This writ petition raises the question of assessability to agricultural income-tax under the Agricultural Income-tax Act, 1950, of the properties of the Valiamma Thampuran Kovilakam Estate, known compendiously as the V.T.K. Estate. It is agreed that the properties of the V.T.K. Estate comprise the ancestral properties of the Cochin Royal Family as well as the amounts donated from time to time by the Maharaja of Cochin for the maintenance of the members. The petitioner is the manager of the V.T.K. Estate. The management of the estate is governed by the provision of the Cochin Proclamation 9 of 1124. the writ petition seeks a declaration that the V.T.K. Estate is not assessable to agricultural income-tax and a writ of certiorari to quash exhibit P-2 notice, and P-4 order, of the 1st respondent calling upon the petitioner to submit a return of the total agricultural income of the estate for the year 1962-63, and holding after objection that the estate was assessable.
I may notice - only to reject - the preliminary objection raised by counsel appearing for the respondents that the petitioner has no locus standi to maintain this writ petition. The Cochin Proclamation 9 of 1124 vested the management of the V.T.K. Estate, and the Palace Fund in the Palace Administration Board. Exhibit P-2 notice was issued by the 1st respondent to the petitioners as the manager of the estate. He replied thereto by exhibit P-3 objection. The same was overruled by exhibit P-4 communication addressed to the petitioner and a return of income was insisted upon. The provisions of the Proclamation 9 of 1124, no less than the conduct of the 1st respondent in dealing with the petitioners as a representative of the estate ar sufficient to clothe the petitioners with locus standi to maintain this writ petition (vide Gadde Venkateswara Rao v. Government of A.P.).
The V.T.K. Estate has now been partitioned under the provisions of the Valiamma Thampuran Kovilakam Estate, and the Palace Fund (Partition) Act. 1961, and a document of partition has been executed on June 24, 1963. The period to which exhibit P-2 notice and exhibit P-4 order relate is the assessment year 1962-63. The petitioners counsel filed an additional affidavit and prayed to received the same by an unnumbered C.M.P filed on January 9, 1967. In the said additional affidavit, the petitioner had stated that division of status in respect of the V.T.K. Estate took place in 1961, and that the assessment of the owners, if at all, to agricultural income-tax can only be as tenants-in-common under section 3(5) of the Agricultural Income-tax Act of 1950. This is a matter to be taken into account by the assessing authority, if and when it proposes to assess the estate.
The Petitioners claim that the estate is not assessable to agricultural income-tax is founded on exhibit P-1 notification dated 5-5-1112 (17th December, 1936), issued under the provisions of section 59 of the Cochin Income-tax Act VIII of 1108. The said notification reads as follows :
'No. 26. Under section 59 of the Cochin Income-tax Act VIII of 1108, Government are pleased to order that all the members of the Cochin Ruling Family and the Cranganore Chief are exempted from the tax payment under the Cochin Income-tax Act in respect of all income except salaries for services rendered, professional earnings and business incomes.'
Objection was raised that the exemption under exhibit P-1 was a personal Privilege granted to the members of the Cochin Ruling Family so long as the same possessed ruling powers and that with the divestiture of these powers the exemption would cease to operate. Apart from the controversy as to whether the ruling powers, enure in the family or in his Highness the Maharaja as its head, I am unable, on the terms of the notification, to accept the contention that the exemption was valid only so long as the ruling powers lasted.
According to the petitioner the notification is still in force and continues to be available in respect of agricultural income-tax; whereas, according to the respondents, it is not, and the exemption granted thereby cannot in any event enure for the purpose of agricultural income-tax The Cochin Income-tax Act, 1108, appears to have been the earliest of the statutes, which leived income-tax in the State of Cochin, Section 6 thereof made six heads of income, profits, and gains chargeable to income-tax namely : (i) Salaries, (ii) Interest on securities, (iii) Property, (iv) Business, [v] Professional earning, and (vi) Other sources, Section 4(3)(ix) of the Act provided that the Act was not applicable to agricultural income. Section 59 empowered Government by notification in the Gazette to make an exemption in respect of income-tax in favour of any class of income or in regard to the whole or by part of the income of any class of persons. It was in pursuance of this power that exhibit P-1 notification was issued.
