05 November 1964
Supreme Court


Case number: Appeal (civil) 1014 of 1963






DATE OF JUDGMENT: 05/11/1964


CITATION:  1965 AIR  909            1965 SCR  (1)  29  CITATOR INFO :  F          1965 SC1919  (12)

ACT: U.  P. Zamindari Abolition and Land Reforms Act, 1952  (U.P. Act No.  1 of 1952), s. 6(d)-U.P. Zamindari Abolition & Land Reforms Rules, r. 8A-Agricultural income-tax dues-Adjustment against compensation amount due--If obligatory.

HEADNOTE: Pursuant to a certificate issued by the Deputy  Commissioner proceedings  were started against the respondent to  recover instalment of tax, assessed under U.P. Agricultural  Income- tax  Act, 1949.  The respondent moved the High  Court  under Art. 226 of the Constitution for directing the appellants to refrain from recovering or taking any steps for the recovery by  coercive process, and in the alternative, if any  amount was held recoverable, for directing the Revenue  authorities to  adjust  it  against  compensation  bonds  given  to  the respondent under the U.P. Zamindari Abolition & Land Reforms Act  with respect to his zamindari which vested  with  State under  the Act.  The High Court held that the Collector  was bound  to accept in satisfaction of the instalments  of  tax due  the compensation bonds payable to the respondent  under the Zamindari Abolition Act.  In appeal HELD:(i)  The Collector had no option in the matter  of adjustment  of the liability to pay agricultural  income-tax against compensation amount due to the respondent, which was "still due". [34 A-B] Rule  8-A of the Zamindari Abolition and Land Reforms  Rules is  in terms mandatory and obliges the Collector to  realise the  tax  in the manner provided.  The  expression  "without prejudice  to the right of the State Government  to  recover dues" with which the Rule opens does not transform that duty into  an  option.   The  clause  merely  provides  that  the obligation imposed upon the Collector of adjusting the  dues against  compensation  will not prejudice the right  of  the State Government to recover the dues by other means. [33  F- H] (ii)The  case clearly fell within the terms of s. 6(d)  and the  benefit of Rule 8-A was admissible to  the  respondent. The tax assessed was for the period ending June 30, 1952.



The assessment was made after the close of the previous year and  after  the  date of vesting but the  income  which  was liable  to tax was the income of the previous year  that  is before the date of vesting. [34 F-G]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1014  of 1963. Appeal  by special leave from the judgment and decree  dated April  7.  1960,  of  the  Allahabad  High  Court  in  Civil Miscellaneous Writ No. 1562 of 1956. C.  B.  Agarwala, N. D. Karkhanis and O. P.  Rana,  for  the appellants T. N. Sethi and Din Dayal Sharma, for the respondent. 30 The Judgment of the Court was delivered by Shah, J. Agricultural income of the respondent-Raja  Jagdish Prasad  Sahi--was assessed by the Collector of Sultanpur  to tax under the U.P. Agricultural Income-tax Act 3 of 1949 for the  Fasli  year 1359, corresponding to the period  July  1, 1951 to June 30, 1952, and he was directed to pay the amount due  in four equal instalments of Rs. 13,274-5-0 each.   The respondent   failed  to  pay  the  first  and   the   second instalments which fell due respectively on December 9,  1952 and February 9, 1953.  The Revenue authorities imposed  upon the  respondent liability to pay Rs. 4,400 in the  aggregate as penalty for default in payment of the two instalments. Pursuant to a certificate issued by the Deputy  Commissioner of   Sultanpur,   proceedings  were  started   against   the respondent to recover Rs. 17,674-5-0 being the amount of the second   instalment  and  penalty.   The   respondent   then presented  a  petition under Art. 226  of  the  Constitution before the High Court of Judicature at Allahabad for a  writ directing  the  Collectors  of Sultanpur  and  Allahabad  to refrain from recovering or taking any steps for recovery  of the  amount  claimed  under  the)  certificate  by  coercive process,  and  in  the alternative, if  the  amount  or  any portion  thereof was held recoverable, for a writ  directing the  Revenue  authorities  to adjust  the  amount  found  so payable  against compensation bonds given to the  respondent under the U.P. Zamindari Abolition and Land Reforms Act  No. 1 of 1951-hereinafter called "the Abolition Act".  The  High Court  held that the recovery of penalty not being based  on orders properly passed under S. 31 of the U.P.  Agricultural Income-tax  Act, 3 of 1949, the threatened  proceedings  for sale  were void, and that the Collector was bound to  accept in   satisfaction  of  the  instalments  of  tax   due   the compensation  bonds  payable  to the  respondent  under  the Abolition   Act.    The  Court   accordingly   quashed   the proceedings  for  recovery  of the amounts  of  penalty  and directed that the Revenue authorities do grant in respect of the  instalment  of tax due relief to the  respondent  under Rule  8-A of the Zamindari Abolition and Land Reforms  Rules in  the  manner  indicated in the  judgment.   Against  that order,  the  Collectors  of  Sultanpur  and  Allahabad  have appealed to this Court, with special leave. The claim to recover penalty has not been pressed before  us and  nothing  need  be said in  that  behalf.   The  Revenue authorities,   however,  claim  that  an   order   adjusting liability  for the amount due as tax payable under the  U.P. Agricultural  Income-tax  Act  against  compensation   bonds cannot be made by the High Court. 31



