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1991 Supreme(Mad) 363
High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE DR. A.S. ANAND AND THE HONOURABLE MR. JUSTICE RAJU
K. Md. Iqbal and Others - Appellant
Versus
State of Tamil Nadu - Respondents
TC No. 1568 of 1981
Decided On : 29 April 1991
The essential criterion for determining the status of an association of individuals is the unity of income making purpose. Co-ownership does not necessarily involve a community of profit or loss.
Headnote:
AGRICULTURAL INCOME TAX - Association of Individuals - Joint Ownership - Common Exploitation - Status of Assessees - Whether Assessees are Tenants-in-Common or Association of Individuals - Interpretation of Relevant Statutory Provisions - Tests for Determining Association of Individuals - Common Object to Produce Income, Profits and Gains - Sharing of Income, Profits and Gains - Unity of Income Making Purpose - Joint Endeavour - Common Agreement - Evidence on Record - Findings of Statutory Authorities - Interference by Court.
Fact of the Case:
The assessees, who jointly purchased land and cultivated it through one of them, were assessed as an association of individuals under the Tamil Nadu Agricultural Income-tax Act, 1955. They challenged the assessment, claiming the status of tenants-in-common.
Finding of the Court:
The court held that the assessees were an association of individuals and not tenants-in-common. It found that there was a common object to produce income, profits and gains, a joint endeavour towards that end, and a resultant income being the fruit of the joint enterprise. The court also found that the assessees had associated together and decided upon the common exploitation of the land with a view to share the income, profits and gains.
Issues: 1. Whether the assessees were tenants-in-common or an association of individuals? 2. Whether the statutory authorities erred in assessing the assessees as an association of individuals?
Ratio Decidendi: 1. The court held that the essential criterion for determining the status of an association of individuals is the unity of income making purpose. Co-ownership does not necessarily involve a community of profit or loss. 2. The court found that the assessees had a common object to produce income, profits and gains, a joint endeavour towards that end, and a resultant income being the fruit of the joint enterprise. The court also found that the assessees had associated together and decided upon the common exploitation of the land with a view to share the income, profits and gains. Therefore, the court held that the assessees were an association of individuals.
Final Decision: The court dismissed the tax revision petition, upholding the order of the Tamil Nadu Agrl. ITAT.
Dr. A. S. ANAND, C.J.
This tax revision case is directed against the order of the Tamil Nadu Agrl. ITAT, dt. 3rd March, 1981, passed in ATA No. 258 of 1980.
2. The petitioners were assessed on a net agricultural income of Rs. 12, 010 for the asst. yr. 1978-79 in the status of an association of individuals. Before the Assistant Commissioner, the petitioner disputed the status of association of individuals as also the estimated income. The plea of the petitioners was that since the sale deed had been taken jointly in the name of ten persons, there was a presumption in law that where there is no indication in the sale deed that the buyers would take unequally, then, they shall take equally and they could not be assessed as association of individuals. It was argued before the appellate authority that the mere fact that the land had been purchased jointly and cultivated through one of them would not render them liable to be assessed in the status of association of individuals. The plea, however, did not find favour with the Assistant Commissioner. A further appeal before the Tamil Nadu Agrl. ITAT also failed. Before the Tribunal, no arguments, however, were advanced during the course of the hearing as regards the estimate of income. The Tribunal noticed that even before the Assistant Commissioner, the estimate of income had not been seriously questioned. In the revision before us, no arguments have also been raised with regard to the estimate of income. The only question raised before us is about the correctness of the order of the Tribunal upholding the assessment in the status of association of individuals. Learned counsel for the petitioners reiterated the submissions which had been raised before the statutory authorities including the Tribunal, and vehemently argued that neither the joint ownership nor the common enjoyment of the property could give rise to any inference that the assessees had the status of association of individuals. It was argued that the assessees were tenants-in-common because they held joint ownership. Reliance has been placed on certain judgments, which we shall deal with at the appropriate place in this judgment.
3. Learned Government Advocate (Taxes), on the other hand, submitted that the findings recorded by the statutory authorities, on questions of fact, do not call for any interference in exercise of the revisional jurisdiction of this Court.
4. Some facts, which are not in dispute are : that the assessees filed the returns noting the status as "tenants-in-common". The assessees had jointly purchased the land from the vendors by means of two sale deeds. In the sale deeds, however, neither the shares of the individuals were specified nor was there any indication regarding the contributions made by each of the ten persons, who had jointly purchased the land. The cultivation of the land also was done only through one purchaser, viz., Thiru Kayoom. What is the status of the assessees, as deductible from the aforesaid facts, is the only question requiring our consideration. To answer this question, it is desirable to refer to the relevant statutory provisions first.
5. The relevant portion of s. 3(1) of the Tamil Nadu Agricultural Income-tax Act (hereinafter referred to as the Act) provides as follows :
"Charge of agricultural income-tax. - (1) Agricultural income-tax at the rate or rates specified in Part I of the Schedule to this Act shall be charged for each financial year commencing from the 1st April, 1955, in accordance with and subject to the provisions of this Act, on the total agricultural income of the previous year of every person;".
Sec. 3(3) reads thus :
" 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."
6." Person"has been defined in s. 2(q) of the Act to mean :
" any individual or association of individuals, owning or holding property for hi
