1957 (9) TMI 2 - SC - Income Tax

Whether on the facts and in the circumstances of the case the trustees can be said to be holding land on behalf of beneficiaries and can the beneficiaries be said to be jointly interested in the land or in the agricultural income derived therefrom within the meaning of section 11(1) of the U.P Agricultural Income-tax Act, 1948 ? Held that - The learned Judges of the High Court were therefore in error in answering the first part of the question referred to them in the affirmative, though their answer to the latter part in the negative was correct. We are of opinion that both the parts of the question should have been answered by them in the negative. The ultimate result however is the same and this appeal of the appellants is therefore bound to fail. Appeal dismissed.

Summary

Issues Involved:
1. Interpretation of Section 11(1) of the U.P. Agricultural Income-tax Act, 1948.
2. Whether trustees hold land on behalf of beneficiaries.
3. Whether beneficiaries are jointly interested in the land or agricultural income derived therefrom.

Issue-wise Detailed Analysis:

1. Interpretation of Section 11(1) of the U.P. Agricultural Income-tax Act, 1948:

Section 11(1) of the Act deals with the mode of computation of agricultural income-tax in specific cases. It states that when a person holds land from which agricultural income is derived as a common manager, receiver, administrator, or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income-tax by each person on the agricultural income derived from such land and received by him shall be assessed on such common manager, receiver, administrator, or the like. This section is designed to lower the incidence of agricultural income-tax by assessing the tax based on the aggregate sums payable by each person jointly interested, rather than the total income received by the common manager, receiver, administrator, or the like.

2. Whether trustees hold land on behalf of beneficiaries:

The judgment clarifies that trustees do not hold the land on behalf of the beneficiaries but hold it in their own right, though for the benefit of the beneficiaries. The court emphasized that the terms "for the benefit of" and "on behalf of" are not synonymous. The former implies a benefit enjoyed by another, creating a relationship similar to that between a trustee and a beneficiary, while the latter implies an agency relationship, akin to that between a principal and an agent. Therefore, trustees are the legal owners of the trust property and do not hold it as agents or representatives of the beneficiaries.

3. Whether beneficiaries are jointly interested in the land or agricultural income derived therefrom:

The term "jointly interested" implies an undivided interest in the land or agricultural income derived therefrom, as opposed to a separate or individual interest. The court found that the interest created in the beneficiaries under the deed of trust was separate or individual for each beneficiary, not joint. Each annuitant had a distinct interest in the agricultural income to the extent of the annuity payable to them, unaffected by the interests of other annuitants. Consequently, the beneficiaries were not jointly interested in the land or the agricultural income derived therefrom.

Conclusion:

The court concluded that the appellants, as trustees, did not hold the land from which agricultural income was derived as common managers, receivers, administrators, or the like on behalf of the annuitants. Additionally, the annuitants were not jointly interested in the land or the agricultural income derived therefrom. Therefore, Section 11(1) of the U.P. Agricultural Income-tax Act, 1948, did not apply. The High Court's judgment was partially incorrect in affirming that trustees held the land on behalf of beneficiaries, but correct in stating that beneficiaries were not jointly interested in the land or agricultural income. The appeal was dismissed with costs.