State of Madras and Another vs S. Subramania iyer, Advocate and Others

Ramakrishnan, J.—In these three revision cases a common question arises as to how the term association of individuals used in the definition

of person in Section 2(p) of the Madras Agricultural income tax Act, 1955, has to be interpreted for the purpose of assessment under the said Act,

and they were heard together. For the sake of convenience each case will be considered separately.

Tax Case No. 49 of 1963.

The facts as found by the authorities below are succinctly the following. The Assessee, S. Subramania Iyer, filed for the accounting year 14th

April 1957 to 13th April 1958, a return in Form II showing a net income of Rs. 1,798-87 nP. He owned 20 shares of lands in Inam Kottur

Thottam Village and certain other lands, but with these latter items we are not now concerned. Out of the 20 shares of lands, 5� shares

belonged to the Thanjavur Palace Devasthanam, which Subramania Iyer took on lease. 5� shares came to be owned by one Muthusubramaniam

and his brothers, the daughter''s sons of S. Subramania Iyer under a settlement deed in their favour executed on 4th August 1948 by Subramania

Iyer himself. Out of the balance of 9 shares of lands, 8 shares had devolved on Swaminathan and Balasubramaniam in moieties, they being the son

and grandson of Subramania Iyer, while the remaining one share was held by Subramania Iyer himself in pursuance of a partition arrangement

following a division in status several years ago. This petition arrangement was confirmed in a partition deed, dated 3rd April 1960 All the lands,

however, were managed by Subramania Iyer himself. For the said purpose Subramania Iyer maintained a single pannai or farm establishment, and

it is said that he met the expenses realised the proceeds from the entire lands together and then divided the net income in the ratio of the shares of

the different individuals mentioned above to whom the lands belonged. There is, however, one significant feature in regard to these properties. The

Assistant Commissioner of Agricultural income tax, Thanjavur, in the course of his order observed:

The sixth contention is that this is a case where there was a settlement in favour of the daughter''s tons of the Appellant even in 1948 and that there

has been division in status shortly I afterwards and the Appellant, his son and son''s son having been allotted definite and particular items of

properties corresponding to specific shares, that the Appellant has executed a registered will even in 1958 on 28th August 1958 even before the

Agricultural income tax Act had come to force, stating that there has been a division in status and by metes and bounds and describing the various

items of properties in terms of shares as belonging to his son and son''s son and his daughter''s sons and as belonging to the Appellant himself and

that later there has been a regular registered partition deed as between the Appellant, his son and grandson giving effect to the previous division in

status and separate holdings and that the Agricultural income tax Officer has not at all referred to the registered will of 1958 in spite of the fact the

same has been shown to him. The Agricultural income tax Officer does not dispute these facts.

This statement of fact would show (i) that the properties allotted to the grandsons by the daughter of Subramania Iyer (ii) the properties

belonging to Subramania Iyer and (iii) those belonging to his son and son''s son were all specific items defined and localised by metes and bounds.

Before the Agricultural income tax Officer (as the order of the Agricultural income tax Officer shows), Subramania Iyer furnished a list of lands

owned by the different sets of persons defined by metes and bounds. The grandsons by the daughter of Subramania Iyer also filed a return for the

lands settled on them, which, according to one of them Muthusubramaniam, was enjoyed by him along with his brothers as tenants in common, but

which, for facility of cultivation, was looked after by Subramania Iyer. However, Subramania Iyer''s son Swaminathan did not file a return in

respect of the shares alleged to be owned by him and his son. Subramania Iyer furnished a return only for the lands which fell to his share on the

partition. The Agricultural income tax Officer, the assessing authority, observed that Subramania Iyer and Muthusubramaniam had thus agreed that

there should be joint venture for realising the agricultural income, and that the status of the Assessee in so far as it related to the lands in Kottur

Thottam Village, would be that of an association of individuals managed by Subramania Iyer, the principal officer. The return of Subramania Iyer,

was clubbed with that of Muthusubramaniam and there was an assessment on Subramania Iyer as principal officer of an association of individuals.

Against this decision, Subramania Iyer appealed to the Assistant Commissioner of Agricultural income tax. The Assistant Commissioner on the

allegations of fact found that the above mentioned several members of Subramania Iyer''s family got well-defined shares of lands with absolute right

of ownership and enjoyment and held them separately, but that they had preferred that their shares of the lands should be continued to be managed

and cultivated by Subramania Iyer in the same manner as it existed prior to the execution of the Will and the partition. The Appellate Assistant

Commissioner observed:

The common management by the Appellant is admitted. If it was for the mare purpose of convenience, then there need not hare been a common

cultivation on common account.

He, therefore, affirmed the finding of the Agricultural income tax Officer that this was a case of an association of individuals within the meaning of

Section 2(q) of the Act. The Assessee again appealed to the Appellate Tribunal. The Tribunal decided the case on a short ground that the

Assessee, his son and son''s sons held the properties as tenants-in-common, that Section 3(3) of the Agricultural income tax Act would apply and

that they should not be assessed as an association of individuate on the whole of the income. The appeal was allowed and the assessment on the

Assessee as an association of individuals was set aside. Against the said decision of the Tribunal the State of Madras has filed-the present revision

case.