This  plea is sought to be supported on three grounds :  (i) that  compensation  due to the respondent has  already  been paid  to him by the issue of compensation bonds under s.  68 of  Act  1  of 1951, and there is no  machinery  for  making adjustment  of  tax  liability  against  compensation  bonds already delivered to the intermediary; (ii) that under  Rule 8-A  of the Zamindari Abolition and Land Reforms  Rules  the Collector  has  the option to adjust liability for  tax  due against  the compensation payable, but he is not obliged  at the  instance of the intermediary to grant that relief;  and (iii)  that  under s. 6 of Act 1 of 1951 the amount  of  tax payable  for the period after July 1, 1952 is not liable  to be set off against compensation payable to the intermediary. The  first contention was not raised before the High  Court. Nor  are  there sufficient materials on which  a  conclusion that all certificates due in respect of the compensation had been delivered to the respondent before he made a claim  for adjustment under Rule 8-A may be recorded.  As early as 1953 the  respondent had made a claim that the amount of tax  due be  set  off against the amount of compensation  payable  to him,  and  the case which the, Revenue authorities  seek  to make  out  in  this Court is that  compensation  bonds  were issued  in  the year 1955.  Reliance was in that  behalf  is placed  upon certain averments made in the petition  by  the respondent  before the High Court and upon recitals  in  the application  for leave to appeal to this Court  against  the order passed by the High Court.  In paragraph-36 cl. (4) the respondent  ha(] claimed before the High Court that  if  the amount or any portion thereof is held to be recoverable,  it may  be directed to be adjusted by the  Revenue  authorities against compensation bonds of the face value of such  amount given  to  the petitioner under the-Abolition Act.   In  the grounds  mentioned in the application for  certificate  that the  case was fit for appeal to this Court, it was  asserted by  the appellants that the bonds were given to the  respon- dent under the Abolition Act in payment of compensation  and there remained no compensation money payable to the  respon- dent.  ’.Me admission in the petition relied upon is not  so clear  and unambiguous that we would be justified in  acting upon  it  for the first time in this Court, even  though  no reliance  was  placed upon it in the High  Court.   Nor  can reliance  be placed upon the plea raised for the first  time in  the  petition  for certificate under  Art.  133  of  the Constitution. Mr. Agarwala appearing on behalf of the Revenue  authorities of  the State of U.P. also read out portions of a letter  of the  Collector, Allahabad, in which that officer has  stated that after the order 32 of  the  High  Court,  the respondent  was  called  upon  to surrender   the   amounts  withdrawn  by   him   under   the compensation bonds, but the respondent failed to do so,  and the  public debt office was in the circumstances unable,  in pursuance  of  Rule  8-A  of  the  Rules  framed  under  the Abolition  Act,  to  allow adjustment  of  tax  due  against compensation   bonds.    We  would  not  be   justified   in considering any such additional evidence at this stage.   If there  was  any substance in the first  ground,  the  matter should have been brought to the notice of the High Court and evidence  in  support thereof should have been  tendered  in that Court. The second and the third grounds may be considered together. by  the  U.P.  Agricultural  Income  Tax  Act  3  of   1949, agricultural income-tax and super-tax at the rates mentioned in  the  Schedule -to the Act are made chargeable  for  each



year,  subject  to the provisions of the Act and  the  Rules framed,  on  the total agricultural income of  the  previous year  of  every person.  The expression "previous  year"  is defined  by S. 2(13) as meaning twelve months ending on  the 30th day of June preceding the year for which the assessment is to be made.  By S. 6 of the Abolition Act on the issue of an  appropriate  notification by the State  Government,  all estates vest in the State free from all encumbrances.   When such  a  notification  is published in  the  State  Gazette, notwithstanding  anything  contained  in  any  contract   or document or in any other law for the time being in force and save as otherwise provided in the Act, the consequences  set out in S. 6, from the beginning of the date of vesting ensue in  the area to which the notification relates.  By cl.  (d) of s. 6, one of the consequences is that               "all arrears of revenue, cesses or other  dues               in  respect of any estate so acquired and  due               from the intermediary or an arrear on  account               of  tax on agricultural income assessed  under               the U.P. Agricultural Income Tax Act, 1948 for               any period prior to the date of vesting  shall               continue   to   be   recoverable   from   such               intermediary and may, without prejudice to any               other   mode  of  recovery  be   realized   by               deducting  the  amount from  the  compensation               money  payable  to  such  intermediary   under               Chapter III :" Section 26 authorises the State Government to make rules for the  purpose of carrying into effect the provisions  of  Ch. II of the Act in which s. 6 occurs.  Chapter III of the  Act deals  with  the assessment of  compensation.   Section  68, which occurs in Ch.  TV, provides that compensation  payable under the Act shall be given in cash or in bonds, or  partly in cash and partly in bonds as may 33 be prescribed.  Under s. 26 read with s. 6 (d), Rule 8-A was framed by the State Government.  That Rule, which came  into force from August 17, 1954, provides :               "Without  prejudice to the right of the  State               Government to recover the dues mentioned below               by  such  other means, as may be  open  to  it               under law :               (1)   all arrear of land revenue in respect of               the  estates  which have vested in  the  State               Government  as  a result of  the  notification               under Section 4 of the Uttar Pradesh Zamindari               Abolition and Land Reforms Act, 1950 (Act 1 of               1951),  and  of  tax  on  agricultural  income               assessed  under the U.P.  Agricultural  Income               Tax Act, 1948 (U.P. Act III of 1949), due from               an  intermediary for any period prior  to  the               date of vesting shall be realized               (a)   in  the case of an intermediary who  was               assessed  to a land revenue of Rs.  10,000  or               more  from the amount of interim  compensation               due to him, and               (b)   in  the case of an intermediary who  was               assessed  to a land revenue of less  than  Rs.               10,000 per annum by deduction from the  amount               of compensation payable to him;               (2) The  argument raised by the State Government that  Rule  8-A invests  the  Collector  merely with an  option  to  recover amounts due as land revenue or as agricultural income-tax by adjustment  against compensation and does not oblige him  to



