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Supreme Court noted that according to the Maharashtra Revenue Patels (Abolition of Offices) Act, tenants who held watan property on “Tiller’s Day” would be eligible to buy watan property

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Case Title: Baban Balaji More(Dead) by LRs. & others versus Babaji Hari Shelar(Dead) by LRs. & others

Case No: Civil Appeal No.9356 of 2017

Quorum: Justice Sanjay Kumar

Facts of the case:-

Before August of 1898, the current appellants predecessor, Balaji Chimnaji More, had a Patel Watan. He was given Watan property, namely a 50% interest in a 20-acre plot of land in Survey No. 386 and a 50% interest in a 16-acre plot in Survey No. 410 in Village Chikhali. The predecessors of the respondents in this case, Babaji Hari Shelar and Ganapati Dhondiba Tapkir (or Tapkire), have been tenants of this Watan property since around 1955–1956. Balaji Chimnaji More passed away in February or March of 1958 while doing so. This clause stated that without the approval of the State Government or the Commissioner, as the case may be, a Watandar was not permitted to mortgage, charge, alienate, or lease any Watan, or part thereof, or any interest therein, to or for the benefit of any person who was not a Watandar of the same Watan, for a period of time longer than the term of his natural life. By order dated 18.04.1961, the Assistant Collector, I/C, Haveli Taluka, Poona, declared that the applicants’ father’s tenancy could not last past his death and that they would, therefore, be entitled to reclaim the property upon his death. Their father’s passing. As a result, he granted their plea and gave them the order to take ownership of the lands that were under their portion. The tenants, Babaji Hari Shelar and the legal heirs of the late Ganapati Dhondiba Tapkir, namely Laxman, Rama, Damu, and Babu Ganapati Tapkir, filed Watan Appeal No. 6 of 1961 before the Additional Collector, Poona, expressing their grievances. Nevertheless, the appeal in question was dismissed by an order dated March 27, 1962. On April 14, 1962, the tenants took the case to the Additional Commissioner, Poona Division, Poona. The Additional Commissioner issued an order on June 12, 1962, treating the proceedings as an appeal against the ruling dated March 27, 1962, in Watan Appeal No. 6 of 1961. In light of this, the Additional Commissioner dismissed the appeal.

Legal Provisions:-

The oldest of the three statutes:-

Maharashtra Hereditary Offices Act, 1874 (for brevity, ‘the 1874 Act’).

Maharashtra Tenancy and Agricultural Lands Act, 1948 (for brevity, ‘the Tenancy Act’),

Maharashtra Revenue Patels (Abolition of Offices) Act,1962 (for brevity, ‘the Abolition Act’).

Appellant Contentions:-

The appellants contend that this case cannot be considered an appeal since the statutory system only permitted one appeal. They would argue that this case should be interpreted with the ensuing implications. In any case, the lands in question were given to the Watandar family’s legitimate heirs on April 22, 1962, while this case was pending, in accordance with an order issued by the Assistant Collector, I/C, Haveli Taluka, Poona, on April 18, 1961. All Patel Watans were eliminated. As a result, everything related to the aforementioned Watans was eradicated, including their property and their ability to hold public office. All Watan lands were resumptive and subject to land revenue collection, subject to the restrictions of Sections 5, 6, and 9. Furthermore, Section 3(c) stipulated that all Watan lands remained resumed and were subject to payment of land revenue under the terms of Sections 5, 6, and 9.Under the applicable Code, treating them like unclaimed territory. However, Section 5 of that document stipulated that the Watan land would be granted to the Watandar. According to Section 5(1), Watan land resumed under Section 3 shall, upon application, be regranted to the Watandar of the Watan to which it appertained, provided that the Watandar pays the State Government the occupancy price equal to twelve times the amount of the full assessment of such land within the Watan. This application is made in relation to cases not falling under Sections 6 and 9 meaning of the applicable code with regard to any such land and will be principally responsible for paying land tax to the State Government in compliance with that code’s requirements. The provision to Section 5(1) stated that the Watandar, or others acting on their behalf, shall pay the occupancy price equal to six times the full assessment of any Watan land that was not assigned under the current Watan law as compensation for an official will be a resident .