In the first place, it will be necessary to observe that the view of the Tribunal that there was a tenancy-in-common is not an accurate statement

of the facts of the case and the law applicable to them. Section 3(3) of the Agricultural income tax Act, which is the charging section, states:

In the case of persons holding property as tenants-in-common and deriving agricultural income, the tax shall be assessed at the rate applicable to

the agricultural income of each tenant-in-common.

The words tenancy-in-common are derived from the English law of real property. In Halsbury''s Laws of England--third edition--volume

XXXII, page 338; it is observed:

Before 1926 a tenancy-in-common in land might exist either at law or in equity. Under such a tenancy the land was said to be held in undivided

shares and the tenancy differed from a joint tenancy in that it required neither unity of title, interest, nor time, but only unity of possession. Under the

Law of Property Act, 1925 a legal estate is not capable of subsisting or being created in an undivided share in land, and it can only be created so

as to take effect behind a trust for sale.

We are not now concerned with the limitations imposed by the English Law of Property, as to how a legal tenancy-in-common can be created

by the 1926 English Law of Property. Section 45 of the Transfer of Property Act shows how a legal tenancy-in-common can be created in certain

circumstances. Apart from that, parties can deal with their properties in such a manner, that a tenancy-in-common can arise between them inter se.

The main incidents of such tenancy will be that all the co-sharers have a right to joint possession over the entire property and no one co-sharer can

claim for himself any-specific part in the common property, save by obtaining partition. A tenant-in-common who receives more than his share of

the rents and profits will be liable to account to others (vide Kamalamma v. Pitchamma) ILR (1949) Mad. 770. Possession by one co-tenant of

the common property in the absence of proof to the contrary will enure to the benefit of all; such possession by itself will not amount to adverse

possession against the other co-sharers, unless there is clear proof of ouster. In the present case, from the proved fact that Subramania Iyer''s

daughter''s sons on the first part, Subramania Iyer''s son and son''s son on the second part, and Subramania Iyer of the third part, held definite and

localisable items in the properties, there is no unity of possession, and, therefore, no question of a tenancy-in-common arises in this case.

The next and equally important question is whether the group of persons thus mentioned, viz., Subramania Iyer, his grandsons by the daughter

and his son and son''s son, had in fact formed an association of individuals within the meaning of Section 2(q) of the Act, which is in the following

terms:

Person"" means any individual or association of individuals, owning or holding property for himself or for any other, or partly for his own benefit

and partly for another, either as owner, trustee, receiver, common manager, administrator or executor or in any capacity recognised by law, and

includes an undivided Hindu Mitakshara family, an Aliyasanthana family or branch a Marumakkatteyam tarwad or a tavazhi possessing separate

properties, or a Nambudiri or other family to which the rule of impartibility applies, a firm or a company, an association of individuals, whether

incorporated or not, and any institution capable of holding property;

Section 2(n) of the Act defines a principal officer for such an association of individuals as a person connected with the association upon whom

the Agricultural income tax Officer has served a notice of his intention of treating him as principal officer. The Indian income tax Act, 1922, has a

provision analogous to Section 3(3) of the Agricultural income tax Act for dealing with tenancy-in-common in Section 9(3)(of the Act prior to its

amendment in 1961). It came into force by an amendment in 1939 (Act VII of 1939). It reads:

Where property is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of

such property be assessed as an association of persons, but the share of each such person in the income from the property as computed in

accordance with this section shall be included in his total income.

But this section in the Indian income tax Act applied only to properties which consisted of buildings or lands appurtenant to the buildings.

Section 3, the charging section in the Indian income tax Act (before its amendment in 1961) provided that the tax shall be levied in respect of the

total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association

of persons or the partner of the firm or members of the association individually. It has been long recognised that the Indian income tax Act did not

specifically define the term association of individuals and that the question had to be decided on the facts of each case. The various decisions under

the income tax Act are of help in so far as they lay down the broad principles for guidance in deciding when a group of persons should be deemed

to be an association of persons for the purpose of assessment. The earlier relevant decisions have been summarised in Mohamed Noorullah,

Representing The Estate of Late Khan Sahib Mohd. Oomer Sahib Vs. The Commissioner of Income Tax, Madras, and we will refer to it in the

first place. That decision was given in an appeal from a decision of this Court reported in Mahamed Oomer v. Commissioner of income tax ILR

(1958) Mad. 23. In the above case the Court was called upon to deal with co-sharers under Mohammadan Law who owned a business of

manufacturing and selling of beedies. The nature of the business was such that it could not be divided up, but had to be carried on as one whole,

with a unity of control, and all the parties desired to preserve, and did preserve this unity. After the death of Md. Oomer Sahib, the previous owner

of the business, the business was carried on by mutual agreement and consent by his widow, acting on her own behalf and on behalf of her minor

children and her minor step-son. It appeared that after the death of the previous owner, the estate was inherited and the business was continued

and run by a combination of individuals (the heirs) who had pooled their resources for the common purpose of earning income, and it was,

therefore, held that the heirs had constituted themselves into an association of persons. We have here not a business but agricultural lands, and

there is also no question of the property by its very nature being incapable of division, and requiring to be looked after as a whole with unity of

control. Agricultural lands are capable of division and separate enjoyment. In the present case, there was an actual division by metes and bounds.

