INSPECTOR ASSISTANT COMMISSIONER OF AGRICULTURAL INCOME TAX AND SALES TAX, KOZHIKODE versus V. K. RAMUNNI PANIKKAR, RECEIVER OF ZOMORIN ESTATE

934

INSPECTOR AGRICULTURAL

ASSISTANT

COMMISSIONER INCOME TAX AND SALES

OF A

TAX,.

,.

KOZHIKODE v. V. K. RAMUNNI PANIKKAR, RECEIVER OF ZOMORIN ESTATE October 5, 1971 [K. S. HEGDE AND A, N. GROVER, JJ.J Hindu Succession Act, 1956, s. 7(3) and Kera/a Agricultural /ncome- 1«x Act, 1950, s. 24(1)-Sthani liable to pay t'flx-Death of Sthani Liabi/ity of other members of Tarwad.

Section 7(3) of the Hindu Succession Act, 1956, by a fiction deems that the Sthanam property stands divided amongst the sthani and the members of his tarwad, a split second before the death of the sthani. The members of the tarwad took the property as co-owners and not as heirs of the deceased sthani. The purpose of the fiction was to gradually abolish the sthanams and to provide for the devolution of the sthanam properties on the members of sthani's tprwcd except as regards one per capita share which the personal heirs of the sthani are to inherit as the heirs of the Sthani.

On May 2, 1958, the Zamorin of Calicut died.

In respect of the agri cultural income-tax under the Kerala Agricultural Income-tax Act, 1950, which he was liable to pay for the period November I, 1956 to March 31. 1958, the person who took possession of the sthanam property claiming 10 be the succeeding sthani was assessed to tax as the successor sthani. After his death, the Agricultural Income-tax Officer attempted to collect the tax from the successive senior most membe'rs of the Zamorin's family. The validity of the ~ssessment was challenged and the High Court held that the liability to pay the tax and penalty imposed was only that of the l'ersonal heirs of the person who took possession of the properties imme ·diately after the death of the Zamorin, and that, only to the extent of the assets of that person which had come into their possession. Thel-eafter, it was ordered by the Department that, as the entire sthanam property had cJ.evoh-ed on the 693 members of the tarwad all those persons were liable to pay the tax and penalty, but the order was made without notice to the parties. When the authdrities threatened to proceed against the properties in the hands of the Receivers, who were appointed in the par tition suit in the Zamorin's family, the Receivers filed a writ petition challenging the right of the Agricultural Income-tax Officer to collect the arrears of tax and penalty from out of the properties in their hands. The High Court quashed the demand holding that the only persons who were liable to pay the tax were the personal heirs of the Zamorin as it was they who had received the income.

Dismissing the appeal to this Court,

HELD : Under the law relating to sthanams the st1"'ni was alone entitled to the income of the sthanam properties. Therefore the income of the sthanam property in the present case, during November I, 1956 to March 31, 1958 was the exclusive property of the Zamorin who ha\! the sthani. Hence, he alone w.S liable to pay the tax. Under the Agl"icultural Income-tax Act, no charge is created~ on property in respect .of. t!'e arrears of agricultural income-tax. Under s. 24(1) of the Act the hab1hty to pay

B

Cl

D

E

F

G

H

ASST. COMMR. AGRIC. v. v. K. RAMUNNI (Hegde, J.)

935

A

B

the arrears of tax due from the deceased sthani fell on his personal heirs and tnat, only to the extent they received any of his asset's. The assessment made of the person who took possession of the properties after the Zamorin'.1i death as the successor sthani was an invalid assessment, because, legally he never became the sthani. On the death of the Zamorin the sthanani came to an end and the only persons who could have represented the estate of the Zamorin were his pCrsonal heirs \vho, however, were not made parties to the assessment. [938 F-H; 939 A-Bl

Income-tax Officer, Kozhikode v. Mrs. Susheela Sadananda, 51 l.T.R. 168, K. K. Kochuni v. State of Madras, [19601 3 S.C.R. 887 and M. K. B. Menon v. Asst~. Controller of Estate Duty, C.A. No. 1137/1969 dt. 5-10-1971, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1397 of

c

1969.

Appeal from the judgment and order dated January 1, 1968

of the Kerala High Court in 0. P. No. 2413 of 1965.