Respondent Contentions:-

Tenants filed a revision before the government assailing the orders passed against them. However, the Appellants claim that it was only on 11.12.1964 that they suddenly received a copy of the letter dated 10.07.1964 addressed to Damu Ganapati Tapkir by the Officer on Special Duty, Revenue and Forest Department, Government of Maharashtra, stating that, pursuant to Government Letter 5 dated 01.11.1963, he was to state that the Government was pleased to set aside the order dated 18.04.1961 passed by the Pranth Officer, TalukaHaveli, District Poona the order dated 27.03.1962 passed by the Collector, Poona, in Watan Appeal 6 of 1961; and the order dated 12.06.1962 passed by the Commissioner, Poona Division, in Case No. W.T.N.P.6/33. Thereupon, the Collector, Poona, directed the Mamlatdar, Haveli, to ensure Delivery of possession of the lands to the tenants. Aggrieved by this development and complaining that they were not given notice or a hearing prior to the Government’s decision, the appellants preferred an appeal before the Commissioner, Poona, assailing the Direction of the Collector, Poona, to the Mamlatdar, Haveli, to hand over possession of the subject lands to the tenants. The Commissioner, Poona, rejected their request, vide letter dated 02.12.1964. They then approached the Chief Minister, State of Maharashtra, by way of written representation Dated 11.12.1964. However, they were informed by the Officer on Special Duty, Revenue and Forest Department, Government of Maharashtra, vide Letter dated 30.12.1964, that their representation dated 11.12.1964 could not be considered. Aggrieved by the rejection of their representation under Letter dated 30.12.1964, the appellants filed Constitution. And remands the matter to Government with a direction to rehear the matter after giving opportunity to the petitioners and the respondents to be heard in their defence.

Court Analysis and Judgement:-

It is the contention of the appellants that there was no lease subsisting as on 01.01.1963, owing to the order dated 18.04.1961 passed upon the application made by the legal heirs under Section 5 of the 1874 Act after the death of the original Watandar. They would further contend that as the possession of the Watan lands was actually restored to the legal Heirs on 22.04.1962, the tenants were not even in possession on the appointed date, viz., 01.01.1963. In effect, their argument is that neither a lawful lease was in existence nor were the tenants in physical possession. However, this argument loses sight of the fact that the order dated 18.04.1961 had not attained finality in as much as the tenants subjected it to challenge before the higher authorities and their challenge was still pending. No doubt, the High Court erroneously referred to the ‘misconceived appeal’ filed by them as ‘revisional proceedings’ but not with standing the nomenclature, the inescapable fact remains that the challenge to the initial order dated 18.04.1961 was subsisting as on 22.04.1962, the date of delivery of possession, and such proceedings of challenge concluded in favor of the tenants when their revision was allowed, vide the order dated 03.05.1982. Merely because no stay was granted in such proceedings and, in consequence, the tenants stood divested of actual physical possession, it did not lend any finality to the order impugned in those proceedings and, therefore, the purported termination of the lease still hung in balance.

The argument to the contrary is, therefore, rejected. It appears that during the pendency of this litigation, the subject agricultural Watan lands became part of the extended city limits of Pimpari Chinchwad Municipal Corporation and are presently reserved for Defence Purposes (Red Zone) in the development plans sanctioned by the Government of Maharashtra. In consequence, these lands cannot be alienated without the prior approval of the Government of India and the Government of Maharashtra. While so, we find that both sides have been merrily entering into transactions with third parties to alienate/transfer the subject lands. However, our decision in this case relates back to a time When the subject lands were still agricultural in nature and use and it would have no impact on the present position and the consequences flowing there from. Further, disputes, be it with the appellants or the tenants, are not the subject matter of this appeal and have not been dealt with. All such disputes would have to be addressed independently. Before the appropriate forum in accordance with law, if still permissible.

On the above analysis, we hold that it was not open to the appellants to proceed against the tenants under the provisions of Sections 5, 11 and 11A of the 1874 Act after the death of Balaji Chimnaji More, the Original Watandar, in February/March, 1958. This is because the provisions of the tendency Act were very much applicable to the subject lands by then and more so, Sections 29 and 31 thereof. Therefore, the legal heirs of the original Watandar could not have taken lawful possession of these lands. From the tenants pursuant to the order dated 18.04.1961 passed under Sections 5, 11 and 11A of the 1874 Act. The same was rightly held to be invalid in the revisionary order dated 03.05.1982 and that finding was correctly held to be justified by the Bombay High Court. We also hold that the tenancy was lawfully subsisting on 01.04.1957, i.e., Tillers’ Day, and the Tenants were entitled to exercise their right of statutory purchase of these tenanted agricultural Watan lands under Section 32 of the Tenancy Act in Terms of Section 8 of the Abolition Act, after the exemption afforded by Section 88CA ceased to exist. That right became operational on 27.11.1964, when these Watan lands were regranted to the heirs of the original Watandar. We find no grounds made out, either on facts or in law. The appeal is devoid of merit and is accordingly dismissed.

