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TMI Blog1983 (7) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... ' ; and 3. for the assessment years 1969-70 to 1971-72 in the name of 'The Sangli Bank Ltd., Sangli successor to and on behalf of the merged Bank of Poona Investors Ltd.' and for the assessment years 1973-74 to 1975-76 in the name of 'The principal officer, Sangli Bank Ltd., Sangli successor to and on behalf of the merged Bank of Poona Investors Ltd.' " The contentions raised in all these appeals are identical. They have been argued together. They are, therefore, consolidated for the sake of convenience and disposed of by this common order. 2. In order to appreciate the grievances of the assessee in these appeals, it would be useful to posit certain basic questions so that the background of facts and the context in which the dispute between the department and the assessee has arisen may become clear. Firstly, the question to be asked in our view is, what income is sought to be assessed ? The second question is, in whose hands is the income assessable ? and thirdly, whether the proceedings taken by the ITO to make the impugned assessments are legal and valid ? Bearing these questions in mind, we may now proceed to narrate the facts in detail. 3. The Reserve Bank of India mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof or as otherwise appropriate, the security shall be valued at such an amount as is considered reasonable having regard to the instalment of principal and interest remaining to be paid, the period during which such instalments are payable, the yield of any security issued by the Government to which the security pertains and having the same or approximately the same maturity, and other relevant factors. (c) Where the market value of any security, share, debenture, bond or other investment is not considered reasonable by reason of its having been affected by abnormal factors, the investment may be valued on the basis of its average market value over any reasonable period. (d) Where the market value of any security, share, debenture, bond or other investment is not ascertainable only such value, if any, shall be taken into account as is considered reasonable, having regard to the financial position of the issuing concern, the dividends paid by it during the preceding five years and other relevant factors. (e) Premises and all other immovable properties and any assets acquired in satisfaction of claims shall be valued at their market price. (f) Furniture and fixtures, station ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in full. (b) In respect of every savings bank account or current account or any other deposit including a fixed deposit, cash certificate, monthly deposit, deposit payable at call or short notice or any other deposit by whatever name called with the transferor bank, including interest to the extent payable under this scheme, the transferee bank shall open with itself on the prescribed date a corresponding and similar account in the name of the respective holder(s) thereof with a balance equal to the amount or the sum total of the amounts mentioned below, namely : (i) in the first place a sum of two hundred and fifty rupees or the balance in the account whichever may be less, less the amount, if any, paid during the period of moratorium, provided that the sum total of the amounts credited in terms of this sub-clause in respect of the accounts standing in the name of any one person, and not jointly with that of any other person, shall not exceed two hundred and fifty rupees, less the amount, if any, paid during the period of moratorium. (ii) in the next place the pro rata share available in respect of each of the accounts out of the assets referred to in paragraph (4) as value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as 'Advances considered not readily realisable and/or bad or doubtful of recovery', or which are or may be realisable wholly or partly after the prescribed date in terms of paragraph (4) above, take all available steps having regard to the circumstances of each case to demand and enforce or obtain payment, provided, however, that if the amount of the debt exceeds Rs. 5,000 the transferee bank shall not except with the approval of the Reserve Bank of India : (a) enter into a compromise or arrangement with the debtor or any other person, (b) sell or otherwise dispose of any securities transferred to it ; (iii) the transferee bank shall in addition take all available steps having regard to the circumstances of each case to demand and enforce the payment of the amounts, if any, awarded as damages by the High Court against any promoter, director, manager or other officer of the transferor bank under section 45L of the Banking Companies Act read with section 45H thereof and also with section 543 of the Companies Act, 1956 ; (iv) the transferee bank may, out of the realisations effected by it on account of the items mentioned in clauses (i), (ii) and (iii) above, make payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the share as determined by the Reserve Bank of India, the transferee bank shall allot to the extent possible and disburse in cash the balance, if any, of the amount raised may be due ; (b) if the conditions mentioned in sub-clause (a) above are not fulfilled, the transferee bank shall disburse the amount in cash: Provided further that--- (a) the allotment of the shares or the payments aforesaid shall in each case be made before the end of six months from the date on which notice of the payment falling due is deemed to have been served in accordance with the provisions of this scheme, and (b) the share capital of the transferee bank shall be deemed to have been increased and it shall also be lawful for the transferee bank to issue the shares in the manner and to the extent specified for the purposes of this scheme ; (vi) the amounts due to the collection accounts referred to in this paragraph shall be deemed to be a liability of the transferee bank only to the extent provided for in this scheme ; (vii) on the expiry of twelve years from the prescribed date or such earlier period as the Central Government after consulting the Reserve Bank of India may specify for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essments were made by orders dated 8-3-1978. These assessments were made in the name of 'The Sangli Bank Ltd., Sangli, legal representative/executor or manager on behalf of the shareholders of Bank of Poona Ltd., Sangli', the status taken as AOPs. The order for the assessment year 1965-66 was set aside in appeal by the Commissioner (Appeals) on 13-2-1979 with directions to the ITO to assess the bank as a trust in the status of 'artificial juridical person'. The order for 1966-67 was also set aside by the AAC following the order of the Commissioner (Appeals). Against these orders, the assessee