V. A. Sey id Muhammad and A. G. Pudissery, for 'the appellant.

alias

D

E

F

G

H

A. R. Somanatha Iyer and P. Kesava Pillai, for the responde1H.

The Judgment of the Court was delivered by Hegde J. One K. C. Sreemanavikraman alias Eattan Raja was the Zamorin of Calicut. He was a Sthanamdar. In respect of the sthanam property, he was liable to pay agricultural income (in tax under the Kerala Agricultural Income-tax Act, 1950 brief the Act) for the period from November 1, 1956 to March 31, 1958. Sreemanavikraman Raja died on May 2, 1958. Thereafter on May 12, 1958, Sthanam Properties (As sumption of Temporary Management and/ Control) and (Amendment Act 1958), Act 28 of Hindu Succession 1958 came into force. After the death of Sreemanavikrama1t Raja, the sthanam property was taken possession of by Kunhammaman Raja claiming to be the succeeding sthanamdar. In respect of the assessment due for the period November 1, 1956 to March 31, 1958, Kunhammaman Raja was assessed to tax as the successor sthanamdar. The said Kunhammaman Raja died on December 23, 1960 without making any payment. Thereafter the next senior most member in the Zamorin family, P. C. Cheria Kunjunni Raja took possession of the sthanam property. He also died soon after. During the life time of P. C. Cheria Kunjunni Raja, the Agricultural Income-tax Officer imposed a penalty of Rs. 5,000/- for non-payment of the tax referred to earlier. P. C. Cheria Kunjunni Raja paid a sum of Rs. 20, 100/ out of the tax and penalty due, as coercive proceedings were threatened to be taken against him. On the death of P. C. Cheria Kunjunni Raja, the next senior most member the Zamorin family was K. C. Cheria Kunjunni Raja. When the

in

936

SUPREME COURT REPORTS

[ 1972] [ S.C.R.

co~lect the

Agricultural Income-iax Officer attempte~ to tax imposed under the assessment order ment10ned earher from K. C. Cheria Kunjunni Raja, he filed a petition before that officer representing that he had nothing to do with the sthanam property and the sthanam property stood divided under s. 7 ( 3) of the Hindu Succession Act, 1956 on the death of Sreemanavikra_man on May 2, 1958. The Hindu Succession Act, 1956 had come into force on June 18, 1956. After the receipt of that representa tion, the Agricultural Income-tax Officer passed an order on March 25, 1963 stating that as the successors of the Zamorin who died on 2-5-1958 had designated themselves as Zamorin Rajas, they have the liability to pay the arrears due to the Go\'. ernmeht. He directed K. C. Cheria Kunjunni Raja to pay the tax and penalty imposed. Aggrieved by that order K. C. Cheria Kunjunni Raja filed a writ petition in the Kerala High . Court challenging the validity of the threatened proceedings against him. th.e The High Court quashed the demand notices Agricultural Income-tax Officer to K. C. Cheria Kunjunni Raja. It held that the assessment having been made on Kunhammaman It Raja, his share alone was liable to be proceeded against. further held that the liability" to pay that tax and penalty was that of the personal heirs of Kunhammaman Raja and that only to the extent, they had come into possession of the assets of the said Raja.

issue,! by

\.. '

A

B

c

D

Thereafter the Inspecting Assistant Commissioner, Kozhikode E

ordered that as the entire sthanam pr~perty had devolved on the 693 members, all those persons were liable to pay the arrears of the tax and penalty. This oraer was made without notice to the parties.

Meanwhile in the partition suit in the Zamorin's family, the court appointed two joint receivers. The receivers objected to F the order of the Assistant Commissioner demanding . the arrears oi tax referred to earlier from them. They represented fo him that the estate in their hands is not liable to pay the arrears of tax and penalty demanded. But those representations were not accepted by the authorities. They threatened to proceed against the assets in the hands of the receivers. At the receivers filed the writ petition from which this appeal arises. Therein they challenged the right of the Agricultural Income-tax Ofricer. to collect the arrears of tax and penalty from out of the properties in their hands. The question before the High Court was whether the tax due from Manavikraman Raja was realisable from the assets in the hands of the receivers. The writ petition was heard by a full bench of three judges. By a majority, the High ~ourt came to the conclusion mat the only persons who were liable to pay the tax in queStion were the personal heirs

that stage,

G

H

ASST. COMMR;AGRIC. v. V. K. RAMUNNI (Hegde, J.)

937

A oi Sree~anavikraman Raja who had received the income. The Court J\eld that in view of s. 7 ( 3) of the Hindu Succession Act, the sthanam property stood divided at the time of the death of Sreemanavikraman Raja into 693 shares, out of which 692 shares went to members of the Tarwad of the deceased and one share to It opined 1that the tax his personal heirs-wife and children. B due from Manavikraman Raja could have been levied and collect ed only from his p~rsonal heirs as they alone were liable to pay that tax. As a result of that conclusion; it quashed the impugned demand.

Section 7 of the Hindu Succession Act provides for the devo lution of interest in the property of a tarwad, tavazhi, kutumba,

C kavaru, or illom. Section 7 (3) provides :

"Notwithstanding anything contained in sub-s. (1) when a sthanamdar dies after the commencement of this Act, the sthanam property held by hin1 shall devolve upon the members of the family to which the sthanam- dar belonged and the heirs of the sthanamdar as if the sthanam property had been divided per capita imme the sthanamdar among diately before the death of himself and all the members of his family then living, and the shares falling to the members of his family and the heirs of the sthanamdar shall be held by them as their separate property."

