1968 (11) TMI 36 - HC - Income Tax

U.P. Agricultural Income-tax Act, 1948 - On the death of the Raja, the Court of wards entered into the management of the estate on behalf of his widow - Collector took assessment proceedings against the Court of wards for the assessment of the agricultural income of the estate for the year 1359 - held that assessment order u/s 16(3), U.P.Agrl. IT Act, in respect of the agricultural income of the year 1359 Fasli could not be made against the receiver

Issues Involved:

1. Liability of the receiver for the agricultural income of the estate for the year 1359 Fasli.
2. Interpretation and application of the U.P. Agricultural Income-tax Act, 1948, specifically sections 3, 4, 11, 12, 15, and 16.
3. The concept of "representative assessee" under taxation laws.
4. The legal principle of taxing the person who receives the income.

Detailed Analysis:

Issue 1: Liability of the receiver for the agricultural income of the estate for the year 1359 Fasli

The primary question was whether the assessment order under section 16(3) of the U.P. Agricultural Income-tax Act for the agricultural income of the year 1359 Fasli could be made against the receiver, Gauri Shanker Sahi. The court concluded that Gauri Shanker Sahi was not liable for the assessment because he was not the receiver during the year 1359 Fasli. The court of wards was in possession and management of the estate during that year and received the income arising from it. Therefore, the court of wards or the person on whose behalf it received the income could be assessed, but not Gauri Shanker Sahi.

Issue 2: Interpretation and application of the U.P. Agricultural Income-tax Act, 1948

The court examined the relevant sections of the U.P. Agricultural Income-tax Act, 1948, to determine the liability for agricultural income-tax. Section 3 charges agricultural income-tax on the total agricultural income of the previous year of every person. Section 4 specifies that the tax is payable by a person whose total agricultural income of the previous year exceeds Rs. 4,200. Section 11(2) states that in the case of agricultural income received by the Court of Wards, the tax shall be levied upon and recoverable from such Court of Wards in the same manner and to the same extent as would be leviable upon and recoverable from any person on whose behalf such agricultural income is received. The court emphasized that the person to whom the income accrues or by whom it is received in the previous year is liable to be assessed.

Issue 3: The concept of "representative assessee" under taxation laws

The court discussed the concept of "representative assessee" and its application under taxation laws. Provisions such as sub-sections (1) and (2) of section 11 of the U.P. Agricultural Income-tax Act are enabling sections that allow the revenue to make an assessment on the representative assessee instead of directly on the person beneficially entitled to the income. This concept is also found in sections 160 and 161 of the Income-tax Act, 1961. The court highlighted that the assessment could be made on the representative assessee who receives or controls the income, facilitating the ready and convenient assessment and collection of tax.

Issue 4: The legal principle of taxing the person who receives the income

The court reiterated the principle that the liability to pay tax is primarily on the person who receives the income, profits, or gains rather than on the ownership or enjoyment thereof. This principle was supported by references to judicial precedents, including the Supreme Court's decision in Executors of Estate of Dubash v. Commissioner of Income-tax and the Bombay High Court's decision in Court Receiver v. Commissioner of Income-tax. The court concluded that since Gauri Shanker Sahi was not the receiver during the relevant year and did not receive the income, he could not be assessed for the agricultural income of the year 1359 Fasli.

Conclusion:

The court answered the question in the negative, holding that the receiver, Gauri Shanker Sahi, was not liable to assessment in respect of the agricultural income of the year 1359 Fasli. The receiver was entitled to his costs, assessed at Rs. 150, with counsel's fee assessed in the same figure.

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