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TMI Blog1964 (7) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 August 4, 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 1 share was held by Subramania Iyer himself in pursuance of a partition arrangement following a division in status several years ago. This partition arrangement was confirmed in a partition deed dated April 3, 1960. All the lands however were managed by Subramania Iyer himself. For the 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 Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 held 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 mere purpose of convenience, then there need not have been a common cultivation on common account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave 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 [1949] I.L.R. 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 on the third part, held definite and localisable items in the properties, there is no unity of possession, and, therefore, no question of a tenancy-incommon arises in this case. The next and equally important question is whether the group of persons thus mentioned, viz., Subramania Iyer, his grandson by the daughter and his son and son's son, had in fact formed an association of individuals within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 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 v. Commissioner of Income-tax [1961] 42 I.T.R. 115; [1961] 3 S.C.R. 515 and we will refer to it in the first place. This decision was given in an appeal from a decision of this court reported as Estate of Khan Sahib Mohd. Oomer Sahib v. Commissioner of Income-tax [1958] 33 I.T.R. 767. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s property from the date of the purchase down to the present time. Thirdly, they have joined together, as the power of attorney shows, 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, as co-adventurers, to use an archaic expression, then, I think, no difficulty whatever arises in the way of saying that in this particular case these four persons did constitute an 'association of individuals'... The next decision is Commissioner of Income-tax v. Laxmidas Devidas [1937] 5 I.T.R. 584. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 M.M. Ipoh v. Commissioner of Income-tax [1962] 46 I.T.R. 301 dealt with the assessment of a Nattukottai 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 10 per cent. commission of the profits for looking after the 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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese 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 grandsons 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 pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of joint cultivation. This essential requirement is absent in this case. Our attention was drawn to a decision of a Bench of his court (Jagadisan and Srinivasan JJ.) in T.C. No. 3 of 1963 Since reported as State of Madras v. Karuppan Chettiar [1966] 61 I.T.R. 488. The genealogical tree set out in the judgment shows that the members of the assessee's 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner or tenant or mortgagee in possession or as a maintenanceholder 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 individuals 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 the various definitions in that section, would apply unless the context otherwise requires. The context of section 2(q) would make it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 65 of the Act and the 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 under sections 9(2)(a)(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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted 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 1961 (Act 51 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 51 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 to 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 under section 65. But if the lands settled on the wife and minor son are excluded, the bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 the rate or rates specified below... We may note in this connection that originally Act V of 1955 was intended it cover only plantations growing produce like tea, coffee, 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 29 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 of rates for 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 subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 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 ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred 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 T.C. 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 w ..... 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