High Court Of Madras
State Of Tamil Nadu vs. Ezhumeswaramudayar Temple
Sections Art 13, Art 246, Art 265, Art 366(1), Sch. VII, List I, Entry No. 82, Sch. VII, List II, Entry No. 46, TN Agrl.4(b),
Asst. Year 1990-91
Janarthanam & P. Thangavel, JJ.
Tax Case No. 140 of 1994
9th January, 1998
K. Ravi Raja Pandian, for the Petitioner : None, for the Respondent
JANARTHANAM, J. :
This tax case (revision) is directed against the order dt. 28th Oct., 1993, of the Tamil Nadu Agricultural Income- tax Appellate Tribunal, Madras-104 (For short “the Tribunal”) and made in A.T.A. No. 84 of 1991, relatable to the asst. yr. 1990-91 under the Tamil Nadu Agrl. IT Act, 1955 (for short “the Act”).
2. The assessee is none else than A/M. Ezhumeswaramudayar Temple, Ayakkaranbulam, Vedaranyam Taluk, Mannargudi Circle. The assessee, it appears, had been subjected to payment of tax under the Act on a net income of Rs. 26,496 for the asst. yr. 1990-91. The aggrieved assessee-temple filed an appeal A.P. No. 13 of 1991, before the Asstt. Commr. of Agrl. IT, Thanjavur, who in turn, of course, after taking into consideration the relevant materials available on record, confirmed the order of assessment and dismissed the appeal by his order dt. 16th April, 1991.
The aggrieved assessee-temple agitated the matter further by filing an appeal before the Tribunal, as stated above. Before the Tribunal, the assessee-temple, it appears, produced the exemption certificate obtained from the IT Department under s. 11 of the IT Act as relatable to non-agriculturists for the year ending 30th June, 1990. Placing reliance on the exemption certificate obtained by the assesseetemple under s. 11 of the IT Act, the Tribunal also granted exemption under s. 4(b) of the Act. In that view of the matter, the Tribunal allowed the appeal, giving rise to the present actionâTaxcase (R) No. 140 of 1994, by the Revenue.
3. Notice, of course, had been issued to the assessee-temple in this action and the assesseetemple also entered appearance through its counsel K. Srinivasan. R. Venkataraman, G. Prabhurajadurai and P. Jeevarathinam. None of the counsel appearing for the assessee temple was present in the Court at the time, when the matter was called and no representation was made on their behalf. In such a situation, there is no other go for us, exempt to dispose of the matter on the merits by hearing the arguments of Mr. K. Ravi Raja Pandian, learned special Government Pleader, representing the Revenue.
4. From the pith and substance of the submissions of the said learned counsel, representing the Revenue and the rationale or reasoning as projected by the Tribunal in allowing the appeal, the one and only question that arises for consideration is as to whether the order of the Tribunal in granting exemption under s. 4(b) of the Act as respects the income derived by the assessee-temple relatable to the asst. yr. 1990-91, on the facts and in the circumstances of the case, is sustainable in law. The point :
5. The Tribunal, we rather feel, did not approach the issue involved in this action from the correct legal perspective and that is getting reflected by the order passed by it. Originally, the income derived from land held under trust for charitable or religious purposes was exempt from tax by the Act. Such an exemption enured to the benefit of the said trust till the Amendment Act 4 of 1973. The said amendment Act came into force w.e.f. 1st April, 1972, which introduced cl. (b) of s. 4 of the Act. The said clause runs as under : “4. Total agricultural income.âSubject to the provisions of this Act, the total agricultural income of any previous year of any person comprises all agricultural income derived from land situated within the State, which is received by him or which accrues to him within or without the State, but does not include….. (b) any agricultural income derived from property held under trust, wholly or party for charitable or religious purposes to the same extent to which the income derived from property held under trust wholly or partly for charitable or religious purchases, is not included in the total income for purposes of the IT Act, 1961 (Central Act, XLIII of 1961).”Therefore, after the introduction of the said clause, by Act No. 4 of 1973, the exemption granted in respect of the agricultural income derived from the property held under trust is taken away and even the said income is made exigible or assessable to tax and the measure of exigibility or assessability to tax, had, however, been indicated by the insertion of a phraseology, while enacting cl. (b) of s. 4 of the Act. The phraseology “to the same extent to which the income derived from property held under trust wholly or partly for charitable or religious purposes, is not included in the total income for the purposes of the IT Act, 1961 (Central Act No. XLIII of 1961)” assumes signal importance. Unless and until the said phraseology is properly understood, by interpretative process, it is not feasible or possible to come to any conclusion as to whether and in what manner any agricultural income derived from the property held under trust, wholly or partly for charitable or religious purposes, is exigible to tax or not and to what extent.
