1965 (9) TMI 8 - HC - Income Tax

ITO assessed the income arising out of the debutter properties in the hands of the P as shebait - Whether the income of property could not be assessed in the hands of the shebait under s. 9 of the IT Act 1922

Issues Involved:
1. Whether a Hindu deity can be assessed for income tax under the Income-tax Act, 1922.
2. Whether a shebait (manager of a deity's property) can be assessed under section 41 of the Income-tax Act, 1922, for the income of the deity.
3. Whether the procedural requirements for filing tax returns apply to Hindu deities.

Detailed Analysis:

1. Assessing a Hindu Deity for Income Tax:
The primary issue was whether a Hindu deity could be considered an "individual" under section 3 of the Income-tax Act, 1922. The charging section, section 3, specifies that tax shall be charged on the total income of every individual, Hindu undivided family, company, local authority, firm, and other association of persons or their members individually. The court noted that the term "individual" is not defined in the Act, but it has been held that the term can include a juristic person, such as a Hindu deity. The court referenced the Supreme Court decision in Commissioner of Income-tax v. Smt. Sodra Devi, which clarified that "individual" does not necessarily mean a human being and can include entities like corporations or trustees. Therefore, the court concluded that a Hindu deity could be considered an "individual" for the purposes of income tax assessment.

2. Shebait's Liability under Section 41:
Another significant issue was whether a shebait could be assessed under section 41 of the Income-tax Act, 1922, for the income of the deity. Section 41 deals with the liabilities of trustees and other persons managing property on behalf of another. The court held that the term "trustee" in section 41 should be interpreted broadly to include a shebait. This conclusion was supported by the Supreme Court decision in Aggarwal Chamber of Commerce Ltd. v. Ganpat Rai Hiralal, which emphasized that the person in actual receipt and control of the income should be taxed. Additionally, the court cited the Privy Council decision in In re Trustees of the Tribune, which stated that the term "trust" includes Hindu endowments. Therefore, the court concluded that a shebait managing the property of a Hindu deity could be assessed under section 41.

3. Procedural Requirements for Filing Tax Returns:
The procedural issue involved whether the return of total income required under the Act could be appropriately filed by a Hindu deity. The court examined the prescribed forms under the Indian Income-tax Rules, 1922, which require the return to be signed by the individual. The court referenced the Supreme Court decision in Commissioner of Agricultural Income-tax v. Sri Keshab Chandra Mandal, which held that a return must be signed by the individual himself when the statute requires a personal signature. However, the court pointed out that a Hindu deity, being a juristic person, cannot sign a return personally. Therefore, the shebait, who manages the deity's property and income, should sign the return on behalf of the deity. The court concluded that the signature of the shebait should be considered the signature of the deity, thereby satisfying the procedural requirements.

Conclusion:
The court dismissed the appeals, holding that:
1. A Hindu deity can be assessed for income tax as an "individual" under section 3 of the Income-tax Act, 1922.
2. A shebait can be assessed under section 41 for the income of the deity.
3. The procedural requirements for filing tax returns can be fulfilled by the shebait signing on behalf of the deity.

The court's decision clarified that the Income-tax Act, 1922, provided a mechanism for taxing the income of Hindu deities through their shebaits, thereby affirming the applicability of income tax to such entities. The appeals were dismissed with costs, and the interim order was vacated with a stay on the operation of the order for two months.

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