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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 ..... rces 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 death in 1916 the shares of the different members of the family in that business were determined as follows:- Rs. A. P. Ramprotap Chamria 0 3 6 Amloke Chand Chamria. (Now represented by Keshardeo Chamria). ... 0 3 6 Durga Prosad Chamria ...0 3 0 Radha Kissen Chamria ...0 3 0 Motilal Chamria ...0 3 0 Ramprotap Chamria had amassed considerable savings and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 application alleging in its paragraph that since the order appointing the receiver it was agreed between the parties:-- (a) that the Official Receiver shall not take possession of the following immoveable properties and shall, without prejudice to the right of either party to apply for re-instatement of the Receiver, be discharged from acting as Receiver in respect of such properties :--(after this the list of the properties was given but it would be sufficient to say that this list completely covers the properties relevant for our present purposes), (b) that the plaintiff (present assessee) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice 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 whose hands these accounts then were, took the amount of rent received or receivable as representing the bona fide annual value and after making the usual deductions required by Section 9 of the Act arrived at a net figure of income which he distributed half and half between the assessee and his co-sharer Ramprotap. It is admitted that the income from property has been divided half and half between the parties to the litigation or at any rate that when one party drew a cheque for a certain amount the other party drew a cheque for a similar sum. The total amount drawn by each of them during the years 1932-33 and 1933-34 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 another within the meaning of section 41 of the Indian Income Tax Act. I have already set out the circumstances under which they managed these properties. The consent decree declared them to be the owners of these properties in equal share. The decree determined their respective shares in these properties and directed partition. After this decree it was certainly open to them to possess their respective shares amicably. A Receiver was no doubt appointed pending actual partition; but the owners came to an amicable arrangement settling the mode of interim enjoyment and as a result of this arrangement the receiver was discharged. In their applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on the same line as Sec. 40. In interpreting this Sec. 40 it has repeatedly been pointed out that this is not a charging section at all. It is only a machinery or enabling section providing that under the circumstances mentioned in this section, tax can be levied upon and recoverable from persons other than the person to whom the income actually belongs. I may here refer to the decision of the Madras High Court in J.V. Saldanha v. Commissioner of Income Tax (I.L.R. 55 Mad. 891; 6 I.T.C. 114) where some decisions of the English and the Indian Courts have been referred to and relied upon. What has been said of Sec. 40 in this respect will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunately 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, and also after setting apart certain of the premises in suit for religious and charitable purposes. Ramprotap was then declared entitled to the remaining equal half part or share