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TMI Blog1961 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... ocated, belonging to the assessee on the valuation date, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date. Now we come to the facts of this case. One Sri Nandalal Karuri died on May 21, 1944, after having made and published his will on April 24, 1944, whereby he appointed Sm. Suhashini Karuri, his wife, and Sri Sudhir Prosad Karuri, his eldest son, both of whom are petitioners in this case, as executors and trustees. The testator had eight sons of whom seven are alive and one is dead. He had also grandsons. The petitioners obtained probate of the said will from this court on or about July 25, 1945. A copy of the will is annexed to the petition and marked with the letter "A". Actually, there are very few bequests in the will, which in reality creates a trust. The petitioners are made the first trustees and there are elaborate provisions for the appointment and succession of trustees. The estate is described as the "trust estate". The trustees are to perform the pujas of the deities mentioned in clause (5) of the will. The cost thereof was to be defrayed from out of the income of certain properties mentioned therein. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the completion of the administration the petitioners are holding the residuary estate as trustees in terms of the said will. For the assessment year 1957-58, 1958-59 and 1959-60 the Wealth-tax Officer, District 1(2), "D" Ward, Calcutta, assessed the petitioners as representing the estate of the said Nandalal Karuri, deceased, and computed the total net wealth at ₹ 14,02,703, ₹ 14,04,084 and ₹ 14,10,007 respectively and called upon the petitioners to pay the relevant amounts of wealth-tax. Copies of the assessment orders have been annexed to the partition and included in exhibit "A" at pages 8 to 22. In all these assessment orders, we find the name of the assessee to be "Shri Sudhir Prasad Karuri and Sm. Suhashini Karuri, for the estate of late Nandalal Karuri, 54, Raja Raj Ballav Street, Calcutta". The "status" has been stated to be "individual". The assessment orders proceed on the footing that the assessee were trustees under the last will and testament of the late Nandalal Karuri and were holding the trust estate for the benefit of the sons and grandsons of the testator. It is mentioned in the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. Apart from this a technical objection is taken to the effect that joint executors or trustees are an "association of persons" and there is no provision in the said Act for the assessment of such an unit. As stated above, the assessment has been made on the basis of "individual" and not on an "association of persons". I shall now consider these objections. With regard to sub-section (1) of section 21, the plain reading of the provisions is that where assets chargeable to tax are held by trustees then the wealth-tax shall be levied upon and recoverable from them as it would be leviable and recoverable from the person "on whose behalf the assets are held". Who are the persons in the present case on whose behalf the trustees are holding the assets? According to the petitioners, they are the beneficiaries, namely, the sons and grandsons of the deceased testator aforesaid, who were alive at the time of his death. That would seem to be the ordinary meaning. Mr. Pal appearing on behalf of the respondents has argued that under the Indian law, the legal estate vests in the trustees and the trustees do not hold "on behalf of" the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person holds land, from which agricultural income is derived, as a common manager appointed under any law for the time being in force or under any agreement or as receiver, administrator or the like, on behalf of persons jointly interest in such land or in the agricultural income derived therefrom, the aggregate of the sum payable as agricultural income-tax by each person on the agricultural income derived from such land and received by him, shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income-tax so payable by each such person and shall be liable to pay the same." It will be observed that there is one difference, and it is the enumeration of the class of persons holding land on behalf of the persons interested in such lands or in the income derived therefrom. In section 11(1) of the Agricultural Income-tax Act, we find the mention of a common manager, a receiver and administrator. Then we have the expression "or the like". Under section 21(1) of the Wealth-tax Act we have two groups. The first group contains the mention of the court of wards, administrator- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act a "person" included an individual. A trustee was a "person". The learned judge explained the section thus: "It is to be noted that the primary liability for the payment of agricultural income-tax is on the person who is interested in the land or in the agricultural income derived therefrom. The incidence of the tax is on that person and the amount of tax is determined with reference to the aggregate income derived by him. Inasmuch as, however, such land is held by some other person who is a common manager, receiver, administrator or the like on behalf of such person and others jointly interested in such land or in the agricultural income derived therefrom, the agricultural income-tax is assessed on such common manager, receiver, administrator or the like instead of the assessment being made on each of such persons who is jointly interested in such land or in the agricultural income derived therefrom. Section 11(1) prescribes a mode of assessing such common manager, receiver, administrator or the like and he is deemed to be the assessee in respect of agricultural income-tax so payable by each such person and is liable to pay the same." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke so as to attract the operation of section 11(1). Trustees do not hold the land from which agricultural income is derived on behalf of the beneficiaries but they hold it in their own right though for the benefit of the beneficiaries." In the above-mentioned case, the claim was that the annuitants being the beneficiaries, their individual income should be taxable. It was held however that section 11(1) did not operate in the case of trustees because the trustees were the legal owners of the trust estate and did not hold land "on behalf of" the annuitants. Coming now to section 21(1) of the Wealth-tax Act, we find that the wealth-tax is to be levied upon the trustee in the like manner and to the same extent as it would be leviable upon and recoverable from the person "on whose behalf" the assets are held. The expression is "on whose behalf" and not "for the benefit of". In working out this provision of law, the question has to be asked, as to whether in the present case the trustees could be said to hold the property "on behalf of" the beneficiaries, namely, the sons and the grandsons of the testator. According to the reasoni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees, the expression "on whose behalf" is synonymous with "for whose benefit". In the above-mentioned Supreme Court