TMI Blog1962 (5) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... or maintenance of his sons and carried on the business as a trustee at Hogg Market, Calcutta, which is the subject-matter of the present reference. The said business was intended to be and actually carried on for the benefit of the assessee himself and his other three brothers in equal shares. On March 15, 1941, the said Baborally appointed the assessee as a new trustee in pursuance of the terms of the said deed of 1937. Baborally died in June, 1941. We are concerned here with the three assessment years, viz. , the years 1951-52, 1952-53 and 1953-54- The Income-tax Officer assessed the income under the provisions of section 23(3) read with section 41 of the Income-tax Act dividing the income into four equal shares, viz., of the assessee and of his three brothers, as stated above, for the purpose of taxation. The Commissioner cancelled the order of the Income-tax Officer under the provisions of section 33B of the Income-tax Act and directed that a fresh assessment should be made on the assessee in the status of an individual, inter alia, holding that the tax should be payable by the assessee under the provisions of section 10(1) of the Act relying on the observations of Saijud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same for the benefit of the beneficiaries and not on their behalf , the word trustee, wherever appearing in the said section 41, should be deemed to be non est, that is to say, goes out of the said section. According to him, a trustee in section 41 cannot, on the basis of the said Supreme Court decision, receive the income on behalf of the beneficiaries. In other words, when a trustee is the owner of the property, i.e., business, in the instant case, then the income out of the same must be his and he should be assessed as such. To appreciate the argument of Mr. Meyer and the effect of the said Supreme Court decision the provisions of section 41 of the Income-tax Act are set out below: Section 41. (1) In the case of income, profits, or gains chargeable under this Act which the Courts of Wards, the Administrator-General, the official trustee or any receiver or manager (including any person whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a court, or any trustee or trustees appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including the trustee or tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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. In dealing with the said section of the U.P. Act their Lordships of the Supreme Court (Bhagwati, S.K. Das and Gajendragadkar JJ.) considered the expression trust and trustee and referred to both English and Indian laws and ruled that the legal estate is vested in the trustee who held it for the benefit of the beneficiaries and not on their behalf , because the said two expressions are not synonymous and conveyed different meanings. In my view, the language of section 11(1) of the U.P. Act and section 41 of the Income-tax Act are really different and the following points of difference arise: (a) The word trustee is not there in section 11(1) of the U.P. Act. (b) The words in the like manner and to the same amount would be leviable , etc., appearing in section 41 of the Income-tax Act are absent in section 11(1) of the U.P. Act. (c) Section 11(1) of the U.P. Act contains a deeming provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a trustee whereas there were no express words to that effect in section 11(1) of the U.P. Agricultural Income-tax Act, 1948. The language used in section 41 of the Indian Income-tax Act is very different from that used in section 11 of the U.P. Agricultural Income-tax Act, 1948. Though a trustee may not hold trust properties on behalf of the beneficiaries, he may be entitled to receive the income of the trust properties in his representative character as a trustee on behalf of the beneficiaries. Mr. Meyer contended that the above observation made by his Lordship, Bachawat J., to the effect that, though the trustee might not hold the properties on behalf of the beneficiaries, still he might be entitled to receive the income of the trust properties in his representative character as a trustee on behalf of the beneficiaries, is an observation difficult to follow and cannot be reconciled. We need not express any opinion as to whether that is so or not, but for the purpose of this case it is sufficient when we say that the principles and the ratio enunciated in the said decision of the Supreme Court are not applicable to the facts of the present case. In another decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee as a trustee in respect of the said sum at the maximum rate, because the individual shares of the beneficiaries on whose behalf the money was receivable were indeterminate and not known. On a reference, the High Court accepted the contention of the assessee against which the department took the appeal to the Supreme Court. We are not concerned here with the other main questions that were decided by their Lordships of the Supreme Court in the said decision, but it would be profitable to quote below the observations of their Lordships on section 41 of the Income-tax Act with which we are concerned in the instant case. S.K. Das J., who delivered the judgment on behalf of the court (S.K. Das, Hidayatullah and Shah JJ.), states as follows in the penultimate paragraph of the judgment: Under section 41 of the Income-tax Act it was open to the department either to tax the trustees of the trust deed or to tax those on whose behalf the trustees had received the amount. The true position of the assessee in this case was that he was a trustee and not the sole beneficiary under the trust deed. He held the income of the trust for himself, his wife and his childrenIn respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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