M.S.P. Family Jain Trust vs State of Kerala and Others

C.N. Ramachandran Nair, J.—The petitioner is challenging exhibits P-1 and P-2 notices proposing to revise agricultural Income Tax assessments for the years 1991-92 to 1993-94 u/s 41 of the Agricultural Income Tax Act, 1991, on the ground that the same is arbitrary and without jurisdiction. I have heard counsel appearing for the petitioner and the Government pleader.

The petitioner claimed to be a charitable trust and was granted registration as such u/s 16 of the AIT Act. Even though the agricultural holding of the petitioner, namely, coffee Plantation, was above 20 hectares, the limit provided for payment of tax at the compounded rate, the petitioner was granted the benefit of payment of tax by compounding by virtue of Section 13(7) of the Act, which grants eligibility to charitable trusts for payment of tax at the compounded rate above 20 hectares. Assessments were originally completed for the years 1991-92 to 1993-94 u/s 13 of the Act accepting the position that the petitioner as a charitable trust was eligible for payment of tax by compounding above 20 hectares. However, the question whether the petitioner is a charitable trust or not was pending in appeal before the Supreme Court for earlier years and the Supreme Court in the year 1998 held that the petitioner was not a charitable trust as it was formed to promote the interests of a single religious community. Consequent upon the judgment of the Supreme Court the registration granted to the petitioner as a charitable trust was cancelled and the Assessing Officer issued notices stating that assessments completed at the compounted rate for the years 1991-92 to 1993-94 are untenable and therefore he took permission from the Commissioner to reopen assessments u/s 41 of the AIT Act. The Commissioner vide order dated September 4, 2001, issued u/s 41(2) of the Act granted permission to revise the assessments for 1991-92 to 1993-94 u/s 41 and the impugned notices are issued under the said provision after getting such sanction.

Counsel for the petitioner contended that assessments completed u/s 13 cannot be reopened u/s 41 as there is no escapement of income because the scheme of payment of tax at the compounded rate u/s 13 is based on the area of cultivated land and determination of income did not arise. The Government pleader on the other hand contended that Section 41 applies to escapement of income, whether the assessment is made at the compounded rate u/s 13 or whether the assessment is made u/s 35. I am in agreement with the contention of the Government pleader because Section 13(1) provides for payment of tax at the compounded rate which is in lieu of tax payable under other provisions of the Act. In other words Section 13(1) is an alternate scheme of assessment, as eligible assessees are given the option to pay tax under the said scheme which is based on cultivated area. Section 13 has an overriding effect over other provisions of the Act, and it is therefore an exception to Section 3, namely, the charging section which provides for collection of tax at the rates provided in the Schedule to the Act. So much so, Section 13 acts as a charging section in lieu of Section 3 of the Act for those who opt for payment of tax under the scheme of compounding. Therefore, what is provided u/s 13(1) is determination of tax payable under the Act, though the same does not involve determination of income, is also agricultural Income Tax payable under the Act. Moreover, Section 14 of the Act makes Section 41 applicable in respect of assessments u/s 13 involving escapement of tax. Therefore proceedings u/s 41(1) can be initiated to assess escaped tax even in respect of assessments at the compounded rate u/s 13 of the Act. In the circumstances, the petitioners objection against maintainability of proceedings u/s 41(1) of the Act is overruled. Since limitation is got over by virtue of the order of the Commissioner u/s 41(2) the Assessing Officer is entitled to make assessments u/s 35(2) and (4) read with Section 41(1) of the Act. Even though the petitioner has relied on the decision of this Court in Krishna Bhat Vs. Agricultural Income Tax Officer, , Commissioner of Agricultural Income Tax Vs. Chullikkan Parameswara Bhat, and Cochin Port Trust v. Ernakulam Dt. L.D. & C. Labour Union (1995) 2 KLT 31 , I do not find any of the above decisions applies to the facts of the case.

Since no other issue is considered or decided in the impugned notices, there is no need for this Court to decide the questions raised by counsel for the petitioner, such as "status of the assessee, the eligibility for compounding, if assessee is treated as tenants-in-common, etc." I leave these issues open to be raised by the petitioner before the Assessing Officer, and the Assessing Officer will consider the same while completing the revised assessments. Since the matter is pending for over three years in this Court, the Assessing Officer is directed to complete the assessments for 1991-92 to 1993-94 within two months from the date of production of a copy of this judgment by the petitioner, after considering the objections raised by the petitioner, which the petitioner can raise along with a copy of this judgment without any delay. Accordingly O.P. is disposed of upholding the impugned notices, but with the above directions.