1957 (9) TMI 87 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sum of Rs. 1,50,000 can be deemed to have been received by the assessee in the taxable territories within the meaning of section 14(2)(c) of the Income-tax Act.
2. Whether the tax paid by the beneficiaries under section 18A or section 23B of the Act could be set off against the liability of tax of the trustees in respect of the same income.
3. Whether it is open to the Income-tax Officer to proceed against the trustees when the demand under section 18A and/or assessment under section 23B of the Act had already been made against the beneficiaries and partly recovered.

Issue-wise Detailed Analysis:

1. Receipt of Rs. 1,50,000 in Taxable Territories:
The primary issue concerns whether the sum of Rs. 1,50,000 received by the assessees can be considered as received in the taxable territories under section 14(2)(c) of the Income-tax Act. The Tribunal had concluded that there was a constructive remittance from the State to the taxable territories when the dividend was declared and adjusted against the loan account. However, the Court disagreed with this reasoning, stating that directing a dividend to be sent elsewhere does not imply receipt in the taxable territory. The Court found that the Rs. 1,50,000 was an accelerated payment of the proposed dividend and bonus, known to be due shortly. The transaction was essentially an advance payment of income, which was remitted to Ahmedabad, thus taxable in India. The Court upheld the inclusion of this amount in the taxable income of the assessees, affirming that there was an actual remittance of money to Ahmedabad.

2. Set-off of Tax Paid by Beneficiaries:
The second issue pertained to whether the tax paid by the beneficiaries under section 18A or section 23B could be set off against the trustees' tax liability. The Income-tax Officer had demanded the entire tax from the trustees without crediting the tax paid by the beneficiaries. The Court criticized this approach as unreasonable, emphasizing that tax should be levied on the trustees "in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable." The Court concluded that the tax paid by the beneficiaries should indeed be set off against the trustees' liability, answering this question in the affirmative.

3. Authority to Proceed Against Trustees:
The third issue questioned the authority of the Income-tax Officer to proceed against the trustees when assessments had already been made against the beneficiaries. The Court noted that this question should have been raised by the assessees, not the Income-tax Commissioner. Since neither party wished for this question to be decided, the Court did not provide an answer.

Unanswered Questions:
The Tribunal mentioned an additional question raised by the assessees, but it was not referred for a decision as it was covered by existing authority. Therefore, this question was not answered.

Conclusion:
The Court affirmed that the Rs. 1,50,000 was taxable as it was an accelerated payment of income remitted to Ahmedabad. It also ruled that the tax paid by beneficiaries should be credited against the trustees' liability, ensuring that the same income is not taxed twice. The question regarding the authority to proceed against trustees was not answered as it was not appropriately raised.