Madras High Court
P.E. Ramakrishnan vs The Assistant Commissioner Of ... on 8 July, 1998
Equivalent citations: 1999(1)CTC166, [2000]245ITR281(MAD)
Author: P. Sathasivam
Bench: P. Sathasivam
ORDER
1. The prayer in the above writ petition is to issue a writ of Certiorarified Mandamus calling for the records relating to third respondent in Form No.1 under Section 8, namely, the Distraint Order in proceedings No.PAP/5/R/KDK dated 21.1.88 and quash the same and forbear the respondents from taking any proceedings against the petitioner in respect of the arrears of agricultural income-tax due by W.P.A.R. Ramamurthy or his legal representative.
2. According to the petitioner, one W.P.A.R. Ramamurthy owed several lakhs of rupees to M/s. V.R.V. and Company of Kumbakonam and its partners. The said V.R.V. and Company brought a suit against the said W.P.A.R. Ramamurthy in O.S.No.717 of 1978 in the Sub Court, Dindigul. Accordingly, the mortgaged properties, were brought to sale in court auction on 11.1.1984 and the petitioner bought the properties in court auction for a sum of Rs. 1,20,105 subject to the mortgages mentioned in the sale deed executed by the Court. The petitioner undertook to clear the encumbrances mentioned in the said sale deed and in fact has cleared the same. The said court auction was confirmed on 3.7.1984 and the learned Subordinate Judge, Dindigul executed a sale deed on 3.7.1984 and thus the petitioner obtained absolute right and title over the property. The total extent of lands purchased in the court auction sale was of an extent of 270 acres and M/s V.R.V. and Company, the partnership firm is managing the lands on behalf of the petitioner. The petitioner was a tenant of the lands right from the year 1979 and has been paying the agricultural income tax regularly, without any default. It is further stated that the legal heirs of the said W.P.A.R. Ramamurthy informed the petitioner that there were arrears of agricultural income-tax to the tune of nearly Rs.1,11,000 and they have already written a letter to the Department on 30.9.85 to attach the amount of Rs.1,27,000 lying to the credit of O.S.No.717 of 1979 and further informed the petitioner that the Department would have taken necessary action based on the said letter. However, the department had not taken any action on the letter given by the legal heirs of W.P.A.R. Ramamurthy for attachment of the amount lying in court deposit to the credit of O.S.No.717 of 1978. Immediately, on 22.2.1986, the petitioner wrote a letter to the Personal Assistant to the District Revenue Officer, Dindigul bringing the aspect above to his notice. The petitioner was under the bona fide impression that the Government would have suitable action to attach the amount lying to the credit of O.S.No.717/1978 and adjusting the same towards the arrears of agricultural income tax due by the said Ramamurthy. Third respondent has also issued a notice in Form 1 under Section 8, namely, Distraint order, for selling the lands purchased by the petitioner in the court auction. It is further stated that the respondents have no right whatsoever to take any further proceedings in the matter from the bona fide court auction purchaser of the property for value. Aggrieved by the said order, the petitioner has filed the present writ petition.
3. On behalf of the respondents, Commissioner of Agricultural Income-tax, Madras-5 has filed a counter affidavit wherein it is stated that the petitioner is a partner of the firm, namely, V.R.V. and Company. The firm filed a suit for their debt against one Thiru W.P.A.R. Ramamurthy, who was in arrears of agricultural income-tax from the assessment years 1972-73 to 1980-81 and purchased entire lands belonging to the said Ramamurthy in Court auction. Therefore, demand notice was issued to V.R.V. and Company under Tamil Nadu Revenue Recovery Act calling upon them to remit the tax dues kept in arrears in respect of lands in their possession and enjoyment. It is stated that even on the date of purchase, through court auction, a charge was created on the lands towards Agricultural Income-tax dues. The transferee of the lands subjected to charge created thereon for agricultural income-tax arrears, is liable to unburden the obligation of discharging the charge. According to Section 23 of the Tamil Nadu Agricultural Income-tax Act, 1955, the transferee is liable to pay the tax arrears and he shall be entitled to recover from the transferor the amount of any tax so paid. It is further stated that they took efforts to realise the agricultural income-tax arrears in E.P. 141 of 1984 at Sub Court, Dindigul in O.S.No.717 of 1978 to attach the deposit amount. Since the other creditors have taken steps to claim the court deposit, the efforts of the department to realise the arrears have not been fructified. Therefore, simultaneously, a notice under Revenue Recovery Act was issued to the Court auction purchaser to realise the Government dues at the earliest. It is also stated that the petitioner has purchased the entire lands when the assessee was alive. Therefore, the authority has rightly acted under section 23 of the Act. Hence the pendency of any suit before the Sub- Court, Dindigul and consequences resulting out of the said proceedings do not preclude the statutory authority to proceed against the transferee in possession and enjoyment of lands in respect of which agricultural income-tax is due to the exchequer. With these averments, they prayed for dismissal of the writ petition.
