# • ' • STATE OF U. P. & ANR v. RAZA BULAND SUGAR CO. LTD., RAMPUR

- **Citation:** [1979] 3 S.C.R. 419
- **Court:** Supreme Court of India
- **Decided:** 1979-02-27
- **Bench:** R. S. Sarkaria, P. S. Kailasam, 0. CmNNAPPA REDDY
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-u-p-anr-v-raza-buland-sugar-co-ltd-rampur-7626
- **Pages:** 9

## Headnote

B
U.P. Agricultural Income-tax
Act (1948)-S. 18 Assessment of tax-If
•could be made against partners of a firm without issuing notice to the
firm.
Plea not taken at the first instance-If could be raised later.
Two joint stock companies entered into agreements with a former Princely
State for the grant of agricultural land on payment of fu1r and equitable land
C
reYenue.
Later the two companies formed into a partnership. firm.
On the
merger of the State with the Union of India, the Assessing Authority under the
U.P. Agricultural Income-tax Act issued notices to the two companies to submit
their returns of agricultural income, which the companies did.
In writ petitions filed by the companies cho.llenging the assessment orders 1
the High Court accepted the contention that since the lands were neither assessed to land revenue nor were they assessed to any local rate or cess as requir~d
by s. 2(a) of the Act, they were not assessabl'e to agricultural income-tax and
remanded the cases to the Assessing Authority for determination of this question.
Before the Assessing Authority, on remand the companies raised for the
D
-first time the contention that since no notice had been issued to the firm of
which they were partners, the assessment was invalid. The Assessing Authority
E
rejected this contention. He also held that the ]ands satisfied the requirements
of s. 2(a).
In writ petitions filed by the two companies a single Judge of the High
Court upheld the contention that the Assessing . .<\uthority committed an error
of lb
1w in assessing the two' partners without assessing the firm. This \'iew V>'as
affirmed by a Division Bench on appeal.
F'
On further appeal to this Court it was contended that in the absence of a
prohibition in the Act, the two companies could be validly assessed to tax
without assessing the firm .
Allowing the appeal,
HELO : 1. The Assessing Authority was not in error in assessing tax on
the returns submitted by the two companies and therefore the argument
that
assessment of the companies, without assessing the firm, was not legal, is without sub&tance.
[ 425 H-426 A]
2. "Person" defined in the section means an individual and includes a firm
or a company. [ 423 G]
G
3. There is nothing in the Act prohibiting the Assessing Authority frcm
H
proceeding against individuals forming a partnership. Section 18 enables the
authorities,
v;1hile proceeding with assessment of a firm or a company, not to
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420
SUPREME COURT REPORTS
[1979] 3 s.c.R.
A
determine the tax payable by the firm or the company but to
proceed
to
determine the agricultural income of each member of the firrn.
Tho provisions
do not apply to a case \Vhere the returns were submitted by the partners and
the assessment made on that basis. The section would be applicable if assess·
ment proceedings against a firm are stopped and the share of the individual is
to be determined under the provisions of s. 18.
[ 424 F]
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4. The well established position under the Income·tax 1\.ct (Central Act)
\Vith regard to assessment of firms is that where a firm has not made a return
it is op'en to the department to assess a. partner directly in H~pect of his share
of the firm's income without resorting to the machinery provided under the
Act and without making an assessment on the firm, the only prohibition hi!ing
against double taxation. [424 HJ
C.I.T. v. Murlidhar Jhawar & l'urna Ginning & Pressing Factory, 60 lTR
95 SC; referred to.
5. Secondly, the plea that assessment proceedings ought to have been taken
e·gainst the firm, was not taken by them in the first instance either before the
Assessing Authority or before the High Court. This plea cannot be
allowed
to be taken at a later stage. The assessees submitted their returns on the basis
of their respective incomes.
