1964 (10) TMI 10 - SC - Income Tax

Whether, on the facts and in the circumstances of the case, the assessments on the Administrator-General of West Bengal as an individual and not as representing the shares of the various beneficiaries under the will of the late Raja P. N. Tagore separately was in accordance with law ? Whether, on the facts and in the circumstances of the case, the assessment of the said Administrator-General at the maximum rate was legal ? Held that - Section 41 of the Act is not applicable in the present case as the appellant received the income on his behalf and not on 4 behalf of the five sons of the deceased Raja. In view of the above, the answers to the two questions set out in the beginning of the judgment must be in the affirmative. The appeals are, therefore, dismissed

Issues Involved:
1. Legality of assessing the Administrator-General of West Bengal as an individual rather than representing the shares of various beneficiaries.
2. Legality of assessing the Administrator-General at the maximum rate if the first issue is affirmed.

Detailed Analysis:

1. Legality of Assessing the Administrator-General as an Individual:

The judgment addressed whether the Administrator-General of West Bengal should be assessed as an individual or as representing the shares of the various beneficiaries under the will of the deceased Raja P. N. Tagore. The Administrator-General submitted returns for the assessment years 1950-51 and 1951-52, claiming that the income was specifically receivable on behalf of the five sons of the deceased, with definite and determinate shares.

However, the Income-tax Officer rejected this claim, stating that the Administrator-General was acting as an executor and that the execution of the estate was not yet complete. The Appellate Assistant Commissioner upheld this decision, asserting that tax on the beneficiaries' incomes could only be levied once the administration of the estate was complete and the residue ascertained.

The Appellate Tribunal also rejected the contention, holding that the Administrator-General received the income as a legal representative of the deceased and not on behalf of the beneficiaries. The Tribunal emphasized that tax must be levied at the maximum rate when the income is not specifically receivable on behalf of any beneficiary or when the individual shares are indeterminate or unknown.

The High Court concurred, stating that the Administrator-General, when appointed by the court, is expressly covered by section 41, and the income did not become the sons' property as long as the administration was incomplete. Therefore, the shares of the sons were indeterminate, attracting the maximum tax rate.

The Supreme Court examined whether the Administrator-General received the income on behalf of the five sons or on his behalf during the administration period. It concluded that during the administration of the estate, the Administrator-General did not receive the income on behalf of the five sons. Instead, the income was received for the administration of the estate, and the sons were only entitled to the residue after the administration was complete.

2. Legality of Assessing the Administrator-General at the Maximum Rate:

Given the affirmation of the first issue, the second issue was whether assessing the Administrator-General at the maximum rate was legal. The proviso to section 41(1) of the Indian Income-tax Act, 1922, stipulates that when income is not specifically receivable on behalf of any one person or when individual shares are indeterminate or unknown, tax shall be levied at the maximum rate.

The Supreme Court found that as the administration of the estate was incomplete, the income was not specifically receivable on behalf of the five sons. Therefore, the shares of the sons were indeterminate, and the proviso to section 41(1) was applicable, making the assessment at the maximum rate legal.

Conclusion:

The Supreme Court held that section 41 of the Indian Income-tax Act, 1922, was not applicable in this case as the Administrator-General received the income on his behalf and not on behalf of the five sons. Consequently, the answers to both questions were in the affirmative, and the appeals were dismissed with costs. The assessment of the Administrator-General as an individual and at the maximum rate was deemed in accordance with the law. Appeals dismissed.

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