TMI Blog1961 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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. The residue is to be distributed in the following manner: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 orders that there were seven sons and three grandsons. In the body of the assessment orders it is stated that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 beneficiaries. Under the Indian Trusts Act, 1882, a trust is an obligation annexed to the ownership of property, and arising out of a confidence rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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-general, official trustee, receiver, manager or any other person by whatever name called , appointed under any order of a court to manage property on behalf of another. The second group consists of any trustee appointed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. The learned judge pointed out that with regard to a common manager, receiver, administrator or the like, there is no doubt that he was holding property for others. In such cases, the agricultural income-tax is determined with reference, not to the person holding property on behalf of another, but with reference to each of the persons j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reasoning given above, they do not do so. They hold the property on their own behalf, being legal owners thereof, but for the benefit of the beneficiaries. Mr. Pal argues that it follows that in the present case also, it must be held that the trustees do not hold the property on behalf of the beneficiaries, and the computation of wealth- tax cannot be according to the individual inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld 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-section included in the term 'beneficiary') holds any assets on behalf of such beneficiary, the tax under this Act shall be levied upon and recoverable from such guardian or trustee, as the case may be, in the like manner and to the same extent as it would be leviable upon the recoverable from any such beneficiary if of full age or sound mind and in direct ownership of such assets. Here, a trustee has been clearly descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Chaudhury has cited a Division Bench judgment of the Patna High Court in M. Habibur Rahman v. Commissioner of Income-tax [1945] 13 I.T.R. 189; A.I.R. 1945 Pat. 494. That was a case under section 41 of the Income- tax Act, which corresponds to section 21 of the Wealth-tax Act. Under sub-section (1) of section 41, where trustees were entitled to receive income on behalf of any person, the tax shall be levied upon and recoverable from such trustees as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 'family' or not. It was held that the assessee, mutawalli, should be taxed on the basis of profits falling to the share of each beneficiary. In the present case, there seems to be no difficulty in determining the share of the beneficiaries during the relevant account period. The will clearly lays down as to who would be entitled to the income and it is a mere matter of calculation as to how many sons and grandsons were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 purpose of taxation. Mr. Pal has cited a Supreme Court decision in Commissioner of Income-tax v. Sodra Devi**. In that case, Bhagwati J. points out that the word individual has not been defined in the Income-tax Act and there is authority for the proposition that the word individual is wide enough to include a group of persons forming an unit. I have already mentioned the case of Hotz Trust of Simla v. Commissioner of Income-tax*, where it has been held that body of trustees could be g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners 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 petitioners hold the property as executors until the period of distribution has arrived. It is a mistake to think that an executor necessarily remains an executor until he hands over the property to the persons ultimately entitled to it. The administration of an estate in the hands of an executor is at an end as soon as the debts have been paid and the legacies that have been assented to have been paid. Lewin in his book on Trusts says: When the funeral and testamentary expenses, debts and legacies have been satisfied, and the surplus has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtgage. 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 Sanyal**, Mootham J. said as follows: The duties of an executor in general terms are to collect the assets of the deceased, to pay his debts and the funeral and testamentary expenses and thereafter to make over the residue of the estate to the person or persons entitled thereto under the will. Where the testator intends to create a trust of the whole or part of his property his will, if properly drawn, will direct the executor, after performing the ordinary duties of administration, to make over the estate or such part ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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