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TMI Blog1988 (7) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be divided for distributed among the beneficiaries until the duration of the trust which was to be a period of 15 years or such time as may be determined by the trustees or if extinguished sooner by the beneficiaries unanimously. The beneficiaries were to receive only 1/3rd share of the net interest income each year according to the shares mentioned in the instrument. The trustees were empowered to carry on business and invest the funds of the trust and any loss was to be deducted from the corpus. For the assessment year 1983-84, corresponding to the previous year ended 31-3-1983, the trustees filed a return of income on 22-11-1985 showing an income of Rs. 780 under "Other Sources" in the status of representative assessee of the beneficiaries. They also claimed a refund of tax deducted at source amounting to Rs. 3,75,000 out of a sum of Rs. 15,00,000 received by them as a lottery prize under the U.P. State Lottery Scheme in January, 1983. The I.T.O. was of the opinion that the entire amount received should be treated as income and assessed in the hands of the trustees in the status of "Association of Persons". He thus determined the gross income at Rs. 14,79,204 being net lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of tax on the total income unaffected by the circumstance that such total income belonged to several beneficiaries having definite shares. But courts elucidated the correct principle underlying the representative assessment, viz. that the primary liability for payment of tax was that of the beneficiary and that the assessability of representative trustee was only a vicarious liability designed to facilitate collection, since the representative is the person ordinarily handling the income of the beneficiary. (See CIT v. Balwantrai Jethalal Vaidya [1958] 34 ITR 187 (Bom) and A. W. Williams v. M.G. Singer 7 TC 387 (HL). Thereafter, the Law Commission in its 12th Report at pages 425 and 426 recommended as under :--- "Law Commission's 12th Report, pages 425, 426 : "Persons liable as representative assessees, especially the trustees, guardian or manager (i.e., the assessees governed by existing sections 40 and 41) are at present, liable to be charged directly under section 3 also. In any case, the absence of a specific provision lends support to the opinion expressed by some commentators that the Act leaves an option with the Department to assess the trustee, etc. either under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red and rejected by the High Courts. In the case of Trustees of Putlibai R.F.Mulla Trust v. CWT [1967] 66 ITR 653, the Bombay High Court pointed out that there is no difference between income-tax and wealth-tax with regard to the question whether the share of the beneficiary is determinate or not. The Madhya Pradesh High Court has pointed out in the case of CIT v. Karelal Kundanlal Trust [1984] 148 ITR 412 that the legal position is now well-settled in the light of the pronouncement of the Supreme Court that it is no longer open to the department to levy a tax on the trustee in the same way as on an assessee who does not fulfil the character of a trustee. The cases relied on by the revenue such as Mahanth Ramswaroop Das v. State of Bihar [1961] 42 ITR 770 (SC) and Aggarwal Chamber of Commerce Ltd. v. Ganpat Rai Hira Lal [1958] 33 ITR 245 (SC) to show that a representative assessee can be independently assessed refer to other representatives such as an agent of the non-resident when the non-resident cannot be reached and do not apply to cases of a trust. Similarly, the decisions of the Tribunal in the case of Mrs. A.V. Rajani Reddy v. ITO [1985] 11 ITD 1 (Hyd.) and Dharamdas Hargova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property vests in him as such and the beneficiary has only a right against the trustee as owner of the trust property. The trustee no doubt holds the trust property for the benefit of the beneficiaries but he does not hold it on their behalf. The expressions "for the benefit of" and "on behalf of" are not synonymous and convey different meanings : the former connotes a benefit which is enjoyed by another thus bringing in a relationship as between a trustee and a beneficiary or cestui que trust ; the latter connotes an agency which brings about a relationship as between principal and agent between the parties, one of whom is acting on behalf of another." The Supreme Court has no doubt explained in the case of CWT v. Kripashankar Dayashanker Worah [1971] 81 ITR 763 that this distinction may not apply to assets held by the trustee because Parliament while enacting section 21(2) of the Wealth-tax Act, 1957, proceeded on the basis that for the purposes of that Act the trustee is holding the trust property on behalf of the beneficiaries. But we do not find such a departure from the general concept enunciated by the Supreme Court in the case of W. O. Holdsworth, extracted above, in se ..... 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