The Supreme Court decision in Commissioner of Income Tax, Bombay Vs. Smt. Indira Balkrishna, was also a case of co-heirs owning a common

business. While a partition suit between them was pending, and even before that, i.e., after the death of the father the business was carried on by

the consent of all the parties as one unit, as indeed it had to be, because it had to be carried on as one unit with unity of control. In such

circumstances, it was held that the co-heirs had constituted themselves, into an association of persons within the meaning of Section 3 of the Indian

income tax Act, 1922.

The above two decisions of the Supreme Court dealt with an association of individuals in relation to a business, whose very nature required

unity of control and management for the purpose of running, it. There are also other decisions under the Indian income tax Act dialing with Income

from landed property u/s 9 of the Act, and these will have direct relevancy for dealing with a case arising under the Agricultural income tax Act. In

Re B. N. Elias ILR (1935) Cal. 538 certain persons who jointly purchased properties in definite shares executed a general power-of-attorney in

favour of one of themselves to manage all their affairs in relation to the properties aforesaid. They were assessed as an association of individuals.

Derbyshire J., after observing that the words association of individuals have to be construed in their plain ordinary meaning, stated:

Did these individuals join in a common purpose, or a common action thereby becoming an association of individuals? In my view, they did. In the

first place, they joined together in the purchase of this property......... In the second place they have remained joint as owners of the property from

the date of the purchase down to the present time. Thirdly, they have joined together, as the power-of-attorney show for the purpose of holding

this property and of using it for the purpose of earning income to the best advantage of them all. Under these circumstances, it seems to me that

looking at the position and construing the words of the Act in their ordinary common meaning, the four persons named are an association of

individuals.

Costello J., also observed:

When we find, as we do find in this case, that there is a combination of persons formed for the promotion of a joint enterprise banded together, if I

may so put it, co-adventurers to use an archaic expression, then I think, no difficulty whatever arises in the way of saying, that in this particular case

that these four persons did constitute an ""association of individuals"".

The next decision is Commissioner of income tax, Bombay, v. Laxmidas Devidas ILR (1937) Bom. 830. That was a case where two

individuals joined together in purchasing certain immovable properties, contributing the purchase money in equal shares, and the properties were

jointly held and managed by or on behalf of them. The management resulted in profits which were shared equally. It was held that the two persons

formed an association of individuals, because they were associated together for the purpose of acquiring property and deriving profit from it.

Another case is DWARAKANATH HARISCHANDRA PITALE AND ANOTHER Vs. RE., . It dealt with income from immovable properties.

In that case two brothers became entitled to certain house properties in Bombay as legatees under a Will of their grandfather. Initially the executor

under the Will managed the properties. Then he handed over the properties of the Assessees under a deed of release. From that time the

Assessees held the properties jointly and managed them jointly. They divided the net income after paying all expenses and municipal tax between

themselves. Beaumont C.J., who delivered the judgment, observed:

They did not purchase the property for the purpose of managing it: they received it under a Will, and it may be said, that in the first instance they

did not constitute an association of individuals. But as soon as they elected to retain the property and manage it as a joint venture producing

income, it seems to me that they became an association of individuals

In Commr. of Inc.-Tax, Burma v. M.A. Baporia and others ILR (1939) Rang. 631 it was pointed out that when an individual inherits a share in

property he has no opportunity of deciding whether he will, by reason of having inherited that share, form an association of individuals or renounce

such relationship. By merely inheriting a share of property, no person can be said to have become a member of an association, unless there is some

forbearance or act on his part to show that his intention and will, accompanied the new status which he had been asked to receive. In that case it

was found that the appointment by the co-heirs of a single person as their agent to realise the income from shares and the property inherited by

them by their father and mother under the Mohammadan Law and the continuance of this arrangement for a long number of years, was sufficient to

constitute an association of individuals.

All the above cases arose before the amendment by Act VII of 1939 which introduced Section 9(3) of the Indian income tax Act. They

enunciate certain general principles for finding out who constitutes an association of persons in regard to property jointly owned by them. Section

9(3) must be deemed to be granting an exemption to co-owners who happen to own specified, but undivided shares in the common property

(tenants-in-common) from being assessed as an association of individuals. The application of this exemption did not arise in the above cases.