decision, it has been held that the two expressions are not synonymous in law. The Supreme Court was, however, interpreting section 11(1) of the Agricultural Income-tax Act, which did not contain any mention of the word "trustees", but is confined to persons or class of persons who held property on behalf of another. A trustee was held not to belong to such a group. Under section 21(1) of the Wealth-tax Act, however, a trustee has been expressly mentioned and has been equated with a group which undoubtedly holds property on behalf of another. In may opinion, the clear intention is that both the groups should be considered in the same light when it came to the computation of wealth-tax, and so far as trustees are concerned, the expression "from the person whose behalf the assets are held" clearly means the beneficiaries. This, I think, is made clear from sub-section (3) which runs as follows: "Where the guardian or trustee of any person being a minor, lunatic or idiot (all of which persons are hereinafter in this sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gless to say that the trustees, for the purpose of this section, hold property on their own behalf and so do not come within the scope thereof. Perhaps, in view of the Supreme Court decision, the wordings of both these Acts require modification. The next point taken on behalf of the respondents is that, in any event, sub-section (4) of section 21 applies to the facts of this case, because the shares of persons on whose behalf the assets are held are indeterminate or unknown. The matter is formulated in this way. Firstly, it is said that the number of beneficiaries is not fixed, because a son may die leaving a number of grandsons. Secondly, that the deities are also beneficiaries. Thirdly, there is provision for the setting apart of the reserve fund, according to the discretion of the trustees. From this it is argued that the share of each beneficiary is indeterminate. In my opinion, this argument is not of substance. The share of a beneficiary can be said to be indeterminate if at the relevant time the share cannot be determined. Merely because the number of beneficiaries varies from time to time, one cannot say that it is indeterminate. In support of this proposition, Mr. Chaudhu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to share the profits were 24 in number and included the settler, his wife, his five sons and seven daughters and his ten grandchildren. It seems that no question was raised before the Tribunal as to whether any relations of the various categories, to which reference was made by the Appellate Assistant Commissioner, such as the son of a half-brother, the son and grandson of a maternal uncle, etc., were in existence and therefore entitled to share the income. The Tribunal took the view that in the accounting year the 24 persons, to whom reference has already been made, were the only persons who were entitled to share the profits........... It seems to me, therefore, that the finding of the Tribunal that there were only 24 persons who were entitled to share the profits in the accounting year and that they were entitled to equal shares therein must be accepted. As it does not seem to have been contended that the assessee had any other relations than those enumerated by the Tribunal who would be entitled to share the profits, it is academic to discuss whether the various categories of person referred to by the Appellate Assistant Commissioner of Income-tax were included in the term &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he association individually. Mr. Chaudhury points out that under section 3 of the Wealth-tax Act, the only person who can be assessed is an individual, a Hindu undivided family and a company. He says that the expression "association of persons" has been deliberately omitted. Mr. Chaudhury argues that under the Income-tax Act, joint trustees can only be assessed as an association of persons. He has cited a Division Bench judgment of the Lahore High Court in Hotz Trust of Simla v. Commissioner of Income-tax*. It was held there that a body of trustees comes within the meaning of "other association of individuals" as used ins section 3 and elsewhere of the Income-tax Act and could be grouped as a unit for the purpose of income-tax. Mr. Pal appearing on behalf of the respondents points out that under section 3 of the Wealth-tax Act, an "individual" can be taxed. Although used in the singular, it includes the plural. He points out that in item 86 of List I in the Seventh Schedule of the Constitution, Parliament has been given power to legislate on the taxation of "individuals". The question is as to whether joint trustees could form an unit for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Wealth-tax Act, which professes to tax wealth. In may opinion, it is sufficient to hold that joint trustees must be taken to be a single unit in law, and there is nothing wrong in treating such an unit as an individual holding property, and becoming assessable under section 3 of the Wealth-tax Act. The result is that under the Wealth-tax Act joint trustees form a unit of taxation and are not excluded by the charging section, namely, section 3. Lastly, I come to the question raised in the assessment order, namely, that the petitioners are holding property as executors and not as trustees. What is stated is that under the will they must hold the property until the death of all the sons and the grandsons living at the time of the death of the testator and/or the period of minority of any of them and, consequently, until the time for distribution arrives, the petitioners are holding as executors and not as trustees. Now, if this contention is correct and the petitioners are holding as executors then they do not come within the mischief of section 21 because section 21 does not apply to executors. In may opinion, the respondent No. 1 is in error in considering that the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Taran Singh Hazari v. Ramratan*, one Gouri Devi was appointed executrix of a will of Siblal Tewari who left a minor son. She continued to manage the property of the minor for sometime and then applied to the court of wards to take over the estate. The court of wards took over the estate and subsequently brought a suit against the defendant, Taran Singh Hazari, to recover an amount due on a mortgage bond executed by him in favour of Gouri Devi as executrix. The deference taken was that it was the executrix who could alone enforce the mortgage. It was held that Gouri Devi had fully administered the estate and was holding the property as a trustee for the minor. The duties of an executor are to pay the debts, collect the outstandings and to administer the estate of the deceased and after this has been done, and the estate has been settled, his duties as an executor are finished and if he is required to continue to be in charge of the property for the benefit of certain beneficiaries, he ceases to be an executor and becomes a trustee of the property. The duties of an executor and those of a trustee are quite different. In the case of Sarnath Sanyal, in the Goods of v. Hrishikesh San ..... X X X X Extracts X X X X X X X X Extracts X X X X
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