The Cochin Income-tax Act, 1108 was repealed by the section 2 of the Cochin Income-tax Act VI of 1117, which was enacted to consolidate and amend the law relating to income-tax and super-tax, Section 9 of the 1117 Act provided for the heads of the income chargeable to income-tax. The six heads of income under section 6 of the 1108 Act were comprised under five heads. Section 5(3)(vii) of the 1117 Act excluded from taxation, agricultural income. Section 103(1) empowered the Government to grant exemption.
The Cochin Act of 1117 was amended by the Cochin Act 22 of 1122. It was on an amending and not a repealing and re-enacting statute. Section 4 of the Amending Act, inter alia, deleted the exclusion of agricultural income, enacted by section 5(3)(vii) of the 1117 Act, Section 6 of the amending Act amended section 9 of the 1117 Act, by adding two additional heads of income, namely, (1) Capital gains, and (2) Agricultural income. Section 7 of the Amending Act introduced two new sections as section 13A and 13B respectively in the 1117 Act, dealing with the computation of agricultural income, and capital gains. There was an inconsequential amendment to section 103 of 1117 Act, which need not be noticed.
The Cochin Income-tax Act of 1117 as amended in 1122 continued in force till the merger of the State of Cochin with the State of Travancore on July 1, 1949, and even thereafter, till the passing of the Finance Act, 1950. Section 13 of the Finance Act, 1950, in so far as it is material, provides as follows :
'If immediately before the 1st before the 1st day of April, 1950, there is in force in any Part B State other than Jammu and Kashmir or in Manipur, Tripura or Vindhya Pradesh or in the merged territory of Cooch-Behar any law relating to income-tax or super-tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922 (XI of 1922), for the year ending on the 31st day of March, 1951, or for subsequent year or, as the case may be, the levy, assessment and collection of the tax on profits of business for by chargeable accounting period ending on or before the 31st day of March, 1949 :.....'
The next, and the final legislative landmark to notice, is the Travancore-Cochin Agricultural Income-tax Act of 1950, which, since the formation of the State of Kerala, became the Kerala Agricultural Income-tax Act. Section 3 of the Act imposed a charge on the total agricultural income of the previous year on 'every person'. Section 71 of the Act provided that 'the Travancore Income-tax Act 1121, as subsequently amended and the Cochin Income-tax Act, VI of 1117 as subsequently amended in so far as they relate to tax on agricultural income are hereby repealed.'
The question whether exhibit P-1 survived the legislative changes noticed above now falls to be examined. At the time of the repeal of the Cochin Act of 1108 by the Act of 1117, there was in force, the Cochin General Clauses Act, 3 of 1079. Section 22 of the said Act provided :
'22. Where any Act is after the commencement of this Act, repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided, any (appointment, notification) order, scheme, rule, form or by-law (made or) issued under the repealed Act shall, so far as it is not inconsistent with the provisions re-enacted, continue in force, and be deemed to have been (made or) issued under the provisions so re-enacted, unless and until it is superseded by any (appointment, notification) order, scheme, rule form or by-law (made or) issued under the provisions so re-enacted.'
As a result of this provision, the exhibit P-1 notification continued in force, and is deemed to have been issued under the 1117 Act. So far, there was no controversy.