A Bench of this Court in Ipoh v. Commissioner of income tax ILR (1962) Mad. 175 dealt with the assessment of a Nattukkottai Chettiar

family which carried on business in money-lending, rubber plantation and purchase and sale of properties in the Malay States, Burma and India. A

partition of the business was effected between the father and his minor son represented by his mother. After the partition was entered into there

was evidence about an agreement to the effect that the properties should be continued to be held by Meyappa and Chettiappa (father and minor

son) in two equal shares and under the management of the M.S.M.M. firm, who was to get ten per cent commission of the profits for looking after

properties. Srinivasan J., who delivered the judgment of the Bench, referred to and adopted three tests for determining the existence of an

association of persons, which were laid down in Mahammed Oomer v. Commr. of income tax ILR (1958) Mad. 23, namely:

(i) the exercise of volition by or, in the case of minors on behalf of those, who form the association;

(ii) unity of purpose and objectivity; and

(iii) the ultimate object of the association must be to produce income, profits and gains and to be earned on their behalf.

The learned Judge further stated Mint in the light of the decided cases, it may further be added that in the absence of express volition to form

an association, such volition could be implied if a person who would otherwise be entitled to separate elects to remain joint. In any event, it is quite

clear that in order to constitute an association of individuals, the above indicia in some form or other must exist. These decisions show that before

persons, who shared in the relationship of co-heirs, co-legatees, or co-sharers, and who own either distinct and separate items of property, or

specified deferred shares in undivided common property could be held to have formed an association of persons, there must be evidence to show

that they had agreed or elected, to remain joint in pursuance of a common purpose, for managing their individual item of property, or their

individual shares in a common undivided property. But this rule about the constitution of an association of persons will be subject to an exemption

in the case of tenants-in-common, by virtue of the later amendment in Section 9(3) of the Indian income tax Act.

In every case referred to above there was evidence of an agreement either express or implied to show that the individuals had agreed to come

together either for the purpose of acquiring the property and exploiting it or for the purpose of exploiting inherited or bequeathed properties so that

they could earn an income by their united activities. But in the present case, the proved facts are materially different. Subramania Iyer originally

owned 14� shares after setting apart 5� shares for the Thanjavur Palace Devasthanam. He gifted 5� shares out of it, after dividing it by

metes and bounds, to his grandsons, by his daughter. However, they permitted Subramania Iyer to look after the properties thus settled, on their

behalf. Subramania Iyer then divided the remaining 9 shares taking one share for himself and giving 8 shares to his son and his grandson by his son.

Even these properties were demarcated by metes and bounds. His son and son''s son also permitted Subramania Iyer to look after their property,

Subramania Iyer maintained a common pannai or farm for looking after the cultivation of all these properties. It was easy for him to divide the

income in the proportion of the shares, which tallied with the proportion attributable to the distinct parcels of land given to each group. But there is

no evidence that, while Subramania Iyer was thus managing the several parcels of the property, his grandson by the daughter on the one hand and

his son and son''s son on the other entered into an arrangement inter se among themselves for the purpose of common exploitation of their distinct

properties. The arrangement could very well be consistent with the case put forward by the Assessee that what in fact happened was a separate

individual arrangement, between the different owners of the land and Subramania Iyer, without the owners themselves coming to an agreement inter

se regarding joint cultivation. Thereafter, Subramania Iyer, for the purpose of his own convenience, as manager or agent for the different owners,

used a common pannai for the purpose of cultivation. It was, therefore, urged, and in our opinion rightly, by the learned Counsel for the Assessee-

Respondent, that the management by Subramania Iyer of the different parcels of land by a common pannai would not ipso facto prove an

agreement between the different owners to associate together for the purpose of cultivation. We may recall that Derbyshire C.J., stressed that the

word association should be given its ordinary meaning.

The dictionary meaning of the word "" associate "" is to ""join in a common purpose or action."" �Any combination of persons who have joined

together in a profit enterprise would, according to ordinary parlance, amount to an association.

(Yahya Ali J., in Mohamed Abdul Kareem and Co. v. Commissioner of income tax ILR (1949) Mad. 720.) In the present case there is no

evidence of such an association having been formed inter se between the different owners. If the factum of common cultivation by a single agent or

manager or different parcels of land owned by different persons could by itself be held to be sufficient to constitute the owners into an association

of persons, it would lead to undesirable results. It is a common experience in this part of the country, where the system of absentee landlords

prevails, that different owners of agricultural lands give them for cultivation to one lessee or manager or agent. The lessee or manager or agent

thereafter, for the purpose of his convenience, uses the same set of ploughs and bulls and common pannai servants for cultivation, and after

collecting the produce, he apportions it among the different owners in proportion to the yields from their lands. There is no scope for construing

such owners as having formed an association solely by reason of their having engaged one and the same lessee, or manager or agent for the

purpose of cultivation. The fact that, in the present case, the different owners of the land, formed members of one family or acquired their

properties by settlement or partition from one person could not by itself lead to any alteration to this principle. Even in such a case it is necessary to

prove the essential requirement, viz., that as between themselves they had associated together and decided upon the common exploitation of their

lands for common benefit and that it was only in pursuance of that agreement a single person was selected to carry out the common purpose of

joint cultivation. This essential requirement is absent in this case.

