Mahanth Ramswaroop Das vs The State Of Bihar

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No.449 of 1958

Decision Date: 11 January 1961

Coram: J.C. Shah, J.L. Kapur, M. Hidayatullah

The case was titled Mahanth Ramswaroop Das versus The State of Bihar and was decided on 11 January 1961 by a Bench of the Supreme Court of India composed of Justices J.C. Shah, J.L. Kapur and M. Hidayatullah. The petitioner was Mahant Ramswaroop Das and the respondent was the State of Bihar. The judgment citation appears as 1961 AIR 1147 and also as 1961 SCR (3) 405. The dispute concerned the Bihar Agricultural Income‑Tax Act of 1948, specifically sections 2 clause (m), 3 and 13 of that Act. According to the headnote, the appellant, who was the Mahant of the Asthal Estate in Bihar, held the estate under the management of a Court Receiver appointed in a suit relating to the estate. The central question that reached the Supreme Court was whether the Mahant, as the owner, could be assessed for agricultural income‑tax under the Bihar Agricultural Income‑Tax Act for the year during which the estate was under the Receiver’s control. The Court held that although the income was collected by the Receiver, the income nonetheless belonged to the appellant. By virtue of sections 2 clause (m) and 13, the taxing authorities were permitted to treat the Receiver as the assessee because he held the property from which the income arose; however, this treatment did not exempt the owner’s income from liability to assessment. Section 3 of the Act defines the chargeable agricultural income as belonging to every person described in section 2 clause (m), a definition that includes a Receiver. Section E3, on the other hand, merely provides a mechanism for recovering tax from “persons” including Receivers and does not itself constitute a charging provision.

The appeal was filed as Civil Appeal No. 449 of 1958 and was taken by special leave under Article 136 of the Constitution from a judgment and decree dated 7 August 1956 of the Patna High Court in Miscellaneous Judicial Case No. 604 of 1953. Counsel for the appellant was identified, and counsel for the respondent was also named. The High Court of Judicature at Patna had answered affirmatively the question referred to it by the Board of Agricultural Income‑Tax, Bihar, under section 28(3) of the Act: whether, given the facts and circumstances, the petitioner could legally be assessed for the estate’s income in the Fasli year 1355 when the estate was in the Receiver’s hands. The appellant, Mahant Ramswaroop Das, was the Mahant of the Asthal Estate located at Salauna in the District of Bhagalpur, Bihar. In a suit concerning that estate, a Court Receiver had been appointed by the First Class Subordinate Judge of Monghyr to manage the estate. The Receiver continued in that role until sometime in December 1949, after which, by order of the Subordinate Judge, he handed over the estate to the appellant on 8 January 1950. Shortly thereafter, on 15 January 1950, the appellant filed an income return for the estate for the Fasli year 1355, which corresponded to the period from 16 September 1948 to 15 September 1949, with the Agricultural Income‑Tax Officer of Monghyr. The Officer assessed the estate’s agricultural income on 7 August 1950 at Rs. 90,507‑2‑6 and directed the appellant to pay Rs. 20,290‑13‑0 as agricultural income‑tax. Subsequent appeals to the Commissioner of Agricultural Income‑Tax and to the Board of Agricultural Income‑Tax, Bihar, were dismissed. The Board then referred the specific question to the High Court under section 28(3) of the Act, and the Supreme Court was asked to determine whether the appellant was liable to be assessed and to pay agricultural income‑tax for the year during which the estate was managed by the Court Receiver.

