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Judgment
Srinivasan, J.—The Petitioner applied u/s 65 of the Madras Agricultural income tax Act, for composition of the agricultural income tax
payable by him. The Agricultural income tax Officer held that the partitions and divisions of properties referred to in the application were
found to be not in terms of definite portions of lands but in their proportionate share only
and that for this reason
composition of the tax in this case was out of the question.
The permission applied for was refused. Precisely identical orders were passed in the assessment years 1958-59, and 1959-60. The Petitioner
took the matter up to the Commissioner of Agricultural income tax by way of revision. The Commissioner took the view that as the Petitioner was
in common enjoyment of certain lands in addition to the lands in his exclusive possession and enjoyment, he could not be deemed to hold such
common land. He observed:
However, when he opts for the method of composition, is it permissible for him to urge that in the case of lands enjoyed in common, the notional
share in the lands can be construed as being held by him for the purpose of Section 65. The definition of the standard acre, the definition of to hold
and the distinction between owning and holding is the definition of a person leads me to conclude that such a view is not permissible.
He refused to permit the Petitioner to compound the tax in respect of the lands in his exclusive possession and to pay agricultural income tax on
the basis of income in respect of the land held by him as tenant-in-common. He was, however, willing to permit the Petitioner to have a
composition of the agricultural income tax if he was willing to include as part of his holding the entirety of lands held by him as tenant-in-common.
As the Petitioner was obviously unwilling to agree to such a course, the Commissioner dismissed the petitions. It is against these orders that the
revision petitions have been filed.
The question that we have to consider is whether a person owning agricultural land, partly in his exclusive possession and enjoyment, and partly
as a tenant-in-common, is denied the right to have a composition of the agricultural income tax. In the absence of any clear indication one way or
the other we have necessarily to examine the various provisions of the Act. At the outset, we may set out Section 65 which reads:
Composition of agricultural income tax. (1) Any person who holds land not exceeding four times the exempted extent may apply to the prescribed
officer for permission to compound the agricultural income tax payable by him and to pay in lieu thereof a lump sum at the rate or rates specified in
Part II of the schedule.
The only restriction that is placed on the right to composition of agricultural income tax appears to be the upper limit upon the extent of such
holding which, according to the section, should not exceed four times the exempted extent. The other sub-sections do not furnish any material to
support the view that the grant of permission to compound agricultural income tax is dependent upon any other conditions. Any person, therefore,
who holds land not exceeding four times the exempted extent is entitled to ask for and obtain such composition.
Exempted extent is defined in Section 2(j) to mean twelve and a half standard acres. It is not necessary to go extensively into the definition of
standard acre except to say that various classes of land are to be converted to extents in terms of notional standard acres on the basis of a table of
equivalents given in the definition of standard acre. The holding of every person liable to pay agricultural income tax is, according to the
requirements of the Act, to be reduced in terms of standard acres for the reason that Section 10 of the Act provides for exemption from income
tax and states:
Nothing contained in this Act shall apply to a person who holds land not exceeding twelve and a half standard acres.
From this provision, it is clear that any person owning only twelve and a half standard acres or less is not liable to any proceeding under this Act.
In so far as the composition of agricultural income tax is concerned, it is clear from Section 65 that the right to compound the tax is available only
to a person who holds land not exceeding fifty standard acres.
The charging section is Section 3. It states:
(1) Agricultural income tax at the rate or rates specified in Part I of the schedule to this Act shall be charged for each financial year commencing
from the 1st April 1955, in accordance with and subject to the provisions of this Act, on the total agricultural income of the previous year of every
person.
Part I of the schedule provides that on the first three thousand and six hundred rupees of total agricultural income, there is a nil rate of tax. Part
II of the schedule, which provides the rates for composition u/s 65 states that on the first twelve and a half standard acres there is a nil rate per
standard acre. It is clear, therefore, that where composition of tax is effected u/s 65, the first twelve and a half standard acres goes free of tax. In
like manner, when the tax is levied on the basis of the income, the first three thousand and six hundred rupees thereof is free of tax. Quite
obviously, these exemption limits are provided in pursuance of Section 10, which provides for exemption from assessment of income tax up to a
limit of twelve and a half standard acre.
A somewhat important provision is contained in Section 3(3) which reads:
In the case of persons holding property as tenants-in-common and reliving agricultural income, the tax shall be assessed at the rate applicable to
the agricultural income of each tenant-in-common.
We shall make further reference to this provision in due course.
On the facts, it is not disputed that the Petitioner in this case owns lands in several villages. Most of the lands are owned by him exclusively.
Certain lands appear to be in the common enjoyment of five persons, one of whom is the Petitioner. The Commissioner of Agricultural income tax
states in paragraph two of his order:
The share of each of the members in these lands is well defined and no doubt the members are to be treated as tenants-in-common in respect of
these lands.
