N K RAJU Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE petitioner, N. K. Raju, had five sons, of whom only one Lingaraj was an adult in 1955. Devammal is the wife of N. K. Raju. THE family owned tea and coffee plantations. THE agricultural income from plantations was made liable to tax under Madras Act V of 1955 in the assessment year 1955-56, which commenced on April 1, 1955. In the course of these assessment proceedings Raju claimed that the tea and coffee plantations had been divided between himself and his sons, a portion also being set aside for his wife, and that each of them should be assessed separately on the income that had been derived from the lands allotted to his or her share. On August 8, 1956, the Agricultural Income-tax Officer passed an order under section 29(1) of the Act, an order which apparently the assessees sought. THE Agricultural Income-tax Officer recorded that he was satisfied that the joint family properties had been partitioned among the assessees in definite shares, that is, between Raju and his five sons. This was followed up by individual orders of assessment with reference to each of the members of the family. Those orders themselves were under section 65(1) of the Act In the proceedings before the Agricultural Income-tax Officer, the claim that the properties had been divided between Raju and his sons was based upon a document, which was styled a settlement deed, executed by Raju on March 9, 1955, the scope of which we shall presently examine In exercise of the revisional powers vested in the Commissioner, he examined the correctness of the orders of the Agricultural Income-tax Officer. and he passed the order dated July 22, 1957. THE Commissioner set aside the order under section 29(1) of the Act as well as the orders of assessment and directed a reassessment, virtually on the footing that all the properties and the income therefrom belonged to the joint family, of which Raju was the karta. THE Commissioner held that the deed of settlement dated March 9, 1955, in which a power of revocation was expressly reserved in favour of the settlor, Raju, came within the scope of section 9 of the Act, and that, despite that document, the entire income from the properties should be taxed in the hands of the settlor, Raju.

(2.) THE Commissioner also recorded a finding that the partition claimed to have been effected even in 1951, that is, even antecedent to the execution of the document dated March 9, 1955, was sham and fictitious and that it was meant to evade paying agricultural income-taxIt is the correctness of the order of the Commissioner dated July 22, 1957, that has been challenged in this petition to revise that order Though the assessees themselves apparently sought the order under section 29(1) of the Act in the assessment proceedings before the Agricultural Income-tax Officer, it should be clear that section 29(1) could have no application at all. Section 29(1) could be invoked by persons of a family who had been assessed as a Hindu undivided family to agricultural income-tax. THE proceedings related to the first of the assessment years 1955-56. THEre has been no assessment to income-tax prior to 1955-56. We shall illustrate our point by an example. If there had been a division in status, whether or not there had been an actual division of the properties between the divided coparceners, long antecedent to the previous year corresponding to the assessment year 1955-56, the income would have lawfully vested in each of the divided coparceners when the Act came into force in the assessment year 1955-56. Each of the quondam coparceners would be entitled to have his income assessed separately, and there would be no need at all for an order under section 29(1). In fact, section 29(1) would not apply. In the present case, the claim ultimately was that there had been a partition between Raju and his sons in 1951, which partition was subsequently evidenced by the document of 1955, a document styled a deed of settlement. THE Commissioner, as we have already pointed out, was of the view that the partition of 1951 pleaded by Raju was a sham transaction. If the partition itself was sham, a document to evidence that sham transaction could have no higher value and if there was no partition, obviously there can be no question of anybody invoking section 29(1).

(3.) IN effect the claim was that all the properties were ancestral properties, either inherited from his father or acquired by him and constituted an accretion to the ancestral property IN the statement that Raju filed before the Commissioner the claim was that all the properties in question were ancestral properties because they had been acquired even during the time of the grandfather of Raju. Several documents to substantiate this last claim were put forward. Whether all the properties dealt with under the document dated March 9, 1955, were ancestral properties or not, was a point for investigation. If all of them were ancestral properties, it would certainly be consistent with the claim put forward by Raju that there had been a partition between himself and his sons, with a provision for Raju's wife for her lifetime. That would be consistent with a division in status or it would possibly be that without a division in status there was a partial partition of joint family properties. IN either case, if there had been such a partition before the commencement of the previous year in relation to the assessment year 1955-56, the income from the properties so partitioned and allotted to the several members of the family could not be clubbed together for purposes of taxation and treated as income of the joint family. The question will have to be investigated afresh and in accordance with all the materials placed before the CommissionerWe have referred to the finding of the Commissioner that the partition of 1951 was a sham transaction. How the transaction could have been brought about in 1951 with a view to evade a tax not imposed then, it is a little difficult to understand. Apart from that, really relevant evidence does not appear to have been taken into consideration by the Commissioner in coming to the conclusion that the partition of 1951 was a sham transaction.