of the income flowing from those interests in the two firms while he was assessed separately as an individual in respect of his share of income from the other firm, Kesariya Nilgiris Hills Tea Plantations, and such separate assessments continued up to 1978-79. Learned counsel further submits that the Commissioner purporting to exercise his jurisdiction under section 34 of the Act issued a show-cause notice dated March 29, 1982, calling upon the said assessee to show cause why orders should not be passed to cancel the assessment orders passed by the Agricultural Income-tax Officer earlier in respect of the above referred to five assessment years 1974-75 to 1978-79. Further he submits that despite his reply to the show-cause notice dated April 5, 1982, the Commissioner passed the impugned order dated October 22, 1982, in respect of those five assessment years setting aside those assessment orders and directing the Agricultural Income-tax Officer to pass fresh assessment orders in the hands of the said assessee as an individual, pursuant to the show-cause notice by clubbing the alleged income of the said assessee from all the abovesaid three firmsIt is against the said order of the Commissioner, these five revisions have been preferred by the abovesaid S. P. Bhansali The other three tax cases also, viz., T. C. Nos. 426 to 428 of 1985, are against similar orders passed by the Commissioner under section 34 of the Act, dated October 22, 1982. There also learned counsel for the petitioner submitted that there was blending in the year 1969 by the assessee, M. K. Bhansali, in favour of his Hindu undivided family, in relation to his interest in one of the above-referred to three firms, viz., Kairbetta Estate Syndicate. Learned counsel also submitted that in the case of M. K. Bhansali also in 1969 after blending the abovesaid Hindu undivided family alone was assessed to tax in respect of the income flowing from the abovesaid interest that was blended into the family right up to the assessment year 1978-79 and the abovesaid change was sought to be made by the Commissioner in the impugned order dated October 22, 1982, in respect of M. K. Bhansali Even at the outset we must state that regarding the abovesaid blending by S. P. Bhansali there is no specific reference to such blending in 1960, in any of the papers placed before us in the above referred to five cases relating to S. P. Bhansali, though learned counsel for the applicant referred to such blending by S. P. Bhansali in 1969. No doubt, in the case of M. K. Bhansali this blending is spoken to in the reply, which M. K. Bhansali sent on September 18, 1992, to the show-cause notice issued by the Commissioner, dated March 29, 1982. However, it is clear that prior to the show-cause notice in each of the two sets of cases, one relating to S. P. Bhansali and another relating to M. K. Bhansali, in the years prior to the relevant impugned orders, there was no clubbing spoken to earlier but there were only separate assessmentsAfter going through the impugned orders in both sets of cases we are unable to conclude that there is any justification for the abovesaid clubbing, despite the rival arguments advanced by learned counsel for the Revenue. The material portions in the impugned order in the case of S. P. Bhansali are as follows "This is a case where the assessment was made in the status of the Hindu undivided family and individual for one and the same person for the assessment years 1975-76 to 1978-79 and the income derived from the three firms was not clubbed together and assessment was not also made as per section 2(x) of the Act The provisions of section 2(x) read with section 9 and section 10(2) of the Act are clear that the total agricultural income includes incomes specified under section 9 and all receipts described in section 10(2) of the Act This is a case for taking all the agricultural income together under section 2(x) of the Act. So the authorities quoted cannot be taken as relevant for the issue in the case where he derived income as a Hindu undivided family taking himself his share from a company and individual for the same assessment year. The status of the individual should not have been differentiated and it is wrong to give more than one status to one and the same assessee who derived income in his individual capacity and as a partner of another firm. The assessment made in the status of the Hindu undivided family in respect of share income from one estate and individual in respect of his share income from another estate should not have been separated. The assessment made in the status of the Hindu undivided family in respect of share income from one estate and individual in respect of his share income from another estate should not have been separated. The one is an income derived by the individual and the other could be taken as receipt under section 10(2) of the Act being the share income derived by him as a partner of the firm." * A similar passage appears in the other impugned order also in relation to M. K. BhansaliBy reading the above passage it appears that the Commissioner mainly relies on section 2(x) read with section 9 of the Act. Section 2(x) defines the term "total agricultural income" thus "... 