1971 (1) TMI 26 - HC - Income Tax

U.P. Agricultural Income Tax Act, 1948 - petitioner realised arrears of rent in respect of that part of the estate which had ceased to belong to him - whether arrears of rent was liable to tax and whether property yielding income should be held by the assessee

Summary

Issues Involved:
1. Interpretation of the term "person" under Section 3 of the U.P. Agricultural Income-tax Act.
2. Taxability of agricultural income from property no longer owned or held by the assessee during the assessment year.

Issue-wise Detailed Analysis:

1. Interpretation of the term "person" under Section 3 of the U.P. Agricultural Income-tax Act:
The case was referred to a larger Bench due to conflicting interpretations by different Benches of the court regarding the term "person" in Section 3 of the U.P. Agricultural Income-tax Act. The petitioner argued that since he was divested of the property yielding the income from July 1, 1952, he did not qualify as a "person" under the Act during the relevant assessment years. The court examined the definition provided in Section 2(11), which includes individuals or associations owning or holding property in various capacities.

The court noted that the agricultural income charged to tax under Section 3 must arise from property owned or held by the assessee. The key issue was whether agricultural income from property no longer owned or held by the assessee during the assessment year could still be taxed. The court referred to Section 3 of the U.P. Agricultural Income-tax (Amendment) Act, 1953, which clarified that the words "owning or holding property" in Section 2(11) do not require the person to continue owning or holding the property in the assessment year.

2. Taxability of agricultural income from property no longer owned or held by the assessee during the assessment year:
The court discussed several precedents to resolve this issue. In Radhey Shyam v. Agricultural Income-tax Officer, it was held that the term "person" did not require ownership or holding of property during the assessment year. In Kunwar Trivikram Narain Singh v. State of Uttar Pradesh, it was held that an assessee who owned or held other agricultural land during the assessment year could still be considered a "person" under the Act, even if the land yielding the income was no longer owned or held.

The court concluded that the owning or holding of property and the assessment year are considerations that go together. The receipt of agricultural income and the previous year are separate considerations. The court rejected the petitioner's argument that the property yielding the income must be owned or held by the person during the assessment year. The court emphasized that the charge under Section 3 is levied on the total agricultural income of the previous year, not on individual items of income. The court cited English cases and the Supreme Court's adoption of the principle that income tax is a single tax on the total income of the person.

The court affirmed the view in Kunwar Trivikram Narain Singh, holding that the petitioner, who owned or held some property during the assessment year, was a "person" under the Act, even if the property yielding the income was no longer owned or held.

Conclusion:
The petition was dismissed with costs assessed at Rs. 150, affirming that the petitioner was liable to be taxed on the arrears of rent received during the relevant previous years, despite no longer owning or holding the property yielding the income during the assessment year.