came up in appeal before the Tribunal, but these appeals were rejected by confirming the orders of the first appellate authority. This order of the Tribunal is dated 3-6-1980. The reference applications moved by the assessee against this order were also rejected. Thus, so far as the assessment years 1965-66 and 1966-67 are concerned, the ITO had to follow the directions of the first appellate authorities to assess the bank in the capacity of a trust. Then came the aforesaid set of proceedings for the assessment years 1967-68, 1969-70, 1970-71 and for the years 1972-73 to 1975-76 which are chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quoted the following passage from B.K. Mukherjee, J. in his Tagore Law Lectures, The Hindu Law Religious and Charitable Trust : " You will see that the 'trust' in its original was a highly artificial thing which had its foundation upon a dual system of law and a dual system of property which came into existence in England under peculiar political and historical conditions. You could not possibly expect to find a trust in this form in the Hindu system. But the existence of dual ownership is not an essential ingredient in the conception of trust and if you take 'trust' in its broad and general sense as signifying a fiduciary relation under which a person in possession of or having control over any property is bound to use that property for the benefit of certain persons or specified objects. Obviously there are trusts in Hindu law. A shebait in charge of a temple, or a mohant having control over a religious institution, would be a trustee in this general sense. " [Emphasis supplied] Further, as for the meaning to be given to the term 'trustee', their Lordships observed on the same page : " That the word 'trustee' is used in the larger sense in the said Act is clear from the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omission on the part of the assessee to file returns of income since on the ITO's own showing, no income for the years in question arose to the Sangli Bank Ltd. as successor to merged banks. 8. Indeed, there can be no quarrel whatever with Shri S.E. Dastur's contention that the interest income which is sought to be assessed was not and could not be the income of the merged banks. With effect from the prescribed date which in the case of Phaltan Bank Ltd. was 7-10-1961 and similarly for the other two banks, all the three banks were amalgamated with the Sangli Bank Ltd. and no question thereafter could arise of income arising to these amalgamating banks. Therefore, if the ITO sought by the notices which he issued under section 148 to assess the income of the merged banks in the hands of the Sangli Bank Ltd., such notices would have to be held as misconceived. However, the question we may ask ourselves is whether by the mere fact that a certain description was given by the ITO in the impugned notices to the Sangli Bank Ltd., that description has to be understood and interpreted as so vitiating those notices as to make them utterly illegal and invalid. We do not read these notices in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary as such, but the person in actual receipt and control of the income, which it is sought to reach. " The dictum proceeds : "...The object of the Acts (Income-tax) is to secure for the State a proportion of the profits chargeable, and this end is attained (speaking generally) by the simple and effective expedient of taxing the profits where they are found. If the beneficiary receives them, he is liable to be assessed upon them. If the trustee receives and controls them, he is primarily so liable. . . ." These principles as the learned authors Kanga and Palkhivala, observed at page 949 of their commentary on The Law Practice of Income-tax, Volume 1, 7th edition, would apply with equal force under the Act and they underlie the provisions of sections 160 to 167 of the Act. If the intent and purpose of the Act is to be understood in the context of the present cases, obviously that intent and purpose would be to assess the Sangli Bank Ltd. in respect of the interest income accruing on the collection accounts as trustee for the beneficiaries of those accounts as laid down in the three schemes. The Sangli Bank Ltd., therefore, was rightly held by the ITO in terms of the notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47. If the notice is issued to a wrong person and it is Shri S.E. Dastur's contention that such is the case before us since the Sangli Bank Ltd. has been named in the notice as successors to and on behalf of the merged banks, such a notice cannot be saved by the provisions of section 292B. We do not find merit in this contention. As we have discussed above, our finding is that the notices in question were issued to the proper person, i.e., the Sangli Bank Ltd. and it is only in the description that the mistake was committed by the ITO which he corrected in the assessment proceedings by taking the status of the assessee as trustee for the shareholders of the merged banks. In our view, it is precisely this kind of defect in a notice against which the proceedings instituted thereby are saved if the notice is in substance and effect in conformity with or according to the intent and purpose of the Act and that condition, as discussed above, was fully satisfied by the impugned notices. We, therefore, reject the contentions raised on this point by Shri S.E. Dastur. We, therefore, hold that the assessments made by the ITO as valid and legal and confirm the order of the Commissioner (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 164 were at all applicable in the assessee's case, i.e., whether it could be held that the interest payable on the collection accounts was not specifically receivable on behalf or for the benefit of any person or that the individual shares of the beneficiaries were indeterminate or unknown. We find that the schemes in terms of which the three banks were merged with the Sangli Bank Ltd. set out clear and detailed provisions as to what amounts were to be paid out to the beneficiaries, i.e., the depositors and shareholders of the merged banks with which we are concerned with reference to the interest payable on the collection accounts. So far as the identity of the beneficiaries is concerned, it would be futile to hold that there could be any doubt ; all the depositors and shareholders of the merged banks were certainly known. As regards their shares, we have only to refer to the relevant provisions of the scheme to ascertain that they were well defined and determinate. We have already noted in the earlier portion of this order that under clause (6) the Sangli Bank Ltd. was required to open a collection account for the depositors and the shareholders of the merged banks enter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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