JUDGMENT
N.K. Jain, Actg. C.J.
1. These cases have been placed before us on a reference made by the Division Bench of this court vide order dated December 3, 1997. The question under reference was as follows :
“Whether it is a pre-requisite or a condition precedent for a firm to own or hold property to get assessed under the Act in the capacity of a registered or unregistered firm ?”
2. The brief facts which gave rise to these tax cases are as follows :
Two firms. Warwick Estates Syndicate and Kesaria Nilgiri Hills Tea Plantations are the assessees. The facts and law involved are identical. The impugned order is also a common order passed by the Commissioner of Agricultural Income-tax. For the convenience, we deal with the facts of the case in T. C. (R.) No. 893 of 1990, Kesaria Nilgiri Hills Tea Plantations’ case. The Agricultural Income-tax Officer, Coonoor, finalised the assessment for the years from 1980-81 to 1983-84 on February 24, 1986, and for the assessment year 1984-85 on August 29, 1989, respectively, and assigned the status of registered firm to the assessees. The net income computed has been allocated among the partners of the assessee-firm as per the assessment order. Thereafter, it was found that the partnership came into effect on July 1, 1980, with the capital of the partnership consisting only of cash contribution and there is no schedule of the property to the partnership deed to indicate that the land from which agricultural income is derived has become partnership property. The Commissioner of Agricultural Income-tax found that the firm does not hold land within the meaning of Section 2(nn) of the Tamil Nadu Agricultural Income-tax Act, 1955. The matter was taken on suo motu revision under Section 34 of the Act by the Commissioner of Agricultural Income-tax. Show-cause notices in S.M.R.P. 8 and 9 to 12 of 1989 dated February 20, 1989, were issued to the partners of the firms to explain as to why the assessment made for the assessment years 1980-81 to 1984-85 assigning the status as “registered firm” should not be cancelled. The Commissioner of Agricultural Income-tax after hearing the parties cancelled the assessment in suo motu proceedings vide orders dated September 21, 1989 and October 16, 1989. The Agricultural Income-tax Officer was further directed to assess the case assigning the status as “unregistered firm”.
3. Against the above orders, T. C. (Revision) are filed before this court. While considering the legality and correctness of the orders dated September 21, 1989, and October 16, 1989, the Division Bench referred to the un-reported decision in the case of Kairbetta Estate Syndicate, vide order dated September 18, 1997, wherein it was held that the Commissioner has erred in holding that it is only the firm which owns land and that can be registered under the Act and set aside the order of the Commissioner cancelling the registration and the Bench laid down the rule that it is not necessary for a firm to own or hold property to get assessed under the Act and receipt of agricultural income is only material. The Division Bench, after taking note of the various definitions in the Act and the various decisions, found that the decision by the Division Bench in the case of Kairbetta Estate Syndicate is not reflecting the real legal position of law in issue and referred the cases to the Full Bench. Thus, these matters are before us.
4. We have heard learned counsel for the parties and perused the materials on record. Learned counsel appearing for the assessee, Mr. Janar-
thana Raja, took us through the provisions of the Tamil Nadu Agricultural Income-tax Act, 1955, with particular reference to Section 2(q) where the word “person” has been defined, and Section 17 (as it stood during the relevant period in question), which provides for assessment of income, Section 27 (subsequently substituted in the year 1992) which provides for procedure to be followed while registering a firm, and the relevant rules particularly Rules 17, 18, 20 and 21 of the Tamil Nadu Agricultural Income-tax Rules, 1958, and certain forms prescribed under the provisions of the Act. He reiterated that for registration, it is not necessary that the firm should own properties because, he submits that Section 27 of the Act pro-vides the procedure to be followed while registering the firm and therefore the firm cannot be debarred for want of holding of the land. He sub-mitted that the two decisions of the Division Bench of this court have laid down the correct proposition of law, particularly, the law laid down in Graham’s case , is very much in consonance with the provisions contained in the Act and is holding the field for more than a quarter century and hence it required no reconsideration. The decisions relied on by the referring Division Bench for coming to the conclusion that the decision of the earlier two Division Benches are not reflecting the correct legal position, are all decisions rendered under the Indian Income-tax Act while considering the provisions contained in the said Act and, as such, they are not of any assistance in deciding the issue.
5. Mr. Haza Nazeeruddeen, the learned Special Government Pleader (Taxes) appearing” on behalf of the Revenue, strongly supported the view expressed by the Division Bench in the reference order and submits that in the absence of any holding of the land by the firm, it is not entitled for any registration.
