Mahanth Ramsw Aroop Das v. the State of Bihar.

Ramswaroop Das 1961. January 11. The Judgii::limt of the Court was • v. delivered by · · -- ·-- . : - '. State of Bihar . . SHAH, J.-The High Court of Judicature at Patna answered· in the . affirmMive the following question which was· submitted by the Board of Agricultural Income-tax, Bihar, under s. 28(3) of the Bihar Agri­ cultural Income-tax Act, XXXII of 1948-hereinafter referred to as the Act £ Shah]. .· ' I "Whether, in the facts and circumstances of the case, the petitioner could be legally assessed for the income of the Estate in 1355 Fasli when the Estate was in the hand of the Receiver?" \Vi th special leave under- Art. 136 of .the Constitu­ tion, this appeal is preferred against the order of the High Court. The appellant is the l\fahant -of the Asthal Estate, Salauna, in the District of Bhagalpur in Bihar. In a suit concerning that estate, a Court Receiver was appointed by the First Class Subordinate Judge, .Mcinghyr, to manage the estate. The.Receiver functioned till sometime in December, 1949, and under the -order of the Subordinate Judge he handed over charge- of the estate to the appellant on Januai:ylb. -1950._ On January}5, 1950, the appellant submitted \.a return of .income of the estate to the Agricultural Income-tax Officer, l\fonghyr, for the Fasli year 1355 ·corresponding to September 16, 1948, to September 15, · 1~49. ·The Agricultural Income-tar Officer: assessed · on August 7, 1950, the agricultural income of the es_t­ ate at Rs. 90,507-2-6 and ordered the appellant to pay Rs. 20,290-13-0 as agricultural: income-tax. Appeals . . against the order of assessment preferred to the Com~ · · -:·missioner 'of Agricultural Income-tax and the Board of, Agricultural Income-tax; Bihar, were unsuccessful. The Board however refori:ed the question set . out hereinbefore to the High Court under s. 28(3) of tho 'Act as arising out of its order. . .. · . - ; The, only question which falls to be determined in this appeal is ~ hether the appellant .was lia hie to be assessed to pay agricultural income-tax for; the year . ' ,_ ' \... . . .. " -- . 3 S.C.R. SUPREME COURT REPORTS 407 in which the estate was in the management of the Court Receiver. Section 3 of the Act which is the charging section provides : "Agricultural income-tax shall be charged for each financial year in accordance with and subject to the provisions of this Act on the total agri­ cultural income of the previous year of every person." By s. 4, it is provided : "Save as hereinafter provided, this Act shall apply to all agricultural income derived from land situated in the State of Bihar." The income of the estate of the appellant was not exempt from payment of tax and by virtue of s. 3, agricultural income-tax was charged upon the income for the assessment year in question, and the appellant was prima facie liable as owner of the estate to pay tax on th~t income. The appellant however relied upon s. 13 of the Act which provides: "Where any person holds land, from which agri­ cultural income is: derived, as a common manager appointed under any law for the time being in force, or under any agreement or as receiver, ad­ ministrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums pay­ able as agricultural income-tax by each person on the agricultural income derived from such land and received by him shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income-tax so payable by each such person and shall be liable to pay the same." The appellant urged that if the land from which agricultural income is derived is held by a Receiver and the income is received by the Receiver,. the Receiver alone can, by virtue of s. 13, be deemed to be the assessee and the Receiver alone is liable to pay the tax in respect of that income. In support of his contention, the appellant relies upon the definition of the word, "person" in s. 2, cl. (m) which states: Mahanth Ramswaroop Das v. State of Bihar Shah]. Mahanth Ram swaroop Da£ v. State of Bihar Shah]. 408 SUPREME COURT REPORTS [1961) "'Person' means any individual or association of individuals, owning or holding property for him­ self 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 Jaw, and includes an undivided Hindu family, firm or company." In our view, there is no substance in the contention raised by the appellant. The liability to pay tax is charged on the agricultural income of every person. The income though collected by the Receiver was the income of the appellant. Bys. 13, in addition to the owner, the Receiver is to be deemed to be an assessee. But the fact that the Receiver may, because he held the property from which income was derived in the year of account, be deemed to be an assessee and liable to pay tax, does not absolve the appellant on whose behalf the income was received from the obli­ gation to pay agricultural income-tax. Section .13 merely provides a machinery for recovery of tax, and is not a charging section. When property is in the possession of the Receiver, common manager or administrator, the taxing authorities may, but are not bound to, treat such persons as assessees and recover tax. The taxing authorities may always proceed against the owner of the income and assess the tax against him. The definition in the connotation of "person " undoubtedly included a receiver, trustee, common manager, administrator or executor, and by such inclusion, it is open to the taxing authorities to assess tax against any such persons ; but on that account, the income in the hand of the owner is not exempt from liability to assessment of tax. Counsel for the appellant urged that the income received by the appellant from the Receiver did not retain its character of agricultural ihcome and there­ fore also the appellant was not liable to pay agri­ cultural income-tax. But this contention was never raised before the taxing authorities and no such question has been referred to this court. The charac­ ter of the income was accepted to be agricultural 3 S.C:R. SUPREME COURT REPORTS 409 income in the hands of the appellant and the only question which was sought to be referred and raised before the Board of Agricultural Income-tax was one as to the liability of the appellant to be assessed to agricultural income-tax for the year in question. In that view of the case, the appeal fails and is dis­ missed with costs. Appeal dismissed. M/S. BHOR INDUSTRIES L'l'D. . v. THE COMMISSIONER OF INCOME-TAX, BOMBAY· CITY I. (and connected appeals) (J. L. KAPUR, M. HrnAYATULLAH and J.C. SHAH, JJ.) Income-tax-Assessment of dividend income-Company incor­ porated in Indian State subsequently merged-Extension of Indian Income-tax Act to merged State-Taxation concessions tit merged State-Scope-Assessment on shareholders of non-distributed profits -Exemption from taxation-Computation of dividends deemed to be distributed-Deduction of interest-Merged States (Taxation Conces­ sions) Order, r949, para. r2-lndian Income-tax Act, r922 (fr of r922), ss. r4(2)(c), z8A(8), 23A. The appellant had been incorporated in r944 as a private company limited by shares in the former State of Bhor with its registered office in Bhor. The shareholders of the company were at all material times resident in British India. By virtue of the States Merger (Governors' Provinces) Order, r949, the State was merged with the Province of Bombay with effect from August I, 1949. The provisions of the Indian Income-tax Act, r922, were extended to the merged State with effect from April r, r949. Under fue power given by s. 6oA of the Act which enabled the Central Government to remove any difficulty in the application of the Act to'merged States by making a general or special order granting exemption or other modification, the Central Govern­ ment notified the Merged States (Taxation Concessions) Order, r949. Paragraph r2 of that Order stated that "the provisions of s. 23A of tile Indian Income-tax Act shall not be applied in respect of the profits and gains of any previous year ending before rst day of August, 1949, unless the State law contains a provi­ sion corresponding thereto." The total world incon1e of the company for 1946and.1947 was Rs. 6,57,084-and 7,80,r25 respect. ively and for those years the company declared dividends of Rs. 2,580 and Rs. 1,140. For (he assessment years r947-48 and 5• Mahanth Ramswaroop Dt1s v. State of Bihar Shah]. · J11nuary za .