1970 (4) TMI 10 - SC - Income Tax

Whether the income of the trust properties were not specifically receivable by trustees on behalf of any person - The court shall proceed on the basis that it is a person within the meaning of section 2(9) - case clearly falls within the meaning of s. 41(1) - first proviso to that section is inapplicable to the facts of the case - It cannot be said that the income or profits in question are not specifically receivable by the trustees on behalf of any one person - Revenue s appeal dismissed

Summary

Issues:
1. Interpretation of trust deeds and determination of the sole beneficiary under the trust.
2. Applicability of the first proviso to section 41(1) of the Income-tax Act, 1922 to the income of the trust.

Analysis:
The Supreme Court judgment dealt with appeals arising from certificates granted by the High Court of Calcutta regarding the interpretation of trust deeds under the Indian Income-tax Act, 1922. The main issue revolved around whether there was only one beneficiary, the deity, under the trust as per the deeds executed on specific dates. The High Court affirmed the sole beneficiary status of the deity, rendering the second issue regarding the assessment of trust income at the maximum rate under the first proviso to section 41(1) unnecessary.

The facts established by the Tribunal revealed the intricate family structure of the settlor, including multiple wives and sons. The settlor executed three trust deeds on different dates, designating the deity as the primary beneficiary. The deeds outlined the trustees' roles, the management of trust properties, and the utilization of income for deity-related expenses. The Tribunal concluded that the trustees had no beneficial interest in the trust income, affirming the deity as the sole beneficiary.

The Income-tax Officer initially assessed the trust income at the maximum rate under the first proviso to section 41(1). However, the Appellate Tribunal determined that the trustees held the income on behalf of the deity, precluding the application of the proviso. The Supreme Court upheld this finding, emphasizing that the trustees did not have a beneficial interest in the income and that the deity was considered a "person" under the Act. Therefore, the case fell within the purview of section 41(1) rather than the first proviso.

The Court clarified that the trustees' status as "property" holders and their interest in the trust were irrelevant for the assessment under section 41(1). The critical consideration was whether the income was received by the trustees on behalf of any person, which, in this case, was the deity. Consequently, the appeals were dismissed, with no costs awarded to the respondents. The judgment affirmed the Tribunal's decision regarding the sole beneficiary status of the deity and the inapplicability of the first proviso to section 41(1) to the trust income.