6. In rejoinder, Mr. Janarthana Raja, appearing for the assessee, has submitted that in the instant case, the partnership was entered into for joint management with a view to ensure efficiency, economy and convenience and with a view to expand and improve the agricultural production and carry on and continue the agricultural business in partnership on the terms and conditions set out in the deed. He also submitted that the partners associated themselves together and have decided upon common exploitation of the land for their common benefit. The common object is to carry out agricultural operations and earn agricultural income. Owning of property by the partnership firm is not a condition precedent for the existence of a firm. The definition of the word “person” which is a taxable entity under the Act has been defined in Section 2(q) of the Act which is an inclusive definition and it has not made holding or owning or possessing of property by a firm a condition for treating the firm as an assessable entity under the Act, in contradistinction with the main part of the definition in which owning and holding of the property either as
owner, trustee, receiver, common manager, administrator or executor or in any capacity recognised by law is essential. Owning’ of property by a partnership is not a pre-requisite for existence of the firm and hence a firm is liable to be assessed in respect of the agricultural income derived by it.
7. The further argument of learned counsel is that the assessees have strictly complied with the provisions of Section 27 of the Act which provides for the procedure relating to registration of the firm. According to him, Sub-section (1) of Section 27 provides that application may be made to the Agricultural Income-tax Officer on behalf of the firm constituted under an instrument of partnership specifying the individual shares of the partners for registration. Sub-section (2) thereof provides that the application shall be made by such person or persons and at such times and shall contain such particulars and shall be in such form and be verified in such manner, and Rules 16 to 24 contain the relevant provisions for the registration of the firm, issuance of certificate of registration and the cancellation of the registration so made under certain contingencies. Since the assessees have complied with the requirements under Section 27 and the relevant rules, the approach of the Commissioner is wrong as stated above.
8. He also brought to the notice of this court that by the Amendment Act 36 of 1992, the Legislature deleted the old Section 27 which provided for registration of firms and the Schedule to the Act was also suitably substituted by Act 40 of 1991. Hence, as on date, the question to be resolved in this revision is only academic.
9. Learned counsel also referred to Rule 17 and Form No. IV with parti cular reference to the particulars to be stated in the form as to the constitution of the firm at the date of filing of the application, and he drew our attention to the prescriptions contained as A and B and note (1) and (2) embedded to the Schedule to Form No. IV and submits that the relevant provisions, rules and the form prescribed thereunder as stated above do not prescribe a condition precedent to own or hold property for getting the firm registered. If that be so, there is no reason to differ from the statutory prescription to get the firm assessed as a registered firm. To support this submission, learned counsel strongly relied on the definition contained in the last part of Section 2(q). This section says that “person” means any individual or association of individuals, owning or holding property for himself or for any other, or partly for his own behalf and partly for another, either as owner, trustee, receiver, common manager, administrator or executor or in any capacity recognised by law and includes an undivided Hindu Mitakshara family, an Aliyasanthana family or branch, a Marumakkattayam, tarwad or a tavazhi possessing separate properties, or a Nambudiri or other family to which the rule of imparti-
bility applies, a firm or a company, an association of individuals, whether incorporated or not, and any institution capable of holding property. In the main part, owning and holding property either as owner, trustee, receiver, or common manager, administrator or executor or in any capacity recognised by law is essential. However, the definition is an inclusive definition and includes a firm or a company or an association of individuals whether incorporated or not and any institution capable of holding property. Holding or owning of property by the firm itself has not been made a condition for treating the firm as an assessable entity. It is so clear from the fact that an association of individuals comes both in the main part and the inclusive definition in the latter part.
10. The main question to be resolved is as to whether a firm has to hold property or own land to get assessed under the Act, in the capacity of a registered or unregistered firm. Section 3 of the Act is the charging section which is to the effect that agricultural income-tax at the rate or rates specified in Part I of the Schedule to this Act shall be charged on the total agricultural income of the year of every person. Section 17 of the Act provides for the assessment of income. Section 17(5) is to the effect that notwithstanding anything contained in the earlier sub-sections, when the assessee is a firm and the total income of the firm has been assessed, in the case of a registered firm, the sum payable by the firm itself shall not be determined but the total income of each partner of the firm, including therein his share of income, profits and gains of the previous year, shall be assessed and in the case of an unregistered firm, the Assessing Officer shall proceed in the manner as above if the aggregate amount of the tax payable by the partners under such procedure would be greater than the aggregate amount payable by the firm and the partners of the firm individually if the firm were assessed as an unregistered firm. There are also provisions for set-off in the case of loss by any partner and assessment of income on the firm, if any partner is a person not resident in the State. What is emphasised in Section 17(5) is that whether the firm owns property of its own or holds property on behalf of any one or all, the total income of each partner of the firm has to be assessed. Then comes Section 27 of the Act, which provides the procedure for registration of firms. There are two sub-sections to this section. As per Sub-section (1), application may be made to the Agricultural Income-tax Officer on behalf of a firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration and Sub-section (2) provides for the procedure and details which the application made by the firm shall contain. Rules have also been framed under the Act for making the application for registration. If the conditions in the above two sub-sections are fulfilled, the firm is entitled to get registration. In the instant case, the instrument of partnership specifying individual shares is filed and an application to
that effect has been made. The argument of learned counsel has some substance as nothing has been mentioned in the section that the firm should own land or hold property for getting registration. That apart, in our view, the shares of the partners specified in the instrument are also properties of the firm. Under the circumstances, we are of the view that the registration under the Act is independent of the assessment.
