1964 (4) TMI 111 - HC - Income Tax

Summary

Issues Involved:
1. Validity of assessments for the years 1948-49, 1949-50, and 1950-51.
2. Exemption of income under section 4(3)(i) of the Indian Income-tax Act, 1922.

Detailed Analysis:

Issue 1: Validity of Assessments for the Years 1948-49, 1949-50, and 1950-51

The court examined whether the assessments made on the court receiver for the years 1948-49, 1949-50, and 1950-51 were valid. The dispute arose from the income received by the estate of Haji Alimohamed Haji Cassum, who died on November 6, 1946, leaving a will dated November 30, 1934. The will appointed certain executors and trustees. Disputes among the heirs led to the appointment of private receivers by the court on July 15, 1949, and later a court receiver on June 30, 1950.

The court receiver contended that the income for the relevant years was received by the executors and private receivers, not by the court receiver, making the assessments invalid. The Tribunal had rejected this contention, holding that there was continuity in the office of the receiver, and the change of incumbents did not alter the position.

The court disagreed with the Tribunal, stating that the continuity in the office of the receiver does not imply that the court receiver is liable for income received by others. The court emphasized that the Income-tax Act imposes tax on the person who actually received the income during the relevant accounting year. The court cited Asit Kumar Ghose v. Commissioner of Agricultural Income-tax, which held that the income received by executors cannot be assessed in the hands of a subsequent receiver.

Conclusion: The court held that the assessments made on the court receiver for the years 1948-49, 1949-50, and 1950-51 were invalid as the income was not received by the court receiver during those years.

Issue 2: Exemption of Income under Section 4(3)(i) of the Indian Income-tax Act, 1922

The court examined whether 1/3rd of the income from the estate was exempt under section 4(3)(i) of the Act, which exempts income held under trust or legal obligation for charitable purposes. The will directed that 1/3rd of the remaining property be set apart for specific charitable purposes.

The Tribunal had found that the administration of the estate was not complete, and therefore, no trust or legal obligation had emerged. The court, however, disagreed, stating that the completion of administration is not a universal condition for the emergence of a trust. The court emphasized that the intention to create a trust, the trust property, the purpose, and the beneficiaries must be established.

The court found that the executors had assented to hold 1/3rd of the property for the benefit of the beneficiaries under the will, creating a trust or legal obligation. The court also examined the purposes mentioned in sub-clauses (a) to (f) of clause 4 of the will and found them to be charitable or religious.

Conclusion: The court held that the 1/3rd share of the property required to give effect to the dispositions in sub-clauses (a) to (f) of clause 4 of the will was held under a trust or legal obligation for charitable purposes and was thus exempt under section 4(3)(i) of the Act.

Final Judgment:

First Issue: The assessments made on the court receiver for the years 1948-49, 1949-50, and 1950-51 were invalid.

Second Issue: The 1/3rd share of the property required to give effect to the dispositions in sub-clauses (a) to (f) of clause 4 of the will was held under a trust or legal obligation for charitable purposes and was exempt under section 4(3)(i) of the Act.