6. For a proper undertaking of the phraseology, as extracted above, it is but necessary to refer to certain provisions of the Constitution and the Indian IT Act, 1922. “Agricultural income” is defined under cl. (1) of Art. 366 of the Constitution of India, which reads as under : “366. In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say : (1) âagricultural incomeâ means agricultural income as defined for the purposes of the enactments relating to Indian Income- tax…..” Under s. 2(1A) of the IT Act, “agricultural income” is defined. The said definition, it appears, underwent amendments on many occasions. There is no need or necessity, we rather feel, to extract the definition of “agricultural income” as contained in the IT Act. Suffice it for us to say that as per the salient provisions adumbrated under cl. (1) of Art. 366 of the Constitution, the “agricultural income” can mean only income as defined under the definition clause of the IT Act. In tune with the definition of “agricultural income”, as defined in the IT Act, the Act also defines “agricultural income” under s. 2, cl. (a), and there is no need at all therefore, to extract the said definition, on the facts and in the circumstances of this case. The fields of legislative activity of the Union and the State in relation to taxation had been earmarked by Lists I and II of the Seventh Schedule to the Constitution. Entry No. 82 of List I of the Seventh Schedule to the Constitution reads as under : “82. Taxes on income other than agricultural income.” Entry No. 46 of List II of the Seventh Schedule to the Constitution reads as under : “46. Taxes on agricultural income”. Art. 265 of the Constitution deals with power of taxation and the said article reads as under : “265. Taxes not to be imposed save by authority of law.âNo tax shall be levied or collected except by authority of law.” Thus, the said article provides that the State shall not levy or collect tax, except by authority of law. A tax cannot be levied or collected by a mere executive fiat. It is to be done by authority of law, which must mean valid law only. In order for law to be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing the tax and authorising collection thereon and, secondly, the tax must be subject to the conditions laid down in Art. 13 of the Constitution. Art. 13 of the Constitution reads as under : “13. Laws inconsistent with or in derogation of the fundamental rights.â(1) All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void. (2) The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void. (3) In this article, unless the context otherwise requires, (a) âlawâ includes any Ordinance, order, bye-law, rule, regulation, notification, custom or usage having in the territory of India the force of law; (b) âlaws in forceâ includes laws passed or made by a legislature or other competent authority in the territory of India before the commencement of this Constitution and not previously repealed, notwithstanding that any such law or any part thereof may not be then in operation either at all or in particular areas. (4) Nothing in this article shall apply to any amendment of this Constitution made under Art. 368.” Art. 246 dealing with the subject-matter of laws made by Parliament and by the Legislatures of States reads as under : “246. (1) Notwithstanding anything in cls. (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the âUnion Listâ). (2) Notwithstanding anything in cl. (3), Parliament, and subject to cl. (1), the Legislature of any State also have power to make laws with respect to any of the matters enumerated in List III in the seventh Schedule (in this Constitution referred to as the âConcurrent Listâ). (3) Subject to cls. (1) and (2), the legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution, referred to as the âState Listâ).
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State, notwithstanding that such matter is a mater enumerated in the State List.”
From the salient provisions adumbrated under Art. 246, it is thus crystal clear that the Union can legislate on taxes under entry 82 of List I of the Seventh Schedule to the Constitution, that is to say, it can legislate only on income, other than “agricultural income”. Likewise, the State can legislate on tax under entry 46 of List II of the Seventh Schedule, that is to say, on tax on “agricultural income”.
