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TMI Blog1937 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... on a total income of ₹ 54,558 as below:-- Rs. Interest on securities 496 Property 28,177 Share in a partnership business 25,850 Other sources 35 In both these cases income under the head 'Property' was computed under section 9 of the Indian Income Tax Act and represented the assessee's share of the bona fide annual value of certain house properties of which the assessee is the owner of 8 annas share, and the question that is being referred affects the assessment only in respect of this income under the head 'Property'. 3. The assessee comes of a Hindu family, the geneological table of which I set out below: Nandram Keshardeo Chamria. Litigation has been going on in the courts for many years between the various members of this family and the facts of this litigation, so far as they are material to this case, are as follows. There was at one time a very prosperous business carried on in the name of Hardutrai Chamria and before his dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective parties are not disputed and the ownership of the actual items of property which has till now been disclosed by the Rai Bahadur and which alone are the subject matter in this assessment is not questioned. The assessee is not satisfied with the assets which have been shown by Ramprotap and he in his different petitions has alleged that the said Ramprotap has other joint properties at his disposal. In that suit by a further order of the court dated 28th July the Official Receiver was appointed Receiver pendente lite of the moveable properties and of the rents, issues and profits of the immoveable properties belonging to the parties of the suits mentioned in the plaint with power to him to get in and collect the outstanding debts and claims due in respect of the said property and with all the powers provided for in Order 40, rule 1, clause (4) of the Civil Procedure Code with certain exceptions with which we are not now concerned. The property in question in the present assessment was covered by this order. The Receiver, so appointed did not succeed in taking possession of property and on the 2nd April 1931 the plaintiff in that suit (viz., the present assessee) made an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order was only a copy of the contents of paragraph 5 of the petition already reproduced above. That arrangement remained in force till 23rd August, 1933, when on the application of the parties another order was passed re-appointing the Official Receiver as Receiver pendentelite of this property again, but the Official Receiver reports that he did not get actual possession till the 23rd or 24th February 1934 and presumably, therefore, the joint managers, that is, Ramprotap and Keshardeo, the assessee, remained in possession up till the later date, collected the income of the property and it will be pertinent to notice that they distributed the collected amounts between themselves in equal shares. 4. The Income-tax Officer in making his assessment for the two years in question proceeded to tax the assessee directly in respect of his share of income derivable from this property taxable under Section 9 of the Act and did not make an assessment in the first instance on the joint managers, that is, the assessee and Ramprotap and for the purpose of arriving at the quantum of income assessable in respect of this property, he examined the rent account of the Official Receiver in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in respect of his charge of the property? 7. I respectfully submit this question for Their Lordships' decision. 8. It is to be noted that the managers and the owners are in this case the same persons or at any rate were so at the time the income was received and that in the ultimate event which happened each owner received his share of the income at all relevant times. 9. The assessee's argument is based on section 41 of the Act which says that in the case of income, profits or gains chargeable under the Act which are received by the Court of Wards..........................................................or by any receiver or manager appointed by or under any order of Court, the tax shall be levied upon and recoverable from such Court of Wards........................................... receiver or manager in the like manner and to the same amount as it would be leviable upon and recoverable from any person on whose behalf such income, profits or gains are received. In my opinion, the assessee and his co-sharer Rai Bahadur Ramprotap Chamria cannot be said to be the persons appointed by or under the order of a Court to manage the property on behalf of anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t were made in the joint names of the managers, the quantum of income assessed in respect of these properties would have been the same. In my opinion, even after such assessment the amount would have been realisable from this assessee as one of the joint assessees and it would have made no practical difference specially in view of the fact that the other co-owner has already been assessed for his half share and has already paid that tax. I would further like to point out that the section seems to apply only to those cases where income, profits or gains chargeable under the Indian Income Tax Act are received by the persons named in the section. I would contend that where the income