TaxTMI 
TaxTMI 
1989 (3) TMI 8
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....s to why the order passed by the Agricultural Income-tax Officer under section 65(5) of the Act should not be cancelled and the Agricultural Income-tax Officer directed to pass orders under section 17 of the Act apportioning the income among the partners of the firm and subject it to tax accordingly. In that notice, it was pointed out that under section 65(3) of the Act, no registered firm or unregistered firm, treated under section 17(5)(b) of the Act as a registered firm, shall be entitled to apply for permission to compound under that section, but that any partner of such firm may apply for permission for such composition of the agricultural income-tax payable by him on the aggregate of the income derived by him from (a) the land held by him individually ; and (b) his proportionate share of the land held by the firm, and as the petitioners did not hold any land individually, except the proportionate share of the land held by the firm, permission for compounding the agricultural income-tax payable by the partners had been granted contrary to the provisions of the Act and, therefore, it was proposed to cancel the order passed by the Agricultural Income-tax Officer and to direct hi....
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....pression "aggregate" and some decisions purporting to support the contention set out above. Before embarking upon a consideration of the correctness of this contention, it would be necessary to notice the relevant provisions in the Act, in the backdrop of the fact found that the petitioners do not own any land individually apart from their proportionate share of the land held by the firm. We may add that neither before the Commissioner of Agricultural Income-tax nor even before this court was any attempt made to establish that the petitioners held lands in their individual capacity, apart from the proportionate share of the land held by the firm. We have, therefore, to proceed on the footing that, apart from the proportionate share of the land held by the petitioners as partners in the firm, they did not hold any other land individually. We may now refer to section 17(5) of the Act, which is as follows : " 17. (5) Notwithstanding anything contained in the foregoing subsections, when the assessee is a firm and the total income of the firm has been assessed under sub-section (1), sub-section (3) or sub-section (4), as the case may be (a) in the case of a registered firm, the su....
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....eding under section 17 and a proceeding for composition under section 65 of the Act. It is difficult to conceive of a composition arrangement as a mode of assessment to tax. Indeed, in Commissioner of Agricultural Income-tax v. K. Subbiah Gounder [1963] 47 ITR 522 (Mad), the question arose whether an order of composition under section 65 was appealable under section 31 of the Act and it was held that in a proceeding under section 65 of the Act, there is no assessment of the income of the assessee or assessment to tax as such within the meaning of section 31 and, therefore, the order was not appealable. It is thus obvious that the provision under section 65 of the Act for composition of the agricultural income-tax liability is not in the nature of proceedings for assessment, but only a concession in the nature of commutation based on a graduated scale of payment dependent upon the extent of the holding and without reference to the actual income derived therefrom. While enabling the assessees to take advantage of section 65 of the Act, which, as pointed out earlier, is only a concessional commutation related to the extent of the holding without reference to the actual income derived,....
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....er part of section 65(3), the benefit of such composition is made available to a partner with reference to the totality of the income derived by him from the lands held by him individually and also his proportionate share income from the land held by the firm. It is thus seen that only with reference to the total agricultural income assessable in the hands of each partner of the firm, as provided under section 17(5)(a) of the Act, the benefit of composition with reference to a partner of a firm is made available under the latter part of section 65(3) of the Act and not in any other case. To interpret the latter part of section 65(3) in the manner contended for by learned counsel for the petitioners would lead to situation where the earlier part of section 65(3) would be defeated. We can conceive of a case where all the partners of the firm do not have separate holdings individually apart from the share held by them in the land held by the firm and if they are permitted to compound the tax liability, it would tantamount to the firm itself securing the benefit of composition, which is prohibited under the first part of section 65(3) of the Act. Therefore, in the case of a firm con....