THOMAS VARGHESE Vs. STATE OF KERALA

JUDGEMENT

(1.) THE prime question involved in this batch of tax revision cases is whether the petitioners are liable to be assessed to agricultural income-tax invoking the provisions contained in Section 9(2)(a)(i) of the Agricultural Income-tax Act, 1950 (for short, "the Act"). THE assessment years involved in all these cases are 1978-79 and 1979-80. THEse tax revision cases have been filed under Section 78 of the Agricultural Income-tax Act, 1991, against the common order passed by the Deputy Commissioner of Agricultural Income-tax, Trichur, dated March 20, 1991, in respect of the aforesaid assessment years.

(2.) THE petitioners in these cases are the trustees of twelve family trusts. Those trusts are : (1) John Paul Daughters Trust ; (2) Mary John Family Trust ; (3) Leela Philip Family Trust ; (4) Susan Varghese Family Trust ; (5) Susheela George Family Trust ; (6) Sheela Thomas Family Trust ; (7) Saju Thomas Daughters Trust ; (8) Francis Paul Heirs Trust ; (9) Francis Paul Daughters Trust; (10) John Paul Heirs Trust ; (11) Francis and John Family Trust; and (12) Saju Thomas Heirs Trust. THEse family trusts were constituted under separate deeds executed on May 1, 1975. THEse family trusts own extensive properties, both agricultural and non-agricultural. For the effective management of these properties, the terms in the trust deed specifically empowers the respective trusts to enter into partnership or joint ventures or any other arrangement. In terms of the trust deed, two partnerships were constituted, namely, "Popular Plantations" and "Popular Estates". THE trust deed provides that the trust could nominate one of its trustees as partner in the firm for and on behalf of the trust.

(3.) IN view of the above, the Commissioner took the view that the twelve partners have joined the partnership in their individual capacity and not in the representative capacity of the respective trusts. Therefore, under Section 9(2)(a)(i) of the Act, the agricultural income of an individual shall include the agricultural income of his wife from the membership in a firm in which the individual is also a partner and such income shall be assessed in the hands of the individual. Consequently, the Commissioner further said that Smt. Susan Varghese, wife of the petitioner, is also a partner of the firms, "Popular Estates" and "Popular Plantations" and hence the income derived by her from the said two firms should have been included in the income derived by her husband. Therefore, according to the Commissioner, the omission to observe the provision contained in Section 9(2) of the Act has resulted in underassessments creating a short demand of Rs. 39,489 for the years 1978-79 and 1979-80. It was in the above background, the Commissioner has issued notices initiating suo motu revision under Section 34 of the Act to all the partners of the firm.