chargeable is merely a notional income it can hardly be said to be received by anybody. In the case of house properties tax shall be payable in respect of the bona fide annual value of the property and it will be payable by the owner of such property. It does not seem to matter who manages and receives the rents and profits of the property. This seems to follow from Sec. 9 of the Act and in this view Sec. 41 would not at all apply to house properties. Further, it may be pointed out that Sec. 41 is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some complexity. The assessee Keshardeo Chamria instituted a suit in 1929 on the Original Side of the Court, for a declaration that he had been validly adopted by one Amloke Chand deceased and was accordingly entitled under Mitakshara Law to certain immoveable properties jointly with the defendant Ramprotap, Amloke Chand's brother. There was also a prayer for partition. Ramprotap filed a written statement denying the adoption, and also denying that the properties alleged by the assessee to be joint family properties were in fact such with the exception of one No. 23 Cullen Place, Howrah. On May 23, 1930, a decree was made by consent. Unfortunately the decree has been drawn up in somewhat ambiguous language, and still more unfortunately the Commissioner of Income-tax appears to be under a misapprehension as to its effect. It was agreed under the terms of statement annexed to the decree that the assessee was the validly adopted son of Amloke Chand. The decree further declared that the assessee was entitled to one equal half part or share of the residue of the joint estate mentioned in the terms, after setting apart eleven lacs of rupees for allotment to Ramprotap, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of April 2, 1931 was effective throughout. No objection has been taken to this way of treating the assessment, the assessee's complaint being that on the basis of the 1931 order the Department should have applied Sec. 41 of the Indian Income-tax Act. During the years in question the assessee and Ramprotap in exercise of the liberty given them under the order have been collecting the rents of the properties and dividing them equally. The Income-tax Officer in these circumstances has treated the rents collected subject to the statutory deductions as the bona fide annual value of the properties within the meaning of Sec. 9 of the Income-tax Act, and the assessee and Ramprotap as the owners of the properties in equal shares. He has accordingly included half the annual value in the assessable income of the assessee under the head property the actual amounts being ₹ 33,920 out of a total income of ₹ 48,628 for 1932-33 and ₹ 28,177 out of a total income of ₹ 54,558 for 1933-34. The assessee appealed against the orders of the Income-tax Officer made in the two assessments, but the Assistant Commissioner dismissed the appeals and confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a case, for I cannot see that such considerations can affect the construction of the Section. Now with regard to the ownership of the property, the position is that the assessee has been assessed in respect of property of which at the time of assessment he alleged he was the owner, and of which he still alleges himself the owner, for he does not object to the assessment on the ground that he is not the owner. He points out however that his title is disputed, and that to establish it he has been compelled to institute a suit which may terminate in part at any rate in favour of Ramprotap, who until the Official Receiver was appointed on July 28, 1930, was in possession of the disputed properties. To adopt the language of the assessee's counsel the law says owners shall be taxed, it does not say that claimants shall be taxed. Now it is clear that before an assessee can be taxed as an owner under Section 9 it must be decided that he is in fact the owner of the property in question, and in my opinion the decision rests with the Income-tax Officer, subject to the rights of appeal under Secs. 30 and 31. The mere existence of a dispute as to title, even where a suit h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns are fulfilled the Department can only look to the manager, and has no recourse to the person upon whose behalf the income, profits and gains are received. On the other hand, the Crown maintains that the section cannot apply in the circumstances of this case, and further submits that even if the section is applicable, it merely provides machinery for collection, which is available to the Department, and which the Department is not compelled to employ. For the latter contention the Crown relies on the observations of the Madras High Court in Commissioner of Income Tax, Madras v. Saldanha (I.L.R. 55 Mad. 891). There a widow was assessed under S. 10(1) of the Income Tax Act in respect of a business carried on by her and belonging partly to her and partly to her children. It was contended that the tax should be separately assessed on the various owners of the business and levied on the widow as guardian under S. 40. Dealing with S. 40 the Court states at page 898:-- Now the argument based on Sec. 40 may first be disposed of. Sec. 40 and the following sections have been held to be not charging sections but only machinery sections. Sec. 40 provides that the trustees or guardians ..... X X X X Extracts X X X X X X X X Extracts X X X X
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