1963 (11) TMI 92 - HC - Income Tax

Court rules on jurisdiction and income set-off, affirms 60% shade tree income assessment.

Raja Yadvendra Datt Dube Versus State of Uttar Pradesh

Raja Yadvendra Datt Dube Versus State of Uttar Pradesh - [1964] 54 ITR 506 Issues Involved:1. Whether the Board could direct a fresh assessment to be made more than one year after the expiry of the assessment year.2. Whether the applicant is entitled to set off losses determined under section 6(2)(b) against income arrived at under section 5 of the Act.3. Whether 60% of the income from shade trees of the tea garden for the period April 15, 1948, to June 30, 1948, could be assessed as the applicant's income.Issue-wise Detailed Analysis:1. Fresh Assessment Beyond One Year:The primary question was whether the Board could direct a fresh assessment to be made more than one year after the expiry of the assessment year, as per the provisions of section 25 of the Uttar Pradesh Agricultural Income-tax Act. The court analyzed that section 25 allows the assessing authority to serve a notice within one year of the end of the assessment year if any income has escaped assessment. The Board's order directing a fresh assessment was passed more than six years after the end of the assessment year. The court held that the Board had no jurisdiction to direct a fresh assessment after such a lapse of time, as it contravened the statutory time limit prescribed for issuing notices under section 25. The court concluded that the Board's powers under section 22, although wide, must still be exercised within the confines of the Act, and it cannot direct actions that violate statutory provisions.2. Set-off of Losses Against Income:The second issue was whether the applicant could set off losses determined under section 6(2)(b) against income arrived at under section 5 of the Act. The court held that the 'total agricultural income' as defined in section 2(16) means the aggregate of the amounts of agricultural income of different classes specified in sections 5 and 6. There is no provision in the Act for setting off losses under one head against income from another head. The court emphasized that the total agricultural income should be calculated by adding incomes from different heads, and if there is a loss under a head, it should be treated as nil income. The court concluded that the legislature deliberately refrained from enacting a provision for deducting losses under one head from income under another head, indicating that such a deduction is not permissible under the Act.3. Assessment of Income from Shade Trees:The third issue was whether 60% of the income from shade trees of the tea garden for the period April 15, 1948, to June 30, 1948, could be assessed as the applicant's income. The court noted that the income in question was realized during the period after the merger of the Sirmur State with Himachal Pradesh, and it was treated as the private property of the assessee. The Board had held that 60% of this income was liable to assessment under the Agricultural Income-tax Act, with the remaining 40% being liable under the Indian Income-tax Act. The court affirmed this decision, stating that the income for the period in question was indeed liable to be included in the total agricultural income of the assessee.Conclusion:The court answered the questions as follows:1. The Board could not direct a fresh assessment to be made more than one year after the expiry of the assessment year.2. The applicant is not entitled to set off losses determined under section 6(2)(b) against income arrived at under section 5 of the Act.3. 60% of the income from shade trees of the tea garden for the period April 15, 1948, to June 30, 1948, could be assessed as the applicant's income.The court directed that a copy of the judgment be sent to the Revision Board and awarded the assessee costs of the reference.