Our attention was drawn to a decision of a Bench of this Court (Jagadisan and Srinitasan JJ., in T.C. No. 3 of 1903). The genealogical tree set out

in the judgment shows that the members of the Assessees family had become divided by partitioning their common estate and the tabulation of the

lands allotted to each sharer in terms of acres and cents would show that in fact there was an outright partition by metes and bounds. The lands

were cultivated under a common pannai and a common account was maintained and expenses were incurred in common. At the end of each year

the net agricultural income was apportioned among the sharers in the ratio of their holdings. They were assessed as an association of individuals by

the Agricultural income tax Officer. When the matter came before the Bench, Jagadisan J., speaking for the Bench, seems to have assumed that it

was a case of a mere tenancy-in-common and made the observation that when tenants-in-common of a property divide the income in the ratio of

their definite shares without a division of the corpus by metes and bounds, they cannot be said to have earned their respective income by a joint

endeavour, efforts or enterprise and that a joint management of the undivided property held in shares, either by one of the sharers or by a duly

appointed attorney, would not knit them together as an association of individuals. He quoted with approval a decision of the Lahore High Court in

Nizam-ud-in Amir-ud-din of Lahore In Re ILR (1943) Bom. 448 and Bal Keshav Thakrey Vs. Commissioner of Police, Bombay and State of

Bombay, . The principle thus stated by Jagadisan J., refers to the protection we have adverted to earlier in favour of tenants-in-common from

being classified as an association of persons granted by Section 3(3) of the Agricultural income tax Act, which is in pari materia with Section 9(3)

of the Indian income tax Act. But we wish to point out with due respect that Jagadisan J., appears to have overlooked this on the fact of the above

case, there was no tenancy-in-common as the parcels of land owned by each individual were distinct. It appears to us that when the question

arises also in the case of persons who own separate parcels of land defined by metes and bounds, and who for the cultivation of their respective

shares or parcels, engage one and the same manager, agent or lessee, the crucial test will always be whether the individuals had become knit

together for a joint endeavour or effort or enterprise, for the joint cultivation of their lands and the common manager, agent or lessee was engaged

only in pursuance of the joint purpose, thus formed between them.

For the foregoing reasons we are of the opinion that the assessment on Subramania Iyer, his grandsons by his daughter, son and son''s son as

an association of individuals cannot be supported.

Sri Parasaran, learned Counsel for the Respondent urged another argument derived from the language of Section 2(g) of the Act read with

Section 2(nn) of the Act. u/s 2(q) a person is defined as an individual or association of individuals owning or holding property for himself or for any

other or partly for his own benefit and partly for another either as owner, trustee, receiver common manager, etc.

The words to hold have been defined in Section 2(nn) of the Act as meaning with its grammatical variations and cognate expressions.

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.

According to Sri Parasaran it is necessary that an association of persons should own or hold property in one of the capacities mentioned in

Section 2(q), and that it would not suffice if the individuals comprising the association own or hold the property. It would be necessary to look for

some conveyance from the individuals to the association. But the association may not be competent under the statute to receive property by a

conveyance. But according to the learned Government Pleader this argument overlooks two points. First under the terms of the definition of person

just now mentioned, an association of individuals could hold property for another, i.e., on behalf of the individual who comprised the association.

The word hold in such a context should be given its ordinary meaning and not the special meaning mentioned in the definition in Section 2(nn) of the

Act. The preamble to Section 2 of the Act states that the special terms and in the various definitions in that section, would apply unless the context

otherwise requires. The context of Section 2(q) would make it appear that the word hold is used there only in the ordinary sense of enjoyment or

being in possession of without the restrictions mentioned in the definition in Section 2(nn). Secondly the Government Pleader submits that the

second part of the definition in Section 2(q) refers to an association of individuals without the restrictive clause of owning or holding property and

that this may again lead to the inference that the requisite of holding property as defined in Section 2(nn) is not applicable to the assessment of an

association of individuals. But it is not necessary to pursue this line of reasoning further and for a decision on this point because for the reasons

given by us earlier in this judgment the essential ingredients to constitute an association of individuals are lacking in this case. Therefore, while we

cannot uphold the reasons given by the Tribunal for its view that there is no association of individuals in this case, we affirm its decision for the

different reasons given by us, and dismiss the revision case.

