1968 (1) TMI 12 - HC - Income Tax

Hindu Succession Act, 1956 - Whether the tax due under the provisions of the (Kerala) Agricultural Income-tax Act, 1950 (for short, the Act), in respect of income derived by a sthanamdar from sthanam property is, after his death, leviable from the person or persons on whom the property has devolved - Held, yes

Issues Involved:
1. Liability for tax on income derived from sthanam property after the death of a sthanamdar.
2. Interpretation of "person" under the Agricultural Income-tax Act, 1950.
3. Applicability of Section 24 of the Act regarding legal representatives.
4. Juristic personality of sthanam.
5. Binding nature of tax liability on successors of sthanam property.

Detailed Analysis:

1. Liability for Tax on Income Derived from Sthanam Property After the Death of a Sthanamdar
The primary issue was whether the tax due under the Kerala Agricultural Income-tax Act, 1950, on income derived by a sthanamdar from sthanam property is leviable from the person or persons on whom the property devolved after the sthanamdar's death. The court noted that the tax liability of Rs. 85,000 was in respect of income derived from the sthanam property during the period from November 1, 1956, to March 31, 1958, by the then Zamorin, Sreemanavikraman Raja. Upon his death, the property devolved on 692 members of the Zamorin's family and his heirs in separate shares under Section 7(3) of the Hindu Succession Act. The assessment was made on the succeeding Zamorin, Kunhammaman Raja, under Section 24(2) of the Act, and he paid part of the tax. The petitioners, as court-appointed receivers, sought to quash the remaining tax demands.

2. Interpretation of "Person" Under the Agricultural Income-tax Act, 1950
The court considered whether the sthanam itself could be treated as a juristic person under the Act. The argument was made that the sthanam, distinct from the human sthanamdar, is a juristic person liable for the tax. The court rejected this argument, stating that the sthanamdar, as an individual, is the person deriving the income and liable for tax. The definition of "person" in Section 2(m) of the Act includes individuals holding property in any capacity, but it does not imply that each capacity is a separate person.

3. Applicability of Section 24 of the Act Regarding Legal Representatives
Section 24(1) of the Act makes the legal representatives of a deceased person liable to pay the agricultural income-tax assessed on the deceased out of his estate. The court held that the succeeding Zamorins, and now the petitioners, could be regarded as legal representatives of Sreemanavikraman Raja, liable to pay the tax from his 1/693rd share in the property. The liability is limited to the value of the deceased's estate, and credit must be given for payments already made.

4. Juristic Personality of Sthanam
The court examined whether the sthanam could be considered a juristic person capable of being assessed to tax. It concluded that the sthanamdar is the sole owner of the sthanam property and takes the income in his personal right. Thus, the sthanam as such cannot have income or be assessed to tax. The argument that the sthanam is a corporation sole was rejected.

5. Binding Nature of Tax Liability on Successors of Sthanam Property
The court considered whether the tax liability on the income derived by the deceased sthanamdar binds the successors who inherited the property under Section 7(3) of the Hindu Succession Act. It was argued that the property devolved subject to the liabilities of the sthanam. The court held that the tax liability incurred by the deceased sthanamdar is binding on the successors to the extent of the property they inherited. The petitioners, as receivers, are liable to pay the tax from the estate of Sreemanavikraman Raja, limited to his share in the property.

Separate Judgment by Mathew J.
Mathew J. concurred with the majority but provided additional reasoning. He emphasized that the sthanamdar, in his capacity as sthanamdar, is a "person" under the charging section of the Act. He held that the income derived by the sthanamdar is taxable, and the liability to pay the tax is on the sthanamdar in that capacity. The sthanam properties passed to the successors subject to the tax liability. He also noted that the department could assess the legal representative managing the sthanam properties.

Conclusion
The majority judgment allowed the petition, quashing the tax demands on the petitioners, except to the extent of the deceased's estate. Mathew J. would have dismissed the petition, holding the successors liable for the tax. The court's decision was based on the interpretation of the Agricultural Income-tax Act and the Hindu Succession Act, emphasizing the limited liability of legal representatives and the non-juristic nature of the sthanam.

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