But he refused to accept the plea of the Petitioner that the phrase to hold would apply to a definite share of the land which the Petitioner held in
common with certain other persons. We have to consider whether this restricted interpretation of this expression to hold derives any support from
either principle or authority.
To hold has been defined in Section 2(nn) of the Act to mean
...to possess and enjoy either as owner or tenant or mortgagee in possession or as a maintenance holder or in one or more of those capacities.
To hold accordingly means to possess and enjoy as owner. The short question then is whether a tenant-in-common cannot be said to possess
and enjoy the lands in question as owner notwithstanding that his ownership is joint with some other persons. Though the Agricultural income tax
Officer and the Commissioner do not in so many words say so, they seem to suggest that unless a person is in exclusive ownership of any land, he
cannot be said to hold the land. Coming to the definition of person in Section 2(q) of the Act, it reads thus, leaving out those portions of it which
are not relevant for our purpose:
Persons means any individual....owning or holding property for himself or for any other, or partly for his own benefit and partly for another, either
as owner....or in any capacity recognised by law....
This definition would clearly appear to suggest that the expression person used anywhere in the Act would include one who holds property as
a tenant-in-common. Even if the tenant-in-common cannot be said to hold the property for himself or for any other or partly for his own benefit
and partly for another, it is quite clear that the expression in any capacity recognised by law would take in a tenant-in-common as an individual
holding property within the meaning of the section. The Commissioner, however, thought that there was a distinction between owning and holding
in the definition of person �which leads him to conclude that it is not permissible for a Petitioner, situated as in this case, to ask that he should be
deemed to hold a notional share in the lands of which he is a tenant-in-common. We are unable to see how a tenant-in-common would not come
within the description of persons in section 2(q) of the Act.
This part of the section
any individual....holding property-partly for his own benefit and partly for another....in any capacity recognised by law....
is clearly very apposite indeed in referring to a person who is a tenant-in-common. It is difficult to see any distinction between owning and holding
in this definition. Normally, ownership carries with it both possession and enjoyment and holding is also defined as meaning to possess and enjoy.
While a person may hold in a capacity other than that of an owner, a person not being an owner may no doubt be in possession and enjoyment in
some other lawful capacity. There is no doubt this distinction between owning and holding, but notwithstanding the use of both these expressions in
defining person, the section does not purport to exclude one category of owner, viz., the tenant-in-common, which is really the effect of the learned
Commissioner''s observation. It, therefore, should follow that Section 65, in saying any person who holds land, cannot be taken to exclude one
who is a tenant-in-common and who holds land in such capacity as a tenant-in-common. Not only do we not find words of limitation of that kind in
this section; on the other hand, the definition of person taken along with the definition of to hold would seem to support the view that tenants-in-
common are taken in within the scope of Section 65 of the Act.
If the contrary view is to prevail, viz., that the benefit of composition is not available to a person who holds land as tenant-in-common, we
would normally have expected to find much clearer language in the section. That is not the case. We may take judicial notice of the fact that a very
large proportion of persons who derive agricultural income fall within the class of tenants-in-common and if a right which is otherwise unrestricted
by the words of the section is to be denied to them, as a result of the construction placed upon the section by the department, we must require
much stronger support for that denial in the other provisions of the Act. A careful consideration of the relevant provisions leaves us with the firm
conclusion that no such restriction of the right to composition can be inferred from the language employed in any part of the Act.
Except for Section 3, which lays the charge on agricultural. income, Section 4, which defines total agricultural income and Section 5, which
deals with the mode of computation of such agricultural income, the other provisions of the Act are procedural in their scope. We except in this
connection Section 10, which grants an exemption from assessment to income tax to a person who holds land not exceeding twelve and a half
standard acres. Any assistance that may be available in interpreting Section 65 is mainly to be derived only from these few sections read in the light
of the interpretation clause. The learned Counsel for the department contended for the construction placed upon these words to hold by the
Commissioner that a tenant-in-common cannot be said to hold land, and if he is to be regarded as holding land, the land in question, he must be so
deemed to hold the entirety of the land and not only his fractional interest therein though such interest may be defined. Now, it appears to us that
such a construction would amount to the repeal of Section 10 in a large number of cases. Take the case of two persons owning only twenty
standard acres as tenants-in-common. Section 3(3) provides that in the case of persons holding property as tenants-in-common, the tax shall be
assessed at the rate applicable to the agricultural income of each tenant-in-common; that is to say, that in respect of the income derived by each of
the tenants-in-common, he would be entitled to the tax-free limit of three thousand and six hundred rupees as laid down in part I of the schedule.