In the proceedings before the High Court, the Court Receiver had been appointed by the First Class Subordinate Judge of Monghyr to administer the Asthal Estate, Salauna, situated in the District of Bhagalpur. The Receiver carried out his duties until some time in December 1949. By an order dated 8 January 1950, the Subordinate Judge directed the Receiver to relinquish control of the estate to the Mahant, who then became the appellant. Within a week of assuming charge, on 15 January 1950, the appellant filed a return of the estate’s income for the Fasli year 1355, which corresponded to the period from 16 September 1948 to 15 September 1949, before the Agricultural Income‑Tax Officer of Monghyr. The Officer, on 7 August 1950, assessed the agricultural income of the estate at Rs 90,507‑2‑6 and accordingly ordered the appellant to pay a tax of Rs 20,290‑13‑0. The appellant contested the assessment before the Commissioner of Agricultural Income‑Tax and subsequently before the Board of Agricultural Income‑Tax, Bihar, but both appeals were dismissed. The Board nevertheless raised a question of law arising from its order and referred that question to the Patna High Court under section 28(3) of the Bihar Agricultural Income‑Tax Act. The sole issue that the Supreme Court was called upon to consider was whether the appellant was liable to be assessed for agricultural income‑tax for the year in which the estate was under the management of the Court Receiver.

The Act’s charging provision, section 3, stipulates that “Agricultural income‑tax shall be charged for each financial year in accordance with and subject to the provisions of this Act on the total agricultural income of the previous year of every person.” Section 4 further provides that, subject to any subsequent exceptions, the Act applies to all agricultural income derived from land situated in the State of Bihar. Because the estate’s income was not exempt, section 3 imposed agricultural income‑tax on the income of the assessment year, rendering the appellant, as the owner of the estate, prima facie liable to pay the tax. The appellant, however, relied on section 13, which reads: “Where any person holds land, from which agricultural income is derived, as a common manager appointed under any law for the time being in force, or under any agreement or as receiver, administrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income‑tax by each person on the agricultural income derived from such land and received by him shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income‑tax so payable by each such person and shall be liable to pay the same.” Relying on this provision, the appellant contended that when the land was held by a Receiver and the income was received by the Receiver, only the Receiver could be deemed the assessee under section 13, and consequently the Receiver alone should bear liability for the tax. To support this position, the appellant referenced the statutory definition of “person” in section 2, clause (m), which describes a person as any individual or association holding property in any capacity recognised by law, including a receiver or common manager.

In considering the meaning of the term “person” as defined in section 2, clause (m), the judgment quoted the provision verbatim: “Person means any individual or association of individuals, owning or holding property for himself or for any other, or partly for his own benefit and partly for another, either as owner, trustee, receiver, common manager, administrator or executor or in any capacity recognised by law, and includes an undivided Hindu family, firm or company.” The Court stated that the appellant’s argument lacked any substantive basis. It explained that the liability to pay tax is imposed on the agricultural income of every person. Although the income in question had been collected by the Receiver, the Court held that such income remained the appellant’s agricultural income. Under section 13, the Receiver is deemed to be an assessee in addition to the owner, but the Court emphasized that this deemed liability of the Receiver does not relieve the appellant, on whose behalf the income was received, from the obligation to pay agricultural income‑tax. Section 13 was described as a procedural mechanism for tax recovery rather than a substantive charging provision.

The Court further observed that when property is possessed by a Receiver, common manager or administrator, the tax authorities have the discretion, but not the obligation, to treat those persons as assessees and to recover tax from them. Nevertheless, the authorities may always proceed against the owner of the income and assess tax against that owner. The definition of “person” clearly includes receivers, trustees, common managers, administrators and executors, and this inclusion permits tax authorities to assess tax against any such persons. However, the Court stressed that this does not exempt the income in the hands of the owner from being subject to assessment. The appellant’s counsel had argued that the income received from the Receiver had lost its character as agricultural income and therefore the appellant should not be liable for agricultural income‑tax. The Court noted that this contention had never been raised before the tax authorities and had not been referred to the Court. The character of the income had been accepted as agricultural income in the appellant’s hands, and the sole issue before the Board of Agricultural Income‑Tax was whether the appellant was liable to be assessed for agricultural income‑tax for the relevant year. In view of this reasoning, the Court concluded that the appeal failed and dismissed it with costs. The appeal was therefore dismissed.