By the Amending Act of 1122, agricultural income-tax was for the first time introduced in the State of Cochin : and, unlike what was done in the Travancore and Malabar areas of this State, this was not by the provisions of any special statute, but by amendments carried out to the Cochin Income-tax Act. According to the counsel for the respondents, the provisions of section 13 of the Finance Act, 1950, were sufficient to 'put an end to' exhibit P-1 notification. Counsel took the stand that the expression 'ceased to have effect' in section 13 of the Finance Act of 1950, was different from 'repeal' and, therefore, would not attract the provisions of section 24 of the General Clauses Act, 1897 (Central Act 10 of 1997), or the corresponding provision in section 22 of the Cochin General Clauses Act. It is unnecessary to resolve this controversy. It was agreed that the repeal, or the cessation of effect, in respect of the Cochin Act, by reason of section 13 of the Finance Act, could only be in respect of matters relating to income-tax or super-tax, or tax on profits of business. The portion of the Cochin Income-tax Act, relating to the levy of tax on agricultural income continued to be alive even after the Finance Act, 1950, and was in fact repealed only by section 71 of the Travancore-Cochin Agricultural Income-tax Act, 1950. That the said Act effected a repeal and a re-enactment of the Cochin Act in so far as it related to agricultural income was admitted by the counsel appearing for the respondents in answer to a specific question put by me. If so, there can be no doubt that exhibit P-1 notification issued under the Cochin Act VI of 1108, and continued under the 1117 Act, subsisted even after the Travancore-Cochin Agricultural Income-tax, 1950, by reason of section 23 of the Travancore-Cochin Interpretation and General Clauses Act 7 of 1125.
But it was contended by the counsel for the respondents that the scope and the content of the exemption conferred by exhibit P-1 notification would not be enlarged, and that it would not avail against the imposition of fresh or new taxes such as the agricultural income-tax, introduced for the first time by the 1122 amendment. The tenability of this contention remains to be examined. Counsel for the respondents placed reliance on the decision in the Sion College case, and contended that a statutory exemption granted from payment of all taxes can operate only on taxes then existing and will not preclude or prevent the imposition of fresh taxes by a subsequent statute. Sion Collage case was dealt was by the Divisional Court. By section 51 of 7 George 3 - Chapter 37, it was provided that certain lands in the City of London reclaimed from the Thames should vest in the adjoining owners 'free from all taxes and assessments whatsoever'. By section 169 of 11 and 12 Victoria - Chapter CLXIII (The City of London Sewers Act, 1848), it was provided that certain rates for the purpose of the Act shall be made on every occupier of house or building in the city, 'Whether such person shall be now liable in respect of such house or building to be assessed to the relief of the poor in respect thereof by reason of such house or buildings being situate in any precinct or extra parochial place or otherwise.' The question was whether the provisions of the latter statute could operate in view of the exemption contained in the former. In the Divisional Court, Grantham J. and Channell J. noted that the case was one of considerable difficulty and held that the provisions of the latter Act did away with the exemption, and that the exemption was over-ridden by the provisions of the latter statute. The judgment of the Court of Appeal is reported in [1901] 1 K.B. 617. The Court of Appeal consisting of A.L. Smith M.R. Collins L.J. and Romer L.J. dismissed the appeal. They felt bound by certain authorities to hold that the exemption in the earlier statute was only from taxes and assessments then in existence and not for the substantially new ones, coming into existence on a later date. On the point whether the exemption contained in the earlier Act had been repealed or taken away by the later Act, no opinion was expressed.
This latter point of the repeal of an earlier exemption by a later statute was considered by the House of Lords in the Mayor & c. of London v. Netherlands Steamboat Co. A statute of 1812 enacted that a fixed composition in lieu of rates, which had been voluntarily paid by the treasury in respect of Crown property in the city should be paid every year out of the consolidated customs to the rate-collectors, and that the premises should be exempt from all rates and assessments, though they might become private property. A statute of 1832 repealed that part of the Act of 1812 which made the composition payable out of the consolidated customs. It however, enacted that the collectors should collect the composition and no more, from the occupiers of the property, which was about to be sold by the treasury. The premises having become private property, the occupiers were sought to be assessed to rates by section 169 of the City of London Sewers Act of 1848, the same statute considered in the Sion College case. It was held that section 169 of the Sewers Act, 1848, did not take away the exemption granted by the Acts of 1812 and 1832, and that the immunity so granted was perpetual. This pronouncement certainly took away that part of the reasoning in the Sion College case, on which the Divisional Court sustained its opinion.