[425 F-426 A]
6. The Assessing Authority has oorr'ectly come to the conclusion that the
agreement between the parties provided for payment of land revenue.
r426
F-GJ
CIVIL APPELLATE JURJSDICTION :

## Text

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STATE OF U. P. & ANR.
v.
RAZA BULAND SUGAR CO. LTD., RAMPUR
February 27, 1979
419
A
(R. S. SARKARIA, P. S. KAILASAM AND 0. CmNNAPPA REDDY, JJ.)
B
U.P. Agricultural Income-tax
Act (1948)-S. 18 Assessment of tax-If
•could be made against partners of a firm without issuing notice to the
firm.
Plea not taken at the first instance-If could be raised later.
Two joint stock companies entered into agreements with a former Princely
State for the grant of agricultural land on payment of fu1r and equitable land
C
reYenue.
Later the two companies formed into a partnership. firm.
On the
merger of the State with the Union of India, the Assessing Authority under the
U.P. Agricultural Income-tax Act issued notices to the two companies to submit
their returns of agricultural income, which the companies did.
In writ petitions filed by the companies cho.llenging the assessment orders 1
the High Court accepted the contention that since the lands were neither assessed to land revenue nor were they assessed to any local rate or cess as requir~d
by s. 2(a) of the Act, they were not assessabl'e to agricultural income-tax and
remanded the cases to the Assessing Authority for determination of this question.
Before the Assessing Authority, on remand the companies raised for the
D
-first time the contention that since no notice had been issued to the firm of
which they were partners, the assessment was invalid. The Assessing Authority
E
rejected this contention. He also held that the ]ands satisfied the requirements
of s. 2(a).
In writ petitions filed by the two companies a single Judge of the High
Court upheld the contention that the Assessing . .<\uthority committed an error
of lb
1w in assessing the two' partners without assessing the firm. This \'iew V>'as
affirmed by a Division Bench on appeal.
F'
On further appeal to this Court it was contended that in the absence of a
prohibition in the Act, the two companies could be validly assessed to tax
without assessing the firm .
Allowing the appeal,
HELO : 1. The Assessing Authority was not in error in assessing tax on
the returns submitted by the two companies and therefore the argument
that
assessment of the companies, without assessing the firm, was not legal, is without sub&tance.
[ 425 H-426 A]
2. "Person" defined in the section means an individual and includes a firm
or a company. [ 423 G]
G
3. There is nothing in the Act prohibiting the Assessing Authority frcm
H
proceeding against individuals forming a partnership. Section 18 enables the
authorities,
v;1hile proceeding with assessment of a firm or a company, not to
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420
SUPREME COURT REPORTS
[1979] 3 s.c.R.
A
determine the tax payable by the firm or the company but to
proceed
to
determine the agricultural income of each member of the firrn.
Tho provisions
do not apply to a case \Vhere the returns were submitted by the partners and
the assessment made on that basis. The section would be applicable if assess·
ment proceedings against a firm are stopped and the share of the individual is
to be determined under the provisions of s. 18.
[ 424 F]
B
c
D
E
F
G
.H
4. The well established position under the Income·tax 1\.ct (Central Act)
\Vith regard to assessment of firms is that where a firm has not made a return
it is op'en to the department to assess a. partner directly in H~pect of his share
of the firm's income without resorting to the machinery provided under the
Act and without making an assessment on the firm, the only prohibition hi!ing
against double taxation. [424 HJ
C.I.T. v. Murlidhar Jhawar & l'urna Ginning & Pressing Factory, 60 lTR
95 SC; referred to.
5. Secondly, the plea that assessment proceedings ought to have been taken
e·gainst the firm, was not taken by them in the first instance either before the
Assessing Authority or before the High Court. This plea cannot be
allowed
to be taken at a later stage. The assessees submitted their returns on the basis
of their respective incomes.
[425 F-426 A]
6. The Assessing Authority has oorr'ectly come to the conclusion that the
agreement between the parties provided for payment of land revenue.
r426
F-GJ
CIVIL APPELLATE JURJSDICTION : Civil Appeal
No.