4. In the light of the above pleadings, I have heard the learned counsel for the petitioner as well as the learned Special Government Pleader for respondents.
5. Mr.G. Rajagopalan, learned counsel for the petitioner has raised the following contentions:
(i) Section 23 of the Tamil Nadu Agricultural Income-tax Act, 1955 would not apply to Court auction purchases.
(ii) As per Section 73 of the Code of Civil Procedure, Government gets priority than the other creditors, accordingly the respondents ought to have taken effective steps when the sale amount is lying to the credit of O.S.No.717 of 1978 before the Sub-Court, Dindigul.
(iii) As per Section 65 of the Code of Civil Procedure, the petitioner secured an absolute title since the same has been purchased through court auction.
6. On the other hand, learned Special Government Pleader has raised the following contentions:-
(i) The petitioner and the firm V.R.V. and Company are not the bonu fide purchasers for value and without notice.
(ii) As per Section 23 of the Tamil Nadu Agricultural Income-tax Act, the respondents are entitled to proceed against the transferee with regard to tax arrears.
7. I have carefully considered the rival submissions.
8. There is no dispute that the firm by name V.R.V. and Company purchased the lands belonging to W.P.A.R. Ramamurthy through court auction sale. It is the case of the petitioner that several encumbrances were notified in the sale deed and they undertook to clear those encumbrances. As a matter of fact, according to them, they cleared the same. It is also stated that at the appropriate time the legal heirs of the said W.P.A.R. Ramamurthy informed the petitioner that there were arrears of agricultural income-tax to the tune of Rs.1,11,000 and they also informed that they have themselves written a letter to the department on 30.9.85 to attach the amount of Rs.1,27,000 lying to the credit of O.S.No. 717 of 1978. In such circumstances, had the petitioner taken prompt steps, they could have recovered the amount from the deposit lying in the court, since the Government's debts get priority over others. It is also brought to my notice the letter written by legal heirs of W.P.A.R. Ramamurthy to the Agricultural Income-tax Officer, Dindigul as well as V.R.V. and Company, and Personal Assistant (General) District Revenue Officer, Dindigul with a copy to Agricultural Officer, Dindigul. Mr. Rajagopalan vehemently contended that in the light of all the above information furnished by the legal heirs of Ramamurthy as well as the firm V.R.V. and Company, the respondents could have taken steps before the Sub Court, Dindigul in order to realise the agricultural income-tax dues. However, it is the definite case of the respondents that in spite of taking sincere efforts, they could not get the money in view of the other creditors and even otherwise as per Section 23 of the said Act, they are entitled to proceed against the transferee with regard to agricultural income-tax payable by the transferor.
9. In the light of the above factual position, now I shall consider the contention made by both sides. According to Mr. G. Rajagopalan, learned counsel for the petitioner. Section 23 of the Tamil Nadu Agricultural Income-tax Act, 1955 (hereinafter referred to as "the Act") would not apply to court auction sales. Section 23 of the Act is as follows:-
"23. Assessment in case of transfer of right in land.: Where a person in receipt of agricultural income from any land in the State is found to have transferred his interest in such land to another person, the transferor and the transferee shall each be assessed in respect of his actual share, if any, of such agricultural income;
Provided that when the transferor cannot be found, the assessment of such agricultural income of the previous year in which the transfer took place up to the date of the transfer and for the years preceding that year shall be made on the transferee in like manner and to the same amount as it would have been made on the transferor, or when the tax in respect of the assessment made for any or all of such years assessed on the transferor cannot be recovered from him, it shall be payable by and recoverable from the transferee, and the transferee shall be entitled to recover from the transferor the amount of any tax so paid."