But according to the learned Counsel for the department, Section 10 would have no application in the case whatsoever notwithstanding that it lays
down that nothing contained in the Act shall apply to a person who owns land not exceeding twelve and a half standard acres. Where two persons
hold land as tenants-in-common and in moieties, and the interest of each person in such land falls short of the twelve and a half standard acres, one
would have thought that Section 10 would have exempted either of these persons from assessment of income tax. But, according to the learned
Counsel for the department, this section would not apply, that is to say, a computation of the agricultural income has yet to be made in respect of
this holding and an assessment made on the basis of Section 3(3). We are unable to see any justification for this extreme view. When a holding, not
exceeding twelve and a half standard acres, is taken out of the operation of the Act, a different result would not have been intended just for the
reason that there is a joint tenancy of an extent exceeding twelve and a half standard acres, but which reduces itself below the exempted limit when
the interest of each of the tenants-in-common is separately computed. Such a result, a result which would be so opposed to the scheme of the Act,
would follow if the interpretation placed upon these relevant expressions by the department is accepted.
Salmond on Jurisprudence (eleventh edition) at page 306, in dealing with Sole Ownership and Co-ownership, says:
Two or more persons may at the same time have the same right vested in them. This may happen in several distinct ways, but the simplest and
most obvious is that of co-ownership.... Co-ownership, like all other forms of duplicate ownership, is possible only so far as the law makes a
provision for harmonising in some way the conflicting claims of the different owners inter se. In the case of co-owners the title of the one is
rendered consistent with that of the other by the existence of reciprocal obligations of restricted use and enjoyment.
It is clear, therefore, that tenants-in-common have what may be called a joint title to the estate and that each one of the tenants-in-common is
entitled to have the use and enjoyment of the estate. The existence of mutual obligations between the tenants-in-common renders such ownership
possible. A co-owner or tenant-in-common cannot, therefore, be said to be a person not in possession and enjoyment of the estate. When, as a
matter of fact, the interest of each co-tenant is specified and determined, there would appear to be no objection to holding that he is entitled to
possess and enjoy such fractional interest in the estate of the holding, though no distinct part of it might be set apart for his exclusive enjoyment.
In Kamalamma v. Pitchamma I.L.R.. [1949] Mad. 770, the case of a co-sharer and the rights inter se the co-sharers came for consideration.
The learned Chief Justice observed:
In theory, each co-tenant is entitled to be in possession and to use every part of the common property, so long as lie does not exclude his co-
tenant. A co-sharer is not agent of the other sharers, apart from any specific contract.
In the case of land capable of enjoyment by cultivation, it is clear that unless there is joint cultivation or community farming, the theoretical right on
each co-tenant ''to enter upon and hold exclusive possession of common property cannot be enjoyed in practice.... The preponderance of
authorities both in England and America appears to confirm the right on each co-tenant to enter upon and hold exclusive possession of the
common property and to make such profit and he can by proper cultivation or by other usual means of acquiring benefit there from and to retain
the whole of such benefits, provided that, in having such possession and making such profits, he has not been guilty of ouster of his co-tenant, nor
hindered the latter from entering upon the premises and enjoying them as he had a right to do''.... More or less, the same rule has been applied to
India.
Though the right of each co-tenant to hold the entirety of the land, provided that such possession does not imply an ouster of his co-tenant, is,
no doubt, established, it is clear that the possession and enjoyment by one of the co-tenants is equally the possession and enjoyment of another in
law. Obviously, one co-tenant in such exclusive possession cannot be made to account for the profits realised, but where it is clear that the co-
tenants are jointly in such possession and enjoyment, to say chat each co-tenant does not hold the land to the extent of his title is hardly consistent
with factual position, at least in so far as it obtains in the present case.
The argument of the learned Counsel for the department goes to the extent, as we have pointed out, of denying the statutory right of exemption
contemplated u/s 10 of the Act. If a person owns an extent of five standard acres absolutely and a fractional share computable at one acre out of a
joint estate, learned Counsel purports to suggest that Section 10 would not apply to that case, if the whole of the joint estate together with the said
five acres should exceed twelve and a half standard acres. As we have said once before, we can find no warrant for this view in the wording of the
section or in the scheme of the Act. A construction which leads to such a result has necessarily to be rejected.
On behalf of the department, it is again urged that it would be impossible to ascertain the extent of the Petitioner''s holding in such joint estate,
and this practical difficulty should be sufficient to deny the right of composition u/s 65. Section 65 applies to the case of a person whose holding
does not exceed four times the exempted extent, that is to say, fifty standard acres. We are unable to see any difficulty, theoretical or practical, in
ascertaining the extent of the holding of the Petitioner. The acres of which he is in exclusive possession will be converted to standard acres
according to the formula contained in the definition section. In the case of the joint holding, it is obvious that the entirety of the joint holding will be
converted into standard acres on the basis of the same formula, and the admitted fractional interest of the Petitioner therein will yield his holding in
that joint estate in terms of standard acres. That added to the extent of his exclusive holding in standard acres will provide the material for the
application of Section 65. As we said, we find no difficulty in the practical application of the section, when once the real intention of the Section
and its proper construction have been ascertained.
We accordingly set aside the orders of the Commissioner. The Petitioner is entitled to have composition in terms of section 65 of the Act. The
Petitioner will be entitled to his costs.