2281
of
1969
Appeal by Special Leave from the Judgment and
Order dated
6th December, 1965 ·of the Allahabad High Court in Special Appeal
No. 978/62.
Shiv Pujan Singh and M. V. Goswami for the Appellant.
B. P. Maheshwari and Suresh Sethi for the Respondent.
The Judgment of the Court was delivered by
KAILASAM, J.-This appeal is by the State of U.P. by special leave
granted by this Court against the judgment and order of the High
Court at Allahabad in Special Appeal No. 978 of 1962.
Two companies, the Raza Sugar Co. Ltd. and the Buland Sugar
Co. Ltd., were incorporated under the Rampur State Companies Act,
1932.
Messrs. Govan Brothers (Rampur) Ltd. were the common
managing agents of the two companies.
On 10th May, 1933 the
Raza Ltd. and on 11th December, 1934, the Buland Ltd. entered
into agreements with the erstwhile State of Rampur.
The agreements
provided that the Rampur State should grant to the companies le.ases
of the a§ficultural land with adequate irrigation facilities suitable for
cultivation of sugar-cane.
The companies were required to pay fair
and equitable land revenue which was to be agreed upon by the com-
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u. P. STATE v. RAZA BULAND SUGAR co. (Kailasam, J.)
421
panies and the Rampur State.
On 5th May, 1935, a partnership
deed was a executed by the Raza Ltd. and the Buland Ltd. constituting
a partnership firm of the two companies in equal shares known as the
Agricultural Company, Rampur. In the year 1939 the Rampur State
leased 2,000 acres of land and in the year 1946 another 2,000 acres
of land to the Agricultural Company, Rampur.
In 1949 the State
of Rampur acceded to the Union of India and was merged with the
State of Uttar Prades)l with effect from 1st December, 1949.
The
Rampur State had agreed to exempt the Raza Ltd. and the Buland
Ltd. from all taxes for a period of 15 years from the date of commencement of their business.
The U.P. Agricultural Income Tax Act was applied to the areas
which formed part of the erstwhile State of Rampur on 1st July, 1950.
The Assessing Authority issued notices under section 16 ( 4) of the
U.P. Agricultural Income Tax Act to the Raza Ltd. and the Buland
Ltd. for furnishing returns of their agricultural incomes for the years
1357 F to 1361 F. It may be noted that the notice was not issued
to the Agricultural Company, Rampur.
The Raza Ltd. and the Buland
Ltd. submitted their returns. · The Assessing Authority assessed the
two companies to agricultural income-tax for the years concerned. The
companies preferred an appeal against the assessment to the Commissioner, Rohilkhand.j)ivision, and also filed writ petition No. 2385 of
1959 in the High Court of Allahabad challenging the
assessment
orders.
On 17th April, 1961 the writ petition was allowed and the
o.rder of assessment was quashed with a direction that fresh assessments
may be made.
The Commissioner also directed the Assessing Authority to make fresh assessments in the light of the observations made
by the High Court in its. judgment dated 17th April, 1961, allowing
the writ petition No. 2385 of 1959.
When the Assessing Authority started fresh hearing in pursuanco
of the order of the High Court an objection was raised with regard
to the assessability of the two companies on the !lfOund that no notice
had been sent to the Agricultural Company, Rampur.
The Assessing
Authority negatived the plea and assessed the Raza Ltd. and the
Buland Ltd. for the years 1357 F to 1361 F and also for the years
1362 F to 1363 F.
Against the order of the Assessing Authority
the two companies which in the meantime became amalgamated as the
Raza Buland Sugar Co. Ltd., Rampur, filed a writ petition No. l 982
of 1962 in the High Court of Judicature at Allahabad and prayed for
the quashing of the assessment order dated 29th June, 1962. made
by the Assessing Authority against the Raza Ltd. and the Buland Ltd.
for the assessment years 1357 F to 1363 F.