The reasoning of the Court of Appeal in the Sion College case as to the scope of the exemption granted by the earlier statute, directly and more pointedly arose for consideration before the House of Lords in the two Associated Newspapers cases. In the earlier of these cases it is enough to notice that Lord Parker of Waddington reserved his opinion as to the correctness of the decision in the Sion College case. In the second Associated Newspapers case, the identical provisions of the two statutes considered in the Sion College case, namely, section 51 of 7 George 3 - Chapter 37, and section 169 of 11 & 12 Victoria - Chapter CLXIII came up for consideration. It was ruled by Lord Haldane, Lord Parmoor and Lord Wrenbury (Lord Sumner contra) that an exemption from all taxes and assessments whatsoever, would include the local taxes and assessments, whether then existing or thereafter to be imposed. Lord Haldane notice that the legislature could, by a sub-sequent Act have repealed or altered the exemption. It was pointed out that the decision in the Sion College case proceeded on a misapprehension of the authorities by which the Court of Appeal felt itself bound.
It would thus be seen that both the limbs of reasoning on which the decision in the Sion College case was sustained by the Divisional Court and by the Court of Appeal were overruled by the House of Lords in the decisions noticed supra (Mayor & c. of London v. Netherlands Steamboat Co. and Associated Newspapers Ltd. v. Corporation of the City of London). The Sion College case, which was relied upon by the counsel for the respondent, can no longer be regarded as good law either regarding the scope of the exemption or its subsequent repeal. A clear and concise exposition of this aspect of the law is to be found in Craies Interpretation of Statutes (6th edition) at pages 585 to 587.
In In re Winget Ltd. it was ruled by Russell J. adverting to the second Associated Newspapers case, that the word 'whatsoever' which occurred in the provisions of the earlier exemption statute were not of any special significance and that a statutory exemption from all taxes should not be confined existing taxes but included taxes as well.
Counsel for the respondents contended that the continuance of the exemption from agricultural income-tax in favour of the members of the Ruling Family of Cochin, would be discriminatory under the Constitution. The averments in this behalf made in paragraph 14 of the counter-affidavit are quite bald and bare, and I am not prepared on those averments to say that the State had discharged its burden of showing that the classification of members of the Cochin Ruling Family into one class for the purpose of the exemption was not rational, or not based on intelligible differentia. This is quite apart from the objection raised by the counsel for the petitioner that the State will not be heard to contend that its own action is discriminatory. I express no opinion on this objection.
In the light of the foregoing principles, I am of the opinion, that the exemption covered by exhibit P-1 continued in force even after the repeal of the Cochin Income-tax Act, in so far as it related to agricultural income, by section 71 of the Travancore-Cochin Agricultural Income-tax Act, 1950. I am further of the view that the exemption covered not merely the taxes assessable under the Cochin Income-tax Act at the time of the grant, but even agricultural income-tax introduced later by the 1122 amendment. The notification, exhibit P-1, delimited the area of taxation and marked off the residual area as one of immunity. So long as the notification stood, the exemption granted thereby operated on any enlargement or widening of the scope of taxation. At the time of exhibit P-1 notification no exemption from agricultural income-tax could possibly be granted as agricultural income-tax was then unknown and section 4(3)(ix) of the 1108 Act provided for the exclusion of agricultural income. The exemption granted by the exhibit P-1 notification continued to be available to the V.T.K. Estate for the period covered by exhibit P-2 notice, and exhibit P-4 order. It was not taken away by section 3 of the Agricultural Income-tax Act, 1950, imposing a tax on the agricultural income of 'every person'. I am of the opinion that the V.T.K. Estate was not assessable to agricultural income-tax for the assessment year 1962-63.
I allow this O.P. and quash exhibits P-2 and P-4. The petitioner is entitled to his cots.
Petition allowed.