The Indian IT Act, 1922, must be construed to be an enactment made by the Union under entry 82 of List I of the Seventh Schedule to the Constitution. Likewise, the State of Tamil Nadu enacted the Act (Tamil Nadu Agrl. IT Act, 1955) under entry 46 of List II of the Seventh Schedule. From this, it is crystal clear that the purpose for which the IT Act was enacted was to tax income, other than “agricultural income” and the purpose of the enactment of the Tamil Nadu Agrl. IT Act was to tax “agricultural income” and nothing further. It is in this view of the matter that in s. 10(1) of the IT Act, “agricultural income” is not included in the computation of income of the assessee relatable to the previous accounting year in respect of the assessment year and not that the power inheres in an authority to tax “agricultural income” and consequently to grant exemption therefore.
9. Sec. 11 of the IT Act deals with income from property held for charitable or religious purposes. The income from the property held for a charitable or religious purpose under this section cannot be any one other than “non- agricultural income”. The parameters for grant of exemption of such income had been prescribed by the said section. Sec. 12 of the IT Act deals with the income of trusts or institutions from contributions. Sec. 12A prescribes the requisite and necessary conditions as to the registration of trusts, etc., Sec. 13 deals with the situations in respect of which s. 11 shall not apply. Further, s. 11 is subject to the provisions of ss. 60 to 63, as had been indicated in the opening part of the section itself. Thus, the IT Act contains relevant salient provisions prescribing the parameters for grant of exemption in respect of income from property held for charitable or religious purposes.
10. As already adverted to, the subject-matter of taxation cannot be any one other than “agricultural income” under the Act. For the sake of emphasis, we may again reiterate that the income from the property held under trust for religious or charitable purposes, which were originally exempt from tax was sought to be taxed by Act 4 of 1973 w.e.f. 1st April, 1972, by the introduction of cl. (b) of s. 4 and in such process, income from property held under trust for religious or charitable purposes is sought to be exempted in the manner and methodology contemplated therein. In the context in which the phraseology, “to the same extent to which the income derived from property held under trust wholly or partly for charitable or religious purposes is not included in the total income for the purposes of the IT Act, 1961,” occurring in the said clause, no meaning can be ascribed, except as to how under the IT Act, the income derived from non-agricultural property held by a charitable and religious trust is taxable and to the same extent, the agricultural income would be taxable under the said clause of the Act. If any other meaning is given to the said phraseology, it would lead to absurd results. In the process of interpretation of the phraseology, as extracted above, we have to accredit wisdom and knowledge to the legislature in enacting such a clause to the relevant provisions of the IT Act and the provisions of the Constitution, we have earlier referred to and that perhaps was the reason they have introduced cl. (b) of s. 4 to tax “agricultural income” from property held under trust for religious or charitable purposes in the same manner, as had been enacted in the IT Act, as relatable to non-agricultural income from property held under trust for religious and charitable purpose for the purpose of income-tax. Certain consequences are to flow from what has been stated above. There is no need for a religious or charitable trust, receiving income on agricultural from the lands held by them, to get the trust registered under the relevant provisions of the IT Act for claiming a little bit of exemption of tax, as had been granted in cl. (b) of s. 4 of the Act. It is only such sort of religious or charitable trust holding property and deriving non-agricultural income alone have to get themselves registered under the relevant provisions of the IT Act for getting exemption from taxation.
The Tribunal, as already indicated, approached the issue involved in this case from the legal perspective, altogether untenable and that perhaps was the reason it got itself misdirected to the issue involved and consequently held that the assessee-temple had exemption from tax in respect of the income derived from the land held under trust for religious or charitable purposes for the asst. yr.1990-91. Since the Tribunal, as already indicated, had not at all applied its mind in the proper perspective in understanding the significance and meaning of cl. (b) of the s. 4 of the Act and misdirected itself in exempting the assessee-temple from tax in respect of the agricultural income for the asst. yr. 1990-91, the impugned order of the Tribunal deserves to be set aside. Even the other authorities, viz., the Agrl. ITO, Mannargudi, and the Asstt. Commr. of Agrl. IT, Thanjavur, did not approach the issue involved in this case from the correct legal perspective and, therefore, it is, the orders of those authorities also deserve to be set aside.
13. In fine, the tax case (revision) is allowed. The orders of all the tax authorities, inclusive of the Tribunal are set aside and the matter is remitted back to the Agrl. ITO, Mannargudi, for a fresh look into the matter, as we have indicated above. No costs.
[Citation : 247 ITR 521]