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SUPREME COURT REPORTS
[1979] 3 s.c.R.
The writ petition was heard by a single Judge of the High Court
who by his order dated 4th October, 1962 allowed the writ petition;
ou the ground that the Assessing Authority committed an error of law
in assessing the two partners of the Agricultural Company, Rampur,
and not assessing the firm as such.
Aggrieved by the order the State
filed Special Appeal No. 978 of 1962 before the Division Bench of
the High Court at Allahabad.
The Division Bench of the High Court
by its order dated 6th December, 1965, dismissed the Special Appeal.
An application for leave to appeal to the Supreme Court was dismissed
by the High Court.
The appellants then preferred Special Leave
Petition No. 1724 of 1969 to this Court and on the leave being granted
this appeal is now before us.
The main contention that has been raised before us by the appellants is that there being no express prohibition under the U.P. Agricultural Income Tax Act an assessment can be validly and legally
made on the individual partners, in the present case the tWo companies,
without proceeding against the firm. It was pleaded that the tax could
be assessed either on the partnership firm or on the partners invididually and that the view O!f the High Court that ti1e tax can only
be recovered from the firm is erroneous.
The facts of the case disclose that on receipt of a notice by the
Assessing Authority under section 16(4) of the
U.P. Agricultural
Income Tax Act, the two cqmpanies Raza Ltd. and the Buland Ltd.
submitted their returns relating to the income of the two companies.
In the return it was stated that the income was half of the incc 'lle
received from the partnership firm, the Agricultural Company, Rampur.
The assessment was made on the basis of the returns.
The, assessn•ent
was questioned before the Commissioner and in. the writ petition before
the High Court of Allahabad on the ground that the lands were neither
assessed to land revenue in the United Provinces nor were they subject
to local rate or cess assessed and collected by an officer
of
the
Provincial Government.
This contention was accepted by the I-Ugh
Court which directed the Assessing Authority to determine the question whether the lands were assessed to land revenue, in the (; nitcd
Provinces or they were subject to local rate or cess assessed and
collected by an officer as required under section 2 (a) of the U.P.
Agricultural Income Tax Act, 1948.
After remand
the Assessinjli
Authority found that the lands from which the income accrued satfofied
the requirements of the section.
For the first time before the Assessing
Authority the point was raised that as no notice was issued to the
partnership firm, the partners i.e. two companies cannot be proceeded
with for assessment of the tax.
When this plea was rejected by the
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u. P. STATE v. RAZA BULAND SUGAR co. (Kailasam, J.)
423
Assessing Authority the matter was taken up before the High Co~t,
.first before a single Judge and then before the Division Bench, which
accepted the contention of the two companies and held that in the
absence of notice to the partnership firm proceedings cannot be taken
3gainst the two companies for assessment of the tax.
The relevant provisions unde.r the United Provinces Agricultural
Income-Tax Act, 1948, may be noticed.
Section 2(5)
defines
"Assessee" as meaning a person by whom agricultural income-tax is
payable.
"Company" is defined under section 2(8) as meanin~ a
company as defined in the Indian Income-tax Act, 1922. The Indian
Income-tax Act, 1922, section 2(5A) defines a company as follows :-
"(SA) "company" means -
(i) any Indian company, or
(ii) any association, whether incorporated
or not and
whether Indian or non-Indian, which
is or was
assessable or was assessed
as a company fC\f the
assessment for the year ending on the 31st day of
March, 1948, or which is declared by
general or
special order of the Central Board o! Revenue to be
a company for the purposes of this Act;"
""Firm" is defined in section 2(9) as having the same meaning assigned
'to it in the Indian Partnership Act, 1932.
Section 4 of the Indian
'Partnership Act, 1932, states that "Pe.rsons who have entered into
partnership with one another are called individually 'partners' and
collectively a firm and the name under which their business is carried
·on is called the 'firm name' ". "Person" is defined in section 2 ( 11) as
meaning an individual or association of individuals, owning or holding
property for himself or for any other, or partly for his own benefit
and partly for that of another, either as owner,
trustee,
receiver,
manager, administrator or executor or in any capacity recognized by
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law, and includes an undivided Hindu family, firm or company hut · G
does not include a local authC\fity.