give  a  set off, cannot in our judgment  be  accepted.   In terms   Rule  8-A  states  that  the  amount  due  from   an intermediary  for  any period prior to the date  of  vesting shall be realized in the manner indicated in cls. (a) & (b). The Rule is in terms mandatory and obliges the Collector  to realize  the  tax in the manner  provided.   The  expression "Without  prejudice to the right of the State Government  to recover  dues" with which the Rule opens does not  transform that  duty into an option.  The clause merely provides  that the  obligation imposed upon the Collector of adjusting  the dues  against compensation will not prejudice the  right  of the  State  Government to recover the dues by  other  means. If, for any reason, the adjustment cannot be made  effective and  the amount due to the State as tax or as  land  revenue cannot  be recovered by adjustment, the right of  the  State Government to recover the dues in any other 34 manner  permitted by law is not to be prejudiced.  The  High Court  was, therefore, right in holding that  the  Collector had  no option in the matter of adjustment of the  liability to  pay agricultural income-tax against compensation  amount due  to the respondent, which in the view of the High  Court was "still due". It  was urged, however, that Rule 8-A is framed in  exercise of  the power reserved under S. 26 of the Abolition  Act  to effectuate the provisions of cl. (d) of S. 6, and adjustment under  the Rule can only be made in respect of  agricultural income-tax  payable  for  any period prior to  the  date  of vesting.   The  scheme  of the Act, it  was  said,  is  that notwithstanding the vesting of the estate in the State by S. 6,  arrears of land revenue or other dues  and  agricultural income-tax continue to remain recoverable and the amount  so continuing  to remain recoverable is liable under the  Rules to  be adjusted against compensation payable for  compulsory termination of the rights of the intermediary.  Relying upon the  clause  "an arrear on account of  tax  on  agricultural income assessed under the U.P. Agricultural Income Tax  Act, 1948 for any period prior to the date of vesting" in S. 6(d) it  was  urged  that  even  if  under  S.  3  of  the   U.P. Agricultural Income Tax Act, 1948, tax is recoverable on the total agricultural income of the previous year, it is  still tax  due  for  the  year of  assessment  and  therefore  tax assessed  on the respondent for the period July 1,  1952  to June 30, 1953, does not fall within the terms of S. 6(d)  of the  Act and resort cannot be had to Rule 8-A  for  claiming adjustment  of  liability to pay tax against the  amount  of compensation.  We are unable to accept this plea.  Section 3 of the U.P. Agricultural Income-tax Act emphatically charges the  total agricultural income of the previous year to  tax. It  is true that assessment under the Act is made after  the close  of the previous year, but the income which is  liable to tax is the income of the previous year.  The  Legislature has   unambiguously  expressed  its  intention   to   impose liability  to  charge agricultural income  of  the  previous year.   The tax assessed is therefore for the period of  the previous  year i.e., for the period which ended on June  30, 1952.  The case clearly fell within the terms of S. 6(d) and the benefit of 8-A was admissible to the respondent. Rule  8-A requires the Collector to adjust the liability  to pay agricultural income-tax due by the intermediary  against compensation payable to him.  This order, the High Court has directed the Collector to make in favour of the  respondent, but in making the order the High Court has  proceeded on the assumption that compensation bonds remain to be delivered to the respondent.



35 For reasons already set out, there are no materials on which the  truth  of  the  assumption  may  be  ascertained.   We, therefore, set aside the order passed by the High Court  and remand the case to the High Court for deciding whether there are any compensation bonds remaining to be delivered, and if not,   whether  by  any  appropriate  order  or   direction, adjustment of tax liability against compensation due to  the respondent, which has been directed by the High Court, under Rule 8-A can be made effective.  The High Court will dispose of  the petition on the evidence already on record, or  such other  evidence  as  may be brought on  the  record  by  the parties. There will be no order as to costs of this appeal. Cave remanded,