"Explanation-For the 1.mrposes of this sub-section the family of a sthanamdar shall include every branch of that family, whether divided or undivided, the male members of which would have been entitled by any custom or usage to succeed to the po~ition of sthanam- dar if this Act had not been passed."

D

F

G

We have considered the scope of this section in Civil Appeal No. 1137 of 1969. Hence it is sufficient for our present purpose to state that in _view of s. 7 ( 3) of the Hindu Succession Acl, it must be held that on the death of Sreemanavikaraman Raja, e~h of the members of his tarwad took a per capita share in the sthanam property as co-owners and not as his heirs. His personal heirs took the share which the deceased was deemed to have got as his share when he was taking his last breath. Sec tion 7(3) of the Hindu Succession Act embodies a fiction. The purpose of that fiction was to gradually abolish the sthanams and to provide for the devolution of the sthanam properties on the me!11bers of sthani's tarwad except as regards one per capita share H which the personal heirs of the sthanamdar are to inherit as

the heirs of the sthanamdar. 8~Lll9SupC£/72

938

SUPREME COURT REPORTS

[1972] l S.C.R.

to

The nature of a sthanam was considered by this Court in K. K. Kochuni and ors. v. The State of Madras and ors.(1) Therein this Court observed that according the custom, sthilnam means a position of dignity and respect and for maintain- ing that position, properties were attached to that office and the same was held by the "stani". Stani is solely entitled the income of that property during his life time. The senior most the member of a tarwad usually became the sthanamdar of sthanam attached to that tarwad. On his succession to stanom, he stood separated from the rest of the family. He solely became entitled to the stanom property but he gave up his right in the tarwad property. All the same he and the members of his tarwad had the same right of succession to the properties of each other as if his severance from the family had been the result not of his succession to the stanom, but a voluntary division between him aad the rest of the family.

to

A

B

c

Whatever might have been the customary law, s. 7 (3) of the Hindu Succession Act-the validil)' of which was not in issue before us-by a fiction deems that the sthanam property stood D tarwad, a divided amongst the stani and the members of his 1-'plit second before his death. From the language of the section, if is clear that the members of the tarwad took the property as co-owners and not as the heirs of the deceased stani. This fiction was created for the purpose of providing for the devolution of the sthanam properties. The Act 28 of 1958 came into force E -OD!y on May 12, 1958. Therefore that Act cannot have any effect on the sthanam With whii:h we are concerned in this case because that stanom stood destroyed on May 2, 1958. Hence. we need not refer to the provisions of that Act.

F

The income of the sthanam property during November 1. 1956 to March 31, 1958 was the exclusive property of Sreemana- vikaraman Raja. He was alone entitled to that income. There fore he alone was liable to pay the tax. Under the Agricultural Income-tax Act, no charge is created on property in respect of the arrears of agricultural income-tax. That being so, the liability to pay the arrears of tax due from the dece.ased s•ani fell on his personal heirs and that only to the extent they received G .any of his assets. This position is clear from s. 24 (1 ) of the Act which provides that "when a person dies, his executor, administrator or other IC)gal representative shall be to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge, the agricultural income-tax assessed as payable by such person or any agricultural income-tax which would have been payable by him under this H A.ct, if he had not died". (l) [1960] 3 S.C.R. 887.

liable

ASST. COMMR. AGRIC. v. v. K. RAMUNNI (Hegde, J.)

939

A

The assessment made on Kunjunni Raja in his capacity as the successor sthanamdar was an invalid assessment. Legally he never became the sthanamdar. There was no sthanam after the death of Manavikraman Raja. With the death of Manavikraman Raja the sthanam came to an end. The only persons who could have represented the estate of Sreemanavikraman Raja were his B personal heirs. They were not made parties to the assessment. them. No notice of the assessment proceedings was given K;µijunni Raja was not one of his legal representatives. Even if it is considered that the sthanam properties had devolved on the members of the tarwad by succession, Kanjunni Raja alone could not have represented the entire ~dy of successors number- ing 692. There was no question of any bona fide enquiry by the assessing authority. It was clearly a case of misunderstanl! · ing the legal position. Further, it does not appear that Kunjunni Raja was assessed as the legal representative of the deceased 5tani. He appears to have been assessed as the successor stani liable to pay the debts due from the estate. Hence the assessment was Income-tax Officer, Kozhikode v. Mrs. Susheela Sadananda and anr.(1). In this vie\\ of the matter it is not necessary for us to consider the other provisions of the Act providing for the assessment and collection of the tax due from a deceased person.

D not made in accordance with

law,

see

to

C

In the result this appeal fails and the same is dismissed with

costs.

E

V.P.S.

Appeal dismissed.

(I) 571.T.R. 168