It may be noted that by the definition the word "person" means an individual and includes a firm or a
·company. The liability of the person whether he be an individual.
partner or the company for the agricultural income-tax is therefore
beyond question.
The only point that is raised in this case is as to
when there is a registered firm of which the two companies we.re
partners the assessment proceeding& cannot be taken against the two
partners, namely the two companies, without proceeding against the
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SUPREME COURT REPORTS
[1979] 3 s.c.R.
firm.
In support of this contention section 18 of the U.P. Agricultural
Income Tax Act was strongly relied on.
Section 18 confers the power
to assess individual members of ce.rtain firms, associations and companies.
Sub-section (1) of section 18 enables the Assistant Collector
with the previous approval of the Collector of the district concerned
to pass an order under the circumstances stated in the sub-Sec. that the
sum payable as agricultural income-tax by the firm or association
shall not be determined, .and thereupon the share of each member
in the a~icultural income of the firm or association shall be included'
in his total agricultural income for the purpose of his
assessmenL
thereon.
Section 18(2) states that under certain circumstances the,·
Collector may, with the previous approval of the Commissioner of thee
area concerned, pass an order that the sum payable as agricultura·"
income-tax by the company shall not be determined and the.reupon the·
proportionate share of each member in the agricullural income of the
company, whether such agricultural income has been distributed to the
members or not, shall be included in the total agricultural income or
such member for the purpose of his assessment thereon. The submission
of the learned counsel for the respondent which was accepted by the
High Court was that if the Agricultural Income-tax authorities wanted
to p1oceed against the individual members of the firm they ought to
have taken proceedings under section 18 (1) and in the absence of
such proceedings the partners, in this case the two companies, could
not have been proceeded with.
The argument thus presented though
looks attractive does not stand scrutiny. There is nothing in th_e provisions of the Act prohibiting the Assessing Authority from proceeding
against the individuals forming the partnership. Section 18 enables the
authorities while proceeding with the assessment of a firm or a company not to determine the tax payable by the firm or the company but
proceed to determine the agricultural income of each member of the.
firm.
The prnv1sions do not apply to a case wher-o tre returns tlre
submitted by the partners, as in this case, and the assessment made on
that basis.
fhe section would undoubtedly be applicable if assessment
proceeding against the firm is stopped and the share of the individual
is to be dete1 mined under the provisions of section 18. Our attention
was not drawn to any provision in the Act which would bar the incometax authorities from proceeding against the individual partners on the
returns submitted by the partners as such. Under the Indian Incom~
tax Act it has been held that where a firm has not made a return and
has not offered its income for assessment, the Department may assess.
a partner directly in respect of his share of the firm's income without
resorting to the machinery provided under the Act and without making
an assessment on the firm, (ClT v. Murlidhar Jhawar & Purna Ginning
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u. P. STATE v. RAZA BULAND SUGAR co. (Kaiklsam, !.)
425
& Pressing Factory('). It has been further held that once the Department has exercised its option and assessed the partners individually it
cannot therei1flcr assess the same income in the bands cf the firm as an
unregistered firm. It is not necessary for us to refer to the distinction
that is maintained under the Income-tax Act between a registered and
unregistered firm for no snch distinction is maintained under the U.P.
Agricultural Income Tax Act. The only prohibition is against double
taxation. In this case no assessment proceedings have been taken
against the firm much less any tax imposed on it. The principle that
is applicable in tax statutes is that the income is subject to tax in the
hands of the same person only once. Thus, if an association or a firm
is taxed in respect of its income the same income cannot be charged
again in the hands of the members individually and vice versa.