Tax Case No. 52 of 1963

The prior facts leading to this revision case, as found by the authorities below and regarding which there is no dispute before us, are briefly the

following. One K.P.M. Abdul Khader and K.P.M. Abdul Majeed are brothers. They owned 309-66 acres of wet and dry lands in Nannilam

taluk. By executing a partition deed and release deed they divided the property by metes and bounds and each got 154.83 acres. Abdul Khader

thereafter in 1956 settled specified extents of 30 acres and odd in agricultural areas each to his minor son Haja Sheriff, to his wife Rokkayya

Animal. There were similar gifts to Abdul Majeed''s wife and daughter. Application for composition of agricultural income tax for the year 1958-59

were submitted to the Assistant Agricultural income tax Officer, Nannilam, by Abdul Khader, his wife, the guardian of Haja Sheriff, and other

beneficiaries u/s 65 of the Agricultural income tax Act, 1955. Holding that the provisions of Section 9(2)(a)(iii) and Section 9(2)(a)(iv) of the Act

would apply to the settlements in favour of the wife and the minor son, Abdul Khader was asked to give his consent for clubbing together the

income from these lands for the purpose of assessment. The Assessee filed his objections. The applications for composition were thereupon

rejected and Abdul Khader was called upon to file a return of accounts for all the lands comprised in the three applications. Abdul Khader filed a

revision petition before the Commissioner of Agricultural income tax, Madras. In the meantime, Abdul Majeed, who had also settled varying

extents of land on his children under different documents, also applied for composition u/s 65 of the Act and Agricultural income tax Officer

refused the application for composition on the ground that he too did not give his consent for clubbing the properties together u/s 9(2)(iii) and 9(2)

(a)(iv) of the Act. Abdul Majeed also filed a revision petition before the Commissioner of Agricultural income tax, Madras. It is common ground

that the properties of both the brothers, even after the partition and after several settlements, continued to be managed by Abdul Khader. The

Commissioner of the Agricultural income tax disposed of the revision petitions by a short order, which reads:

It is seen from the return filed by Sri Abdul Khader that the lands of the two brothers are cultivated in common and the net total income is shared

by the brothers and that the income shown by Sri K. P. M. Abdul Khader is half of the net total income of their estate. In the above circumstances,

I feel it is a fit case to deal with as an association of individuals, I therefore, direct that the assessments be made accordingly.

Abdul Khader has filed this revision case against the above order of the Commissioner of Agricultural income tax, Madras.

Learned Counsel appearing for the Petitioner urged in the first place that in the circumstances of the case there is no proof regarding the

constitution of an association of individuals. Secondly, after the various settlements in favour of his wife and minor son and others, the Petitioner

had with him property only to an extent of 640-1 acres equivalent to 40-715 standard acres. Section 9(2) of the Act will become applicable only

when a question of assessment on agricultural income arises, and in such a case for the purpose of computing the total agricultural income of the

Assessee, all the income arising from the assets transferred to the wife gratuitously and the income from the assets transferred to the minor child

other than a married daughter gratuitously shall be included; but proceedings for composition u/s 65 of the Act, is different from assessment

proceedings after computing the agricultural income and, therefore, Section 9(2) cannot be applied in the course of composition for the purpose of

adding to the lands of the Assessee the lands settled by him on his wife and minor child.

We will take up for consideration first, the last mentioned argument above. It is based on the scope of composition proceedings u/s 65 of the

Act, as laid down in COMMISSIONER OF AGRICULTURAL Income Tax, MADRAS Vs. K. SUBBIAH GOUNDER AND ANOTHER., .

The question that arose in that case was whether an order of composition u/s 65 of the Act was appeal able u/s 31 of the Act. The learned Judges

observed that an order granting permission to compound and fixing the amounts to be paid by a person holding agricultural lands in lieu of

agricultural income tax does not amount to an order of assessment and that in a proceeding u/s 65 there is no assessment of the income of the

person or an assessment of tax as such. They held that an order of composition is not subject to appeal u/s 31 of the Act. Section 65(1) of the Act

provides that any person who holds land not exceeding four times the exempted extent (under Section 10 of the Act lands not exceeding 12�

standard acres in area will be exempt from assessment) 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. Prior to the amendment in 1951 (Act I

of 1961), Section 65(4) contained a proviso that the provisions of Sections 35 and 36 shall so far as may be, apply in relation to the composition

of agricultural income tax under this section (Section 65) as they apply in relation to the assessment of agricultural income tax under this Act. Act I

of 1961, added to this proviso the provisions of Sub-section 9(2) of the Act. It is on this addition of Section 9(2) to the proviso of Section 65(4)

that the department has relied for insisting on adding to the extent of land in the Assessee''s possession the extent settled by him on his wife and

minor son. By this addition the extent of the land in his holding would exceed 50 standard acres, and he would not be entitled to obtain

composition u/s 65. But if the lands settled on the wife and minor son are excluded, the balance of the land belonging to him would come to only

40-715 standard acres, which would be within the maximum prescribed in Section 65 of the Act. The learned Counsel for the Petitioner argues

that for computing the agricultural income of any individual forth purpose of assessment, Section 9(2) permits the addition to his income, the

income for the assets gifted to his wife and minor son, but in the case of composition u/s 65 of the Act, since no question of computing the