'total agricultural income' means the aggregate of all agricultural income mentioned in section 4 computed in accordance with the provisions of section 5 and includes all income of the description specified in section 9 and all the receipts of the description specified in sub-section (2) of section 10." * Now it is clear from the abovesaid definition that income spoken to under section 9 would also come within this definition under section 2(x). Section 9(1) runs as follows "In computing the total agricultural income of an assessee, all agricultural income arising to any person by virtue of a settlement or disposition, whether revocable or not, and whether effected before or after the commencement of this Act, from assets remaining the property of the settlor or disponer shall be deemed to be the agricultural income of the settlor or disponer, and all agricultural income arising to any person by virtue of a revocable transfer of assets shall be deemed to be the agricultural income of the transferor." * (The provisos therein are not extracted since they are not quite relevant.) The material portions of section 9(2) run as follows "In computing the total agricultural income of any individual for the purpose of assessment, there shall be included--- (a) so much of the agricultural income of a wife or minor child of such individual as arises directly or indirectly (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart ; or(iv) from assets transferred directly or indirectly to the minor child not being a married daughter by such individual otherwise thin for adequate consideration ; and (b) so much of the agricultural income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or minor child or both" * We must first point out that in the impugned orders though section 9 is referred to, it is not specifically mentioned whether section 9(1) is invoked or section 9(2) is invoked in the present case. Even in the show-cause notice issued by the Commissioner originally in both the assessees' cases, there is no specific reference to section 9(1) of 9(2) of the Act. In our view neither section 9(1) nor section 9(2) could be invoked in the case of either of the two above-said assessees. Even in the show-cause notice issued by the Commissioner originally in both the assessees' cases, there is no specific reference to section 9(1) of 9(2) of the Act. In our view neither section 9(1) nor section 9(2) could be invoked in the case of either of the two above-said assessees. Section 9(2) will not at all apply since the abovesaid blending will not be a transfer spoken to in section 9(2) as held in State of Tamil Nadu v. A. Sadhanandam 1978 (113) ITR 453, 1978 (7) CTR 115 (Mad), following the decision in Goli Eswariah v. CGT 1970 AIR(SC) 1722, 1971 (1) SCR 522 , 1970 (2) SCC 390 , 1970 (76) ITR 675, 1971 (1) MLJ 105 (SC) which related to a case under the Gift-tax Act, 1958. In Goli Eswariah v. CGT (supra) the Supreme Court has held that such blending resorted to by one coparcener of the family cannot be termed "transfer" as defined under the Gift-tax Act. Since such blending takes place pursuant to an unilateral declaration only and it is not a bilateral transaction. Learned counsel for the respondent also did not support the impugned orders, invoking section 9(2) of the Act Then, coming to section 9(1) of the Act, it consists of two parts. The second part obviously will have no application since there is no revocable transfer spoken to therein, in the present case. Coming to the first part of section 9(1) of the Act also we have necessarily to conclude that the first part also would not apply to the present case. The said first part contemplates only a case where the income from an asset alone is settled or disposed of while the asset remains with the settlor or disponer. But, in the present case, pursuant to the abovesaid blending, the property in question in each case actually went over to the Hindu undivided family in question in each case and did not remain with the relevant assessee. Therefore, the first part of section 9(1) also will not apply. In the impugned orders, as already indicated, section 10(2) of the Act is also referred to. But that provision only says "Agricultural income-tax shall not be payable on that part of the total agricultural income of a person which is--- (a) any sum which he receives out of the agricultural income of a Hindu undivided family... In the impugned orders, as already indicated, section 10(2) of the Act is also referred to. But that provision only says "Agricultural income-tax shall not be payable on that part of the total agricultural income of a person which is--- (a) any sum which he receives out of the agricultural income of a Hindu undivided family... he receives such sum as a member of the family or tarwad or tavazhi and tax under this Act has been levied on the agricultural income." * Actually, the existence of this provision also shows that there could be separate assessment, one of the individual, who is a coparcener in a Hindu undivided family and another of the Hindu undivided family itself, and when a particular income is assessed in the hands of the Hindu undivided family any coparcener of the family cannot be once again charged to tax in respect of his share of income from the said family. That apart, in section 2(q) of the Act, even while defining the term "person" among the assessable entities, individual as well as the Hindu Mithakshara family are mentioned Therefore, there is no justification at all for the Commissioner invoking section 34 and seeking to resort to the abovesaid clubbing Further we must also point out that there is a confused thinking on the part of the Commissioner. This is evident from the passage extracted above from the impugned order. He proceeds in the said passage as if the assessee in each of these two sets of cases is having two different status, one as an individual and another as a Hindu undivided family. Actually speaking apart from having a status of an individual he is also a coparcener of the Hindu undivided family in question and the said family alone is given the status of the Hindu undivided family under the Act. So, it cannot be said that the assessee in each of the two sets of cases is having two different status The net result is all these revision petitions are allowed. The impugned orders in both the two sets of cases are set aside. No costs.