The
trust iucome cannot be taxed in the hands of the settlor and also in
the hands of the trustee or beneficiary or in the hands of both the
trustee as well as the beneficiary. These principles are, of
course,
subject to any special provision enabling double taxation in the statute.
In the circumstances, we are unable to share the view of the High
Court that without proceeding against the firm the Assessing Authority
was in error in proceeding against the two partners of the firm on the
basi; of the returns submitted by them.
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There is yet another objection to the upholding of the plea of the
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respondents. Apart from submitting the returns their only plea in the
earlier writ petition before the High Court was that the lands did not
satisfy the requirements of the provisions of the U.P. Agricultural
Income Tax Act in that they were not assessed to land revenue in the
United Provmces nor were they subject to local rate or cess.
This
plea was accepted but the High Court remanded it for the detcrminaF
tion of the question whether the land was assessed to land revenue or
was subject to local rate or cess.
The plea that the assessment proceedings ought to have been taken against the firm was not taken. This
plea cannot be allowed to be taken in proceedings after remand. The
objection was taken only before the Assessing Authority after remand.
ft is true 1hat in the proceedings before the Assessing Authority the
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assessment relating to two Fasli years 1362 and 1363 which did not
form part of the proceedings before the High Court was also taken up.
But here again the returns were submitted by the two companies on
the basis of their respective income.
In the circumstances, it cannot
be said that the tax authorities were in error in assessing a tax on the
returns submitted by the two companies. The plea, therefore, that the
II!
(1)_60 I.T.R. 95 (SC)
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SUPREME COURT REPORTS
[1979] 3 s.c.R.
assessment on the two companies, in the absence of proceedings against
the firm of which the companies were partners, is not legal cannot be
11pheld.
The second contention that was raised before us was that it has
not been established that the lands were either assessed to land revenue
in the United Provinces or were subject to local rate or cess assessed
and collected by an officer of the Provincial Government.
As the
Single Judge of the High Court and the Division Bench of the High
Court accepted the plea of the assessees that the assessment proceedings against them could not be sustained because of the failure of the
authorities to take proceedings against the firm, they considered it un-
·nccessary to go into this question.
It is unfortunate that this aspect of
the matter was not considered either by the Single Judge or by the
Division Bench of the High Court.
We do not think it desirable to
remit the case to the High Court for the determination of this question
as the matter has been long pending.
This plea has been elaborately
considered by the Assessing Authority which has pointed
out
that
agreements with the Raza Sugar Co. Ltd. and the Buland Sugar Co.
Ltd. show that it was stipulated that the Rampur State shall from time t·~
tim~ grant to the Company lease of agricultural land.
It was further
provided that such fair equitable land revenue as may be agreoo between the Rampur State and the Company shall be payable in respect
of such land and shall be subject to revision by agreement every 15
years.
The lease also provided that fair and equitable water rales anc!
cesses shall be payable in respect of the land.
In section 4(7) of the
U.P. Land Revenue Act it is mentioned that the word ''·i\fal Guzari"
will be applicable where it has been duly assessed or has been determined by means of an auction or by any other means.
On a consi ·
deration of all the relevant facts the Assessing Authority came to the
conclusion that the agreement in favour of the companies provided for
payment of land revenne and the word "rent" used in i:he leases has
to be considered in relation to the original agreements and as such it
is seen that the agreement provided for payment of land revenue. The
learned counsel appearing for the respondents was unable to challenge
the correctness of the finding of the Assessing Authority.
On a consideration of all the facts that were placed before the Assessing Autho··
rity, we do not see any reason.for not accepting the conclusion arriver:
at by the Authority.
This issue also we find against the assessce.
In the result we hold that the High Court was in error in coming
to the conclusion that the assessment proceedings against the respon··
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u. P. STATE v. RAZA BULAND SUGAR co. (Kailasam, l.)
427
dent were unsustainable.
We set aside the judgment and order of the
High Court and restore the order of the Assessing Authority .
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N.V.K.
Appeal allowed.
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