Law:

Section:

Section 26 of the Karnataka Agricultural Income-Tax Act, 1957 - Assessment in case of discontinued company, firm or association (Validity of retrospective amendment to section 26(4)) - Whether retrospective amendment made to section 26(4) by State Legislature with effect from 1-4-1975 was to be regarded as constitutionally valid - Held, yes [Para 25] [In favour of revenue] FACTS â–  In the course of appellate proceedings, the High Court setting aside retrospective operation of amendment made to section 26(4) by the State Legislature held that assessment of agricultural income could not be made in the hands of assessee-firm after its dissolution in so far as said amount pertained to period prior to dissolution of firm. â–  On appeal to the Supreme Court: HELD â–  From a cursory reading of section 26(4) read with section 27, it becomes clear that any sum received after discontinuance of business by a firm is deemed to be the income of the recipient and charged to tax accordingly, if such sum would have been included in the total income of the person who carried on the business had such sum been received before such discontinuance. Section 27 went one step further and also spoke of income of a firm which is dissolved as opposed to a firm whose business had been discontinued. With respect to such income, every person who was, at the time of discontinuance or dissolution, a partner of such firm was liable to be jointly or severally assessed on such agricultural income as also to pay the same by way of tax, penalty, etc. [Para 5] â–  In L.P. Cardoza v. Agricultural ITO [1997] 227 ITR 421 (Kar.), the question involved was as to whether a dissolved firm could be assessed to agricultural income tax after the date of its dissolution in respect of income received from supply of goods made by the firm prior to its dissolution. This question arose in the light of section 26(4) and section 27 as they then stood in 1987. [Para 6] â–  The court specifically held that there was nothing in section 26(4) as it then stood or section 27 to indicate that where the firm is dissolved and income is received after dissolution in respect of agricultural…