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Judgement Analysis Written by – K. Immey Grace

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The liability of TDS under Section 194-H can’t be extended for the ‘Payments’ made by the Assesses under ‘genuine business operations’: Supreme Court

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The issue revolving around this judgement is relating to the liability to deduct tax at source under Section 194-H of the Income Tax Act, 1961, which provides that the payer (in the present case assessee) responsible for making the payment must deduct tax from the amount paid to another person.

In the case of Bharti Cellular Limited (now Bharti Airtel Limited) versus Assistant Commissioner of Income, the Cellular mobile telephone service providers referred to as the Assesses (Appellants) contend that the discounted amount neither qualify as commission or brokerage to the franchisees/distributors, nor are the franchisees/distributors their agents.

The Revenue (Respondents) contends that the discounted amount is commission under the purview of Section 194-H which is payable to an agent by the Assesses under the franchise/ distributorship agreement between the Assesses and the franchisees/distributors.

This matter was brought before different High Courts which led to conflicting decisions. The Assesses challenged the decision of the Delhi and Calcutta High Courts which held that the assesses were liable to deduct tax at source under Section 194-H of the Act. On a contrary, the Revenue challenged the decisions of Rajasthan, Karnataka and Bombay High Courts which held that Section 194-H of the Act is not attracted under the circumstances of this case.

Subsequently, both the parties challenging the above decisions of the High Courts, appealed before the Supreme Court of India. The key issue before the Court was to interpret the Section 194-H and determine the liability of the cellular mobile service providers to deduct tax at source on the income/profit component received by their distributors/franchisees from third parties/customers.

The court fundamentally dealt with the questions of interpretation Section 194-H which further necessitated in determining the Principal-Agent relationship. Delving into the provisions of the Section the Court stated that the Section 194-H imposes the liability to deduct tax at source on “the person responsible for paying”. The provision provides that such a liability arises when income is credited or paid by the person responsible for paying. Further, the term “direct and indirect” in Explanation (i) states that the obligation vests even when the payment is made indirectly by the payer to the payee.

The Court while interpreting the term ‘acting on behalf of another person’ states that such a phrase entails the existence of a legal relationship of principal and agent, between the payer and the payee. The legal relationship of principal and agent is hence, necessary to impose the liability to deduct tax at source under Section 194-H.

The court lays down five important criteria to be considered for determining the Principal-Agent Relationship.

The Agent’s legal power to alter his principal’s legal relationship with a third party and the Principal’s co-relative liability to have his relations altered.

  • The degree of control by the principal over the conduct of the activities of the agent.
  • The task entrusted by the principal to the agent should result in a fiduciary relationship.
  • The Agent’s liability to render accounts of the Principal and his entitlement to remuneration for the work he performs for the principal.

Further the Courts relied on two decisions to determine what constitutes ‘commission’. In the case of Director, Prasar Bharati v. Commissioner of Income Tax, Thiruvananthapuram, the Court held that the expression ‘commission or brokerage’ is an inclusive definition and hence, must be interpreted widely.

Further, the court highlights the Delhi High Court’s decision in Commissioner of Income Tax v. Singapore Airlines Ltd., which held that tax under Section 194-H is not required to be deducted on discounted tickets sold by airlines through travel agents. The court notes that the revenue did not challenge this decision, leading to its finality. 

Further, the court rejected the contention of the Revenue relying upon the decision of this Court in Singapore Airlines Limited (supra) that assesses would be liable to deduct tax at source even if the assesses are not making payment or crediting the income to the account of the franchisee/distributor.

The court stated that in the instant case, the relationship between the Assesses and the Distributors is not a fiduciary relationship but instead is an activity carried out by an Independent Contractor. Moreover, it highlighted that the facts of each case and the authority given by ‘principal’ to the distributors must be considered while determining the relationship.

Therefore, with regard to the above observations, the Court held that the business operations of the Assesses which amounts to ‘discounted payments’, does not qualify for ‘commission’ under Section194-H of the Act. Accordingly, the appeals filed by the assesses – cellular mobile service providers, challenging the judgments of the High Courts of Delhi and Calcutta were allowed and the Assesses were not liable to deduct the tax at source under the said section.

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Judgement Reviewed By – Keerthi K

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