MSP FAMILY JAIN TRUST Vs. STATE OF KERALA

JUDGEMENT

(1.) Petitioner is challenging Exts. P1 and P2 notices proposing to revise AIT assessments for the years 1991-92 to 1993-94 under S.41 of the AIT Act 1991 on the ground that the same is arbitrary and without jurisdiction. I have heard counsel appearing for the petitioner and Government Pleader.

(2.) Petitioner claimed to be a charitable trust and was granted registration as such under S.16 of the AIT Act. Even though agricultural holding of the petitioner, namely, coffee plantation, was above 20 hectares, the limit provided for payment of tax at compounded rate, the petitioner was granted the benefit of payment of tax at compounding by virtue of S.13(7) of the Act, which grants eligibility to charitable trust for payment of tax at compounded rate above 20 hectares. Assessments were originally completed for the years 1991-92 to 1993-94 under S.13 of the Act accepting the position that petitioner as a charitable trust, was eligible for payment of tax at compounding above 20 hectares. However, the question whether petitioner is a charitable trust or not was pending in appeal before the Supreme Court for earlier years and the Supreme Court in the year 1998 held that petitioner was not a charitable trust as it was formed to promote the interests of a single religious community. Consequent upon the judgment of the Supreme Court the registration granted to the petitioner as a charitable trust was cancelled and the assessing officer issued notices stating that assessments completed at compounded rate for the years 1991-92 to 1993-94 are untenable and therefore he took permission from the Commissioner to reopen assessments under S.41 of the AIT Act. The Commissioner vide order dated 4.9.2001 issued under S.41(2) of the Act granted permission to revise the assessments for 1991-92 to 1993-94 under S.41 and the impugned notices are issued under the said provision after getting such sanction.

(3.) Counsel for the petitioner contended that assessments completed under S.13 cannot be reopened under S.41 as there is no escapement of income because scheme of payment of tax at compounded rate under S.13 is based on area of cultivated land and determination of income did not arise. Government Pleader on the other hand contended that S.41 applies to escapement of income, whether the assessment is made at compounded rate under S.13 or whether assessment is made under S.35. I am in agreement with the contention of Government Pleader because S.13(1) provides for payment of tax at compounded rate which is in lieu of tax payable under other provisions of the Act. In other words. S.13(1) is an alternate scheme of assessment as eligible assessees are given option to pay tax under the said scheme which is based on cultivated area. S.13 has an overriding effect over other provisions of the Act, and it is therefore exception to S.3, namely, the charging Section which provides for collection of tax at the rates provided in the schedule to the Act. So much so. S.13 acts as a charging Section in lieu of S.3 of the Act for those who opt for payment of tax under the scheme of compounding. Therefore what is provided under S.13(1) is determination of tax payable under the Act, though the same does not involve determination of income, is also agricultural income tax payable under the Act. Moreover. S.14 of the Act makes S.41 applicable in respect of assessments under S.13 involving escapement of tax. Therefore proceedings under S.41(1) can be initiated to assess escaped tax even in respect of assessments at compounded rate under S.13 of the Act. In the circumstances, the petitioner's objection against maintainability of proceedings under S.41(1) of the Act is overruled. Since limitation is got over by virtue of the order of the Commissioner under S.41(2) the Assessing Officer is entitled to make assessments under S.35(2) and (4) read with S.41(1) of the Act. Even though petitioner has relied on the decisions of this Court in K. Krishna Bhat v. Agricultural Income Tax Officer ( 1979 KLT 518 ), Commissioner of Agricultural Income Tax v. Parameswara Bhat ( 1980 KLT 276 ) and Cochin Port Trust v. Ernakulam District L. D. & C. Labour Union ( 1995 (2) KLT 31 ), I do not find any of the above decisions applies to the facts of the case.