1937 (1) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 9 of the Indian Income Tax Act, 1922, to the Official Assignee.
2. Applicability of Section 41 of the Indian Income Tax Act, 1922, to the Official Assignee.
3. Determination of the Official Assignee's liability for income tax on properties vested in him under the Presidency Towns Insolvency Act, 1909.

Issue-wise Detailed Analysis:

1. Applicability of Section 9 of the Indian Income Tax Act, 1922, to the Official Assignee:
The primary issue was whether the Official Assignee could be considered the "owner" of the property under Section 9 of the Indian Income Tax Act, 1922. The Commissioner of Income Tax argued that the Official Assignee, by virtue of the property vesting in him under the Presidency Towns Insolvency Act, 1909, became the owner of the property. Consequently, tax should be payable by the Official Assignee in respect of the bona fide annual value of the property.

The court held that the property vested in the Official Assignee did not change its taxable character. The house properties, which were the subject of the assessment, continued to generate income based on their bona fide annual value, irrespective of whether they were owned by the insolvent or vested in the Official Assignee. The court concluded that the Official Assignee was indeed the owner of the property within the meaning of Section 9, thus making him liable for assessment.

2. Applicability of Section 41 of the Indian Income Tax Act, 1922, to the Official Assignee:
The Commissioner of Income Tax also based his opinion on Section 41, which deals with income received by certain officers, including the Official Assignee. According to Section 41, tax shall be levied upon and recoverable from such officers in the same manner as it would be from any person on whose behalf the income is received.

The court observed that while the Commissioner of Income Tax considered Section 41 applicable, it was not necessary to rely on this section if Section 9 alone sufficed to make the Official Assignee liable for assessment. Since the court had already determined that the Official Assignee was the owner under Section 9, it did not delve deeply into the applicability of Section 41, although it acknowledged that the Official Assignee could be seen as managing property on behalf of another.

3. Determination of the Official Assignee's liability for income tax on properties vested in him under the Presidency Towns Insolvency Act, 1909:
The court examined whether the income derived from the properties vested in the Official Assignee should be subject to income tax. The Official Assignee contended that the properties, once vested in him, ceased to have the same taxable quality. However, the court disagreed, stating that the properties' taxable nature remained unchanged, and the income derived from them remained subject to taxation.

The court referenced the case of "Commissioners of Inland Revenue v. Fleming," which held that income from sequestrated estates vested in a trustee was the trustee's income and not the bankrupt's. Applying this principle, the court concluded that the income from the properties vested in the Official Assignee was his income for tax purposes and thus subject to assessment.

Conclusion:
The court affirmed that the Official Assignee was liable to be assessed under Section 9 of the Indian Income Tax Act, 1922, as the owner of the property. Consequently, the assessment made by the Income Tax Officer was upheld. The court did not find it necessary to consider the applicability of Section 41 in detail, given the sufficiency of Section 9 in establishing the Official Assignee's liability. The reference was answered accordingly, with no order as to costs.