11. Now, let us come to the definition of “person”. Section 2(q) of the Act defines “person”. As per that section, person also means an association of persons owning or holding property in any capacity including a firm and any institution entitled by law to hold property. “Person” defined in this section is very wide and it means any individual or association of individuals, who may own or hold property for his or their own benefits or that of others or partly for themselves and partly for others and such owning or holding may be as owner or trustee or receiver, etc. Any one falling within the definition of “person” who receives income from land within the State, which income is taxable under Section 3 of the Act is a person whose total agricultural income is required to be computed in accordance with Section 4 of the Act. So, in view of the above, what is required is receipt of agricultural income from land within the State and it is not necessary to hold or own land.
12. From the above discussion, it is clear that the requirement for registration is a valid instrument of partnership specifying the shares of the partners which is sufficient for registration and holding of property or owning land is not required. Hence, the Commissioner of Agricultural Income-tax is in error in holding that the firm should own land or hold property for being assessed as a registered firm. As per Section 17(5) of the Act, in the case of a registered firm, the sum payable by the firm shall not be determined but the total income of each partner of the firm shall be determined and in the case of an unregistered firm also, the sum shall be determined as above if in the opinion of the Assessing Officer the aggregate amount of tax payable by the partners under such procedure would be greater than the aggregate amount which would be payable by the firm and the partners individually. Further, our view gets support from the fact that the Legislature also thought it fit to delete Section 27, which provides for registration, by Act 36 of 1992 and substituted the Schedule to the Act by Act 40 of 1991. Therefore, after the above amendments, the registration will have no effect. The cases on hand are pertaining to assessment years prior to the amendment Act. Thus, in our opinion, holding of property or owning land is not a pre-requisite condition for registration of the firm under the Act.
13. An earlier Division Bench of this court in Graham and Brothers v. State of Madras wherein four brothers were divided in status and also partitioned, while answering the question whether a firm is liable
to be assessed to agricultural income-tax in respect of the agricultural income derived by it, held as follows (headnote) :
“The definition of ‘person’ in Section 2(q) of the Madras Agricultural Income-tax Act, 1955, which is an inclusive one, has not made holding or owning of property by a firm as a condition for treating” the firm as an assessable entity under the Act, in contradistinction with the main part of the definition in which owning and holding property either as owner, trustee, receiver or common manager, administrator or executor or in any capacity recognised by law is essential. Owning of property by the partnership is not a condition precedent for the existence of the firm and hence a firm is liable to be assessed to agricultural income-tax in respect of the agricultural income derived by it.”
14. Following the above decision, the Commissioner of Agricultural Income-tax, by his proceedings, dated March 5, 1991, has directed the Agricultural Income-tax Officer to grant renewal of registration of this firm for the assessment years 1989-90 and 1990-91 and assign the status of registered firm and proceed with the assessment accordingly.
15. Considering the question with this aspect, as already stated, for subsequent years, the status of registered firm under the Act was given by the authority and thereafter it was not necessary to get registration in view of the subsequent amendment made by Act 36 of 1992. Under these circumstances, it will not be proper to unsettle the settled position as per the deci-sion of Graham’s case decided in the year 1972 for the relevant year. A reference can be made to the decision in CTO (Int.) No. IV, Enforcement Whing v. Ki-Hi-Tech Secure Print Ltd. [2000] 7 JT 432 (SC) wherein while considering the notification issued under the Andhra Pradesh General Sales Tax Act, 1957, and the contention for the appellant that the expression “all books” should be read along with the expression “periodicals” and that would make it clear that “all books” would only mean reading material, their Lordships of the apex court observed that it would be unreasonable to upset the meaning given to the expression used in the enactment which was in force for nearly three decades and that in fact, the Government subsequently had taken note of this decision and has restricted the exemption only to periodicals and books for reading and no justification to interfere with the order.
16. Learned counsel for the Revenue relied upon various decisions of the apex court and this court to support his contentions. The decisions, in our view, are not helpful to the Revenue. In Tea Estate India (P.) Ltd. v. CIT , it was held that agricultural income as defined in the Income-tax Act was intended to refer to revenue received by direct association with the land which is used for agricultural purposes and not by indirectly extending it to cases where that revenue or part thereof changes hands either by way of distribution of dividends or otherwise.
This cast? does not apply to the facts of the case on hand. Another decision in Commr. of Agrl I. T. v. M. L. Bagla , wherein the question was whether lessees can be assessed as association of individuals, is also not applicable to the present case. The other decision in Bihari Lal Jaiswul v. CIT , wherein registration was refused for having formed the partnership by the licensee violating the condition, is also not relevant to the instant case.
17. In the result, as discussed above, we are in full agreement with the decisions rendered by this court in Graham’s case [1973] 91 ITR 412 and Kairbetta Estate Syndicate’s case, which hold good and we affirm the same. Accordingly, we answer the question referred to us in the negative against the Revenue. In view of the same, the Tax Cases (Revisions) are allowed.