It is true that in pursuance of court auction sale in O.S. No.717 of 1978, the firm V.R.V and Company have purchased the properties of W.P.A.R. Ramamurthy. It is also true that a sum of Rs.1,27.000 have been deposited to the credit of the said suit and the same was informed to the respondents for taking appropriate action. At this moment it is also relevant to refer Section 73 C.P.C., which gives priority to the Government in respect of recovery of money. Section 73 deals with distribution of assets, namely, proceeds of execution-sale to be rateably distributed among decree-holders. Section 73(3) C.P.C., says that nothing in this section affects any right of the Government. According to the learned counsel for the petitioner, in the light of Section 73(3) of the Code of Civil Procedure, inasmuch as the amount was lying to the credit of the suit at the relevant point of time having brought to the notice of the respondents, they ought to have taken prompt steps in getting their amount, failing which it is not open to them to proceed against the petitioner or the firm V.R.V. and Company. In support of his contention, he very much relied on a decision of the Supreme Court reported in Union of India v. M/s Somasundaram Mills (P) Ltd., . The following conclusion in the said decision has been pressed into service:-
"...The High Court appears to have thought that the Government could exercise its claim to priority only if the amount was still available with the executing Court and not otherwise. In the present case, the High Court thought, as the amount has already been taken away by the third respondent, the Government could no longer exercise its right to priority. It is difficult to agree with this proposition. It is a general principle of law that debts due to the State are entitled to priority over all other debts. If a decree holder brings a judgment-debtor's property to sale and the sale-proceeds are lying in deposit in Court, the State may, even without prior attachment exercise its right to priority by making an application to the executing Court for payment out. If, however, the State does not choose to apply to the Court for payment of its dues from the sale proceeds since there is no amount left wilh the Court to be paid to the State. However, if the State had already effected an attachment of the property which was sold even before its sale, the State would be entitled to recover the sale proceeds from whoever has received the amount from the Court by filing a suit. S. 73(3) read with 73(2) C.P.C. contemplates such a relief being granted in a suit..."
10. He also relied on a Division Bench decision of this Court reported in Punjab National Bank v. Jaggi Brothers and others, 1995 (2) L.W.569 wherein it is stated as follows:-
"If and when property is sold and the sale proceeds are received in Court, it is open to the concerned statutory authorities to file applications before the executing Court for recovery of such sums as are said to be due to them from the mortgagors. At that stage, the Court will consider whether the statutory liabilities will have precedence over the mortgage rights of the Bank. Hence, we are not deciding that question in this appeal..."
It is true that the dues to the Government get priority over other debts. It is specifically pleaded in the counter affidavit that in view of the action of the other creditors the efforts taken by the department to claim the court deposit could not be fructified. In para 4 of the counter affidavit, it is stated thus:-
"...The department on receipt of a petition dated 30.9.85 From the legal heirs of Thiru W.P.A. R.Ramamurthy, took efforts to realise the Agricultural Income Tax arrears in E.P. 141 of 1984 at Sub Court, Dindigul in O.S.No. 717 of 1978 to attach the deposit amount. Since the other creditors have also taken steps to claim the court deposit, the efforts of the department to realise the arrears have not been fructified..."
It is true that as observed by Their Lordships in Union of India v. M/s Somasundaram Mills (P) Ltd., , even if the said money is taken by some other creditors, it is open to the respondents to proceed against them by filing appropriate suit and they are entitled to a relief as per section 73(3) read with Section 73(2) of the Code of Civil Procedure. I have already extracted Section 23 of the Act which gives power to the department to recover tax arrears from the transferee. At this juncture, the learned Special Government Pleader has brought to my notice the decision of the Apex Court reported in (96 Sales Tax Cases 612). In the light of Section 11-AAAA of Rajasthan Sales Tax Act, 1954, Their Lordships have concluded that the tax payable to the Government shall be the first charge on the property of the assessee, irrespective of the other mortgage or encumbrance they are entitled to proceed against the defaulter in realisation of the tax due. Here, in our case, a perusal of Section 40 which deals with recovery of tax and penalties, Section 41which deals with mode and time of recovery and 42 which deals with right, title and interest in property sold for arrears of lax in certain - cases would go to show that the respondents are entitled to first charge among all other debts. In view of the language used in Section 23 coupled with other sections and in view of the fact that the Government gets priority in recovering their debts, I am unable to accept the argument of the learned counsel for the petitioner, namely. Section 23 of the Act would not apply to court auction purchase. In the absence of any restriction in Section 23 of the Act, it cannot be construed that the same is not applicable when someone purchased the property through court auction irrespective of Section 65 C.P.C. Even on the date of purchase through court auction, a charge was created on the lands towards agricultural income-tax due. The transferee of the lands subjected to charge created thereon for agricultural income-tax arrears is liable to pay the tax dues.
Since the tax is payable with reference to the lands, the petitioner and the firm having purchased the same irrespective of the fact that the respondents did not take appropriate steps when the amount was lying before the Sub Court in the light of un-fettered provision, namely, Section 23 coupled with the other sections referred to above, the respondents are entitled to proceed against the property of the petitioner and the firm in order to realise the agricultural I.T. dues. Further, as per section 24 of the Act, it is not possible for the respondents to recover the tax arrears from the legal heirs of the deceased person since the petitioner has purchased the entire lands when the assessee was alive. Therefore, the action of the respondents is in accordance with section 23 of the Act. I am also of the view that irrespective of the pendency of any suit before the Civil Court and the consequences resulting out of the said proceedings do not preclude the respondents who are all statutory authorities to proceed against the transferee in possession and enjoyment of the lands in respect of which agricultural income tax is due to the Government.
11. Under these circumstances, I do not find any merit in the Writ Petition and the same is accordingly dismissed. No costs.