Commissioner of Agricultural Income Tax vs K.S. Balakrishnan

Veeraswami, C.J.—This appeal arises from K.S. Balakrishnan Vs. Commissioner of Agricultural Income Tax, . The respondent applied for

compensation of agricultural Income Tax in June, 1966. The question was whether an extent of 29 acres and 27 cents which was in excess of the

ceiling area, should be taken into account for purposes of composition. Notwithstanding the fact that the notification u/s 18(3) of the Tamil Nadu

Land Reforms (Fixation of Ceiling on Land) Act, 1961, was made on May 23. 1966, the assessing authority took the view that this extent should

be taken into account for the purpose of composition in respect of the assessment year 1967-68 and in support of this view, he relied on the

proviso to Section 10 of the Madras Agricultural Income Tax Act, 1955. This view prevailed with the Commissioner. But the composition order

passed on that view was quashed by Ramaprasada Rao J., he being of opinion that because of Section 7 of the Land Reforms Act, the stated

extent of land was not liable to be taken into account for the assessment year. The revenue appealed from his order.

With respect, we are unable to share with the learned judge''s view. Section 5 of the Land Reforms Act fixed the ceiling area which a person

could hold after commencement of the Act, which was on April 6, 1960. Section 7 says that on and from the date of the commencement of the

Act, no person shall, except as otherwise provided under the Act, but subject to the provisions of Chapter VIII, be entitled to hold land in excess

of the ceiling area. The expression ""to hold"", as defined, means ""to own land as owner or to possess or enjoy land as possessory mortgagee or as

tenant or as intermediary or in one or more of those capacities"". But Section 7 read with this definition, in our opinion, merely makes a declaration

that from the commencement of the Act, no person shall be entitled to hold land in excess of the ceiling area, to hold as defined in the Act that is to

say, after that date, the person concerned shall not be entitled to own land as owner or to possess or enjoy land as possessory mortgagee or as a

tenant or as an intermediary or in one or more of those capacities. But by its operation, Section 7 does not by itself divest the excess land and vest

the same in the Government free of all encumbrances. Vesting only follows a notification u/s 18(1). The effect of the notification is stated by Sub-

section (3) of that section, which is that from the date of the publication of the notification, the excess land shall be deemed to have been acquired

for a public purpose and vested in the Government free from all encumbrances and all right, title and interest of all persons in such land with effect

from that date be deemed to have been extinguished. It is clear from this provision that notwithstanding the declaration u/s 7 as to the excess land

which the person concerned will not be entitled to hold from the date of the commencement of the Act, his title thereto is not extinguished by

vesting it in the Government from the commencement of the Act. But the vesting, as we said, with reference to Section 18(3), takes place only on

the date of the publication of the notification u/s 18(1), and it is only then the title of the person who held the excess, in point of fact, though he was

not entitled thereto, would stand extinguished. In our opinion, Section 7 will not, therefore, have the operation of extinguishing the ownership of a

holder thereof, though he might not be entitled to the ownership in the sense that he might not be entitled to hold from the date of the

commencement of the Act.

It was on that approach B.E. Kaliyaperumal Nattar Vs. The Authorized Officer (Land Reforms), Tiruchirapalli, allowed a petition by a

transferee of excess land between the date of the commencement of the Act and the date of the publication of the notification u/s 18 of the Land

Reforms Act.

Counsel for the respondent, however, brought to our notice Madras Act VII of 1974, which amended some of the provisions of the principal

Act. Section 3 starts by saying:

The principal Act shall, on and from the first day of March, 1972, have effect as if....

and then we have Section 3(2)(a), which says:

In Section 18 of the principal Act, in Sub-section (3) for the words, ''with effect from the date of such publication'', the words ''with effect from

the date of the commencement of this Act'' has been substituted.

This amendment, as we consider, will not help the respondent. Section 3 provides for two different dates for its operation with two different

results. First of all, as indicated by the opening words of Section 3, the principal Act shall have effect as amended only from March 1, 1972,

Secondly, although Clause (a) of Sub-section (2) of Section 3 of the Amending Act substituted the existing words as mentioned therein by words

giving effect to the consequences of the notification from the date of the commencement of the Act, that would have application only from March

1, 1972. In other words, the combined effect of the opening words of Section 3 and of Clause (a) of Sub-section (2) of Section 3 is that the

amended provisions will leave transactions prior to March 1, 1972, unaffected. Section 3(2)(1) of the Amending Act will have to be read

accordingly. The result is that if the notification u/s 18(3) were made on or after March 1, 1972, its effect would be to vest the land in excess over

the ceiling area with effect from the date of the commencement of the Act; but that would not be so if the notification proceeded March 1, 1972.

There remains then the question as to whether where the notification prior to March 1, 1972, took effect in the middle of the assessment year, the

land, which vested in the Government in consequence from the date of the publication of the notification, should be required to be included in the

composition application. The answer should be clearly in the affirmative, because the proviso to Section 10 of the Madras Agricultural Income Tax

Act is so clear. It says that no person, who held or holds land during any part of a financial year in excess of the exempted extent, shall be entitled

to the exemption under that sub-section, even though the extent of the land held by him during the rest of that financial year may not be in excess of

the exempted extent. This proviso was introduced by Section 11(1) of the Madras Plantations Agricultural Income Tax (Amendment) Act, 1958,

and is a complete answer to the objection raised by the assessee, that because the notification was in the middle of the financial year, the excess

land was not required to be included in such composition application.

The appeal is allowed with costs. Counsel''s fee Rs. 100.