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Issues Involved:
1. Application of Section 33B of the Indian Income-tax Act, 1922. 2. Applicability of Section 10(1) versus Section 41 of the Indian Income-tax Act, 1922, for assessing the profits and gains of the business carried on by the trustee. Issue-wise Detailed Analysis: Issue 1: Application of Section 33B of the Indian Income-tax Act, 1922 The first issue concerns whether the provisions of Section 33B were rightly applied by the Commissioner of Income-tax. The facts reveal that the Income-tax Officer initially assessed the income under Section 23(3) read with Section 41, dividing the income into four equal shares among the trustee and his three brothers. However, the Commissioner canceled this order under Section 33B and directed a fresh assessment on the trustee as an individual under Section 10(1). The applicant's counsel conceded that this question should be answered in the affirmative and against the assessee. Therefore, the court did not delve deeply into this issue, implicitly affirming the Commissioner's application of Section 33B. Issue 2: Applicability of Section 10(1) versus Section 41 of the Indian Income-tax Act, 1922 The second issue revolves around whether the profits and gains of the business carried on by the trustee should be assessed under Section 10(1) in the hands of the trustee as an individual or under Section 41 as an association of persons. Arguments by the Applicant's Counsel: The applicant's counsel argued that Section 10(1) is generally controlled by the special provisions of Section 41. He contended that the liability of the trustee should be measured by the liability of each beneficiary, with assessments made at individual rates applicable to each beneficiary's total income. He relied on the decision in Official Trustee of West Bengal v. Commissioner of Income-tax [1954] 26 ITR 410. Arguments by the Revenue: The revenue's counsel countered by citing the Supreme Court's ruling in W.O. Holdsworth v. State of Uttar Pradesh [1958] 33 ITR 472, arguing that a trustee is the owner of the property and holds it "for the benefit" of the beneficiaries, not "on their behalf." Thus, the trustee should be assessed as an individual under Section 10(1). Court's Analysis: The court examined the provisions of Section 41 and the Supreme Court's decision in Holdsworth's case. It noted that Section 41 specifically includes trustees and provides that the tax should be levied in the same manner and amount as it would be on the beneficiaries. The court distinguished between the language of Section 41 of the Indian Income-tax Act and Section 11(1) of the U.P. Agricultural Income-tax Act, noting several differences: - Section 41 explicitly includes trustees. - Section 41 involves income, while Section 11(1) deals primarily with land. - Section 41 allows for direct assessment of beneficiaries, which is absent in Section 11(1). The court also referred to other Supreme Court decisions, including Commissioner of Income-tax v. Puthiya Ponmanichintakam Wakf [1962] 44 ITR 172 (SC) and Commissioner of Income-tax v. Manilal Dhanji [1962] 44 ITR 876 (SC), which supported the view that trustees could be assessed under Section 41. In the present case, the shares of the beneficiaries were determinate, and the income should be assessed separately for each beneficiary. Therefore, the court concluded that Section 41 was applicable, and the assessment should be made as a separate assessment for each person on whose behalf the income is received. Conclusion: - Question 1: Not pressed and needs no answer. - Question 2: The first part is answered in the negative, and the second part is answered in the affirmative. The provisions of Section 41 were applicable, and the assessment should be made as a separate assessment for each beneficiary. There was no order for costs in this reference.
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