1937 (3) TMI 13 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee and Ramprotap Chamria were managers of the properties appointed by or under any order of a Court within the meaning of Section 41 of the Indian Income Tax Act.
2. Whether the Income Tax Officer acted illegally in assessing the present assessee in respect of his share of the property.

Issue-wise Detailed Analysis:

1. Whether the assessee and Ramprotap Chamria were managers of the properties appointed by or under any order of a Court within the meaning of Section 41 of the Indian Income Tax Act:
The assessee, Keshardeo Chamria, instituted a suit in 1929 for a declaration that he was the validly adopted son of Amloke Chand and entitled to certain properties jointly with Ramprotap. A consent decree in 1930 declared the assessee entitled to half of the joint estate, but the properties were not partitioned. The Official Receiver was appointed in 1930 but was discharged in 1931 by a consent order allowing the assessee and Ramprotap to jointly manage the properties. They were re-appointed as joint managers in 1933, but the Official Receiver only took possession in 1934. The assessee argued that under Section 41, the income from the properties should have been assessed in the hands of the managers, not directly on him.

The Court held that Section 41 applies to income received by a manager appointed by or under a Court order on behalf of another. The Court found that the assessee and Ramprotap were managing the properties on their behalf, not on behalf of another, as they were declared owners of the properties in equal shares by the consent decree. Thus, Section 41 did not apply, and they were not considered managers within its meaning.

2. Whether the Income Tax Officer acted illegally in assessing the present assessee in respect of his share of the property:
The Income Tax Officer assessed the assessee directly for his share of the property income, treating him as the owner. The assessee contended that the income should have been assessed under Section 41. The Court found that the Income Tax Officer was correct in assessing the assessee directly. The Court reasoned that Section 41 is not a charging section but a machinery section, providing an alternative method of assessment. The primary charging section is Section 3, which levies tax on the person whose income it is. Since the assessee was the owner and received his share of the income, he was liable to be taxed directly.

The Court also noted that even if Section 41 were applicable, the assessment would still be on the same income, and the tax would be recoverable from the assessee as one of the joint managers. The Court concluded that the Income Tax Officer acted legally in assessing the assessee directly.

Judgment:
The Court answered the reference by stating that the assessee and Ramprotap were not managers of the properties appointed by or under any order of a Court within the meaning of Section 41 of the Indian Income Tax Act. Consequently, the Income Tax Officer did not act illegally in assessing the assessee in respect of his share of the property. The assessee was ordered to pay the costs of the reference.