Agricultural income arises and since the only question is to find out the area of the land in his holding, and then apply the schedule of rates for

composition in respect of that area, there is no scope for applying Section 9(2) of the Act, and therefore, the reference to that section by the

amendment to Section 65 will in practice be pointless and unworkable. We are not prepared to accept this argument. The proviso to Section 65

states that the provisions of Section 9(2) shall, so far as may be, apply in relation to the composition of agricultural income tax as they apply in

relation to the assessment of agricultural income tax under the Act. The clause so far as may be is important. It would show that what was

contemplated was not a literal application of Section 9(2) to Section 65 which may produce fruitless result, as contended by the Petitioner, but

what was contemplated was the application of the principle of Section 9(2). Section 9(2) states that for computing the income of a person there

shall be added thereto the income from the assets gifted to his wife and minor child, other than a married daughter. The principle behind this

provision is that the assets gifted to the wife and to the minor child shall be deemed as an addition to the assets of the Assessee for the purpose of

fixing his liability to pay agricultural income tax. Composition means substituting a fixed sum in lieu of agricultural income tax. If we are to apply the

principle of Section 9(2) to Section 65, it would mean that for the purpose of composition, the land in the Assessee''s possession should be

deemed to be augmented by the land gifted to his wife and to his minor child other than a married daughter.

The learned Government Pleader referred to the Madras Plantations Agricultural income tax Act (Amendment Act XXIX of 1958), Section

34 of which provides for the composition of tax for the year 1957-58. It reads:

Notwithstanding anything contained in this Act, any person liable to pay agricultural income tax under the principal act as amended by this Act in

respect of any agricultural income derived from any land other than land used for growing tea, coffee, rubber, cinchona or cardamom during the

period of twelve months ending on the 31st day of March 1958, may apply to the prescribed officer for permission to compound such agricultural

income tax, and to pay in lieu thereof a lump sum at a rate or rates specified below....

We may note in this connection that originally Act V of 1955, was intended to cover only plantations growing produce like, tea, rubber, etc.,

Section 65 as it stood then, allowed composition only in the case of plantations limited to a total area of 50 standard acres. By Act XXIX of 1958,

the Act of 1955, was extended to all agricultural lands. For the purpose of dealing with agricultural lands other than plantations, Section 34 was

specifically enacted, giving a schedule for rates of composition and removing the upper limit of 50 standard acres. Section 34 was to be in force

only for 1957-58, and it was extended year after year to subsequent years. The learned Government Pleader submits that while Section 65 is a

general provision which will apply to all lands including plantations for tea, coffee, etc., Section 34 of the Plantations Agricultural income tax

(Amendment) Act, 1958, is a special provision dealing with lands other than lands used for plantations of tea, coffee, rubber, cinchona or

cardamom, and applicable only for the period specified therein. He contends that the principle that a special provision should operate in preference

to a general provision will apply in such a case, and therefore, the question of composition in the present case should be dealt with u/s 34 of the

Plantations Agricultural income tax (Amendment) Act, 1958 and not u/s 65. We are inclined to agree with this contention. It is also stressed by the

learned Government Pleader that Section 34 of the Plantations Agricultural income tax (Amendment) Act, 1958, does not refer to any condition

about the Applicant for composition, holding land not exceeding four times the exempted extent. It applies to all cases where a person is liable to

pay agricultural income tax under the principal Act, in respect of lands other than plantations of coffee, tea, etc. Therefore, for the purpose of

composition u/s 34 of the Plantations Agricultural income tax (Amendment) Act, 1958, in fixing the amount of composition it will be proper to

include besides his own land, the land gifted to his wife and minor child other than a married daughter. We accept this argument.

It would appear from the record of the case that the Commissioner of Agricultural income tax did not at all go into the question of the

application of Section 9(2) to cases of composition, a point dealt with by the assessing authority. He disposed of the case on the short ground that

the facts showed that there was an association of individuals. It was the assessing authority who insisted that the two Petitioners, who applied for

composition, should include the lands settled on their wives and children. It was against that order that they were aggrieved and applied to the

Commissioner in revision. The Commissioner, however, failed to decide the point and dealt with the matter on some other basis. It was pointed out

by the learned Counsel for the Petitioner that the power of revision by the High Court u/s 54(4)(a) of the Agricultural income tax Act would include

not merely the power of remand to the Commissioner for deciding a question which he had not decided, but it can itself decide a question of law

that is raised before it and pass such order thereon as it thinks fit. Since the question of applicability of Section 9(2) of the Act to composition

proceedings was specifically raised before the revising authority, but was omitted to be decided by that authority, we have decided it in this

judgment itself, instead of remitting the matter to the assessing authority. Our view recorded in the foregoing paragraphs is that, Section 34 of the

Plantations Agricultural income tax (Amendment) Act, 1958, has to be applied to the composition proceedings in the present case, and that the

principle of Section 9(2) of the Agricultural income tax Act, 1955, can be applied in the manner stated above for the purpose of calculating the

composition fee.

We next come to the question of association of individuals. Unfortunately we do not find any material from which one can infer that Abdul

Khader and Abdul Majeed as well as the settles from them had joined together in a joint enterprise for the common cultivation of their lands and

dividing the income. Since this is a case where each individual had specific parcels of land, there is no question about a tenancy-in-common. From

the mere circumstance that the lands thus owned by the different individuals were being cultivated by one and the same agent or manager, it will not

automatically follow that the different owners had entered into a mutual agreement for the purpose of the common exploitation of their lands by one

and the same individual. As pointed out earlier in Tax Case No. 49 of 1963, the result could be equally consistent with a situation where each

owner for his own advantage, gave his parcel of land to the same agent or manager or lessee and then that person for the purpose of his own

convenience, might have utilised a single pannai or farm for cultivation, and then divided the income in the ratio of the parcels of lands belonging to

the different owners. In the absence of any finding or evidence to show that there was such a joint enterprise on the part of the different owners it

was not proper for the Commissioner to have assessed the Assessee as an association of individuals. We adopt the same reasoning for this

purpose, as we have done in Tax Case No. 49 of 1963, and we allow the revision case and set aside the order of the Commissioner. It will be

open to the assessing authority to deal with the composition applications pending before him in the light of the observations contained in this

judgment.

Tax Case No. 59 of 1963.

The Assessee, A.M.P. Thiruvambalam Chettiar, executed a partition deed on 30th June 1954 between himself, his son Vadapuri, his minor

daughter Raja Rajeswari, his married daughter Soundaravalli and his grand-daughter Umamaheswari and allotted to them specific items of

properties. All the shares filed separate returns for 1958-59 and 1959-60. The Agricultural income tax Officer made enquiries in various villages

and found that the lands of all the four persons were cultivated as a common farm under the management of Thiruvambalam Chettiar, the expenses

were incurred in common even the plough bulls, cattle-shed, etc., were all common, the accountant, maniyam and talayaris looking after the farm

were also common and the hays stack was kept in common. From these facts, the assessing authority, as well as the Appellate Assistant

Commissioner, inferred that the four persons formed an association of individuals within the meaning of Section 2(q) of the Agricultural income tax

Act and assessed them as such. Thiruvambalam Chettiar appealed to the Appellate Tribunal. The Appellate Tribunal held that this was a case of

property held by tenants-in-common and that, therefore, Section 3(3) would apply. Therefore, the order of the assessing authority directing the

Assessee to be assessed as an association of individuals was set aside. The State of Madras has filed this Revision Case against that order.

As was the case in Tax Case No. 49 of 1963, here again, in our opinion, the Tribunal made a mistake in deducing a tenancy-in-common in a

case where each sharer held the property in separate holdings divided by metes and bounds. There was no question of any unity of possession.

The interest of each owner in particular items of property belonging to them was known and defined. Therefore, we cannot support the reasoning

of the Tribunal for its conclusion as this is not a case of tenancy-in-common. But here also, we have certain members of Thiruvambalam Chettiar''s

family who got, on a partition, specified extents of land, which was originally a common property. Thereafter, for the purpose of their individual

convenience, the owners of the different parcels of lands entrusted them for cultivation to Thiruvambalam Chettiar, so that he may cultivate the land

and give the due share of the income to the several owners. That the owners of different parcels of land had selected one and the same individual

whether manager, or agent or lessee for cultivating their lands and that this individual thereafter, for his own convenience, used a common pannai or

farm for cultivating several parcels of land would not, by itself be sufficient to prove a joint endeavour or a common enterprise on the part of the

several owners to pool their lands together and derive income therefrom for their common benefit. Reference was made by the learned

Government Pleader to the keeping of a common hay-stack. It is not improbable that the lessee did so for the purpose of convenient storage so

that he could distribute the hay later on to the individual sharers in quantities proportionate to the paddy yielded from their lands. There is,

therefore, no substance in the contention put forward that this is a case of an association of individuals.

Another contention urged by the learned Counsel for the Respondent was this. The different owners who got the properties on division

submitted separate returns of their income. The assessing authority clubbed these returns together and assessed the four persons as an association

of individuals. The learned Counsel Sri Kunchithapatham for the Respondent points out that while notices u/s 16(2) of the Act were served

separately on the four persons who filed their individual return, no notice was served for the purpose of assessment on them after treating them as

an association of individual with Tiruvambala Chettiar as Principal Officer of the association as defined in Section 2(11) of the Act. It is urged that

owing to the failure on the part of the assessing authority to serve such a notice, the Respondents had no opportunity for urging their objections to

being assessed as an association of individuals. The Respondents Counsel urged that without a separate notice u/s 16(2) of the Act on the Principal

Officer of the association of individuals the assessments itself is invalid. We see considerable force in this argument, but, however, in the

circumstances of this case, we prefer to rest our decision, on the finding given already, that the data adduced are not sufficient, for constituting the

four persons who have submitted separate returns, into an association of individuals. We, therefore, dismiss the revision case, though for reasons

different from those given by the Tribunal below. It will be open to the assessing authority to assess the different persons on the basis of their return

and in accordance with law.

No costs.