1961 (4) TMI 125 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 41 of the Income-tax Act to the assessee.
2. Status and role of the managing trustees of Nagore Durgah.
3. Interpretation of the scheme framed by the court regarding the appointment of managing trustees.
4. Distinction between a trustee and a manager under Section 41 of the Act.

Detailed Analysis:

1. Applicability of Section 41 of the Income-tax Act to the assessee:
The core issue addressed in the judgment is whether Section 41 of the Income-tax Act applies to the managing trustees of Nagore Durgah. The court examined the historical context and the status of the trustees, noting that the Durgah is managed by hereditary trustees called nattamaigars. The surplus income, after application for the purposes of the Durgah, is distributed among the kasupangudars. The court highlighted that up to the assessment year 1952-53, the surplus income was assessed in the hands of the trustees as an "association of persons." However, for the assessment years 1953-54 and 1954-55, the assessee contended that the assessment should be made under Section 41, which was rejected by the Income-tax Officer, Appellate Assistant Commissioner, and the Tribunal.

2. Status and role of the managing trustees of Nagore Durgah:
The court elaborated on the status and role of the managing trustees, emphasizing that the management and administration of the Nagore Durgah were vested hereditarily in the eight trustees or nattamaigars. The scheme framed by the court allowed for the election of one among the trustees as the managing trustee. The managing trustee's responsibilities included receiving gifts intended for the Durgah, maintaining accounts, preparing a balance sheet, and declaring the amount due to each kasupangudar.

3. Interpretation of the scheme framed by the court regarding the appointment of managing trustees:
The court analyzed the relevant clauses of the scheme, particularly the clause allowing the trustees to appoint one or two of them as the managing trustee. The court concluded that this appointment, made under the scheme framed by the court, should be regarded as an appointment made under the order of the court. The court rejected the department's contention that the clause was merely permissive and that the property vested in the trustees, not the managing trustee.

4. Distinction between a trustee and a manager under Section 41 of the Act:
The court examined the distinction between a trustee and a manager, noting that while a trustee holds the property, a manager does not. The court referred to the decision in Trustees, Nagore Durgah v. Commissioner of Income-tax [1954] 26 ITR 805 (Mad.), which differentiated between a public trust and a private trust for the benefit of the kasupangudars. The court concluded that the managing trustee, who manages the surplus income on behalf of the kasupangudars, falls within the scope of Section 41 as a manager appointed under an order of the court.

Conclusion:
The court held that Section 41 applies to the managing trustees of Nagore Durgah, as their appointment is made under the order of the court. The court emphasized that the managing trustee, who manages the surplus income on behalf of the kasupangudars, is liable to be assessed under Section 41. The court answered the question in the affirmative and in favor of the assessee, entitling the assessee to costs.