SUBRAMANIA PILLAI K Vs. AGRICULTURAL INCOME TAX OFFICER

JUDGEMENT

(1.) THIS reference arises under the Travancore-Cochin Agricultural Income-tax Act, 1950. The assessee, Subramania Pillai, executed a settlement deed covering his agricultural properties. In the assessment years 1957-58 and 1958-59, the Agricultural Income-tax Officer excluded the income from the properties covered by the settlement deed in making an assessment upon the income of the assessee. The Commissioner, in exercise of his suo motu powers of revision, revised the assessment, holding that the settlement fell within the mischief of section 9(1) of the Act. this revision was made after issuing a notice to the assessee and after hearing the assessee. The result was that the settlement was held to be a revocable settlement, failing within the proviso to section 9(1) of the Act, so that the assessee became liable to be assessed on the income of the properties covered by the settlement as well. On the application of the assessee under section 62 of the Act, the Commissioner has referred the following question for our decision :

(2.) SECTION 9(1) and the first proviso thereto read thus :

(3.) IT was next contended on behalf of the assessee that the third proviso to section 9(1) should be considered and, if that is applied, it would take the present case out of the first proviso. In Ramji Keshavji v. Commissioner of Income-tax, it was held that the third proviso to section 16(1)(c) of the Income-tax Act applies to the first proviso as well as to the substantive provision, section 16(1)(c). Even so, we fail to see how the conditions requisite for invoking the third proviso obtain in this case. The third proviso to section 9(1) of the Act takes a case out of the scope of section 9(1) if the settlement is not revocable for a period exceeding six years or during the lifetime of the settlor and from which agricultural income the settlor derives no direct or indirect benefit. In order to invoke this third proviso both the above conditions should exist. IT is true that the latter condition that the settlor derives no direct or indirect benefit from the agricultural income is satisfied. But the first condition that the settlement is not be revocable for the period specified is not complied with. The third proviso has thus no application.