1989 (10) TMI 18 - HC - Income Tax

Court upholds petitioner's mortgage rights over Revenue Recovery Act, directs consideration of objection-petition.

The court ruled in favor of the petitioner, holding that the proceedings under the Kerala Revenue Recovery Act do not have precedence over the ... Agricultural Income Tax, Sales Tax Issues Involved:1. Precedence of proceedings under the Kerala Revenue Recovery Act over a mortgage decree.2. Obligation of respondents to consider the objection-petition filed by the petitioner.Detailed Analysis:Issue 1: Precedence of Proceedings under the Kerala Revenue Recovery Act over a Mortgage DecreeThe court examined whether the proceedings under the Kerala Revenue Recovery Act for recovering arrears of agricultural income-tax and sales tax have precedence over a mortgage decree obtained by the petitioner. The petitioner, a bank, had a pre-existing mortgage on the property dating back to July 28, 1969. The court noted that the Kerala Revenue Recovery Act does not contain any provision that gives it overriding effect over other laws. Specifically, Section 3 of the Kerala Revenue Recovery Act creates a charge on the property for public revenue but does not override pre-existing rights. Similarly, Section 40(2) of the Kerala Agricultural Income-tax Act, which was introduced by an amendment in 1974, does not obliterate the pre-existing mortgage rights of the petitioner.The court highlighted that the arrears of sales tax and agricultural income-tax arose between 1975-1980, and the proceedings for recovery commenced in 1981-82, with the property being attached in 1984. Given that the mortgage was created in 1969 and the decree obtained before the state's recovery actions, the court found that the state's claim does not have precedence over the mortgage rights of the petitioner. The court cited the decision in Nedungadi Bank Ltd. v. Tahsildar [1977] KLT 826, which clarified that Section 68 of the Kerala Revenue Recovery Act does not create a first charge on property for dues other than public revenue on land.Issue 2: Obligation to Consider the Objection-PetitionThe petitioner argued that the Revenue authorities failed to consider their objection-petition (Exhibit P-3) filed against the attachment and sale notice. The court noted that under Section 46 of the Kerala Revenue Recovery Act, it is the duty of the District Collector to dispose of objections. The counter-argument from the respondents was that the objection-petition was time-barred as it was not filed within 14 days of the attachment. However, the court found this contention factually incorrect, as the objection-petition was filed promptly the day after the notice was received.The court referenced the Division Bench decision in Gourikutty Amma v. District Collector, Alleppey [1974] KLT 103, which established that the non-filing of an objection-petition does not bar the maintainability of a writ petition under Article 226 of the Constitution. The court concluded that the Revenue authorities were obliged to consider the objection-petition on its merits and had failed to do so in this instance.ConclusionThe court held both issues in favor of the petitioner. A writ of mandamus was issued directing the second respondent to dispose of Exhibit P-3 objection-petition filed by the petitioner. The interim stay on the revenue recovery proceedings would continue until the objection-petition is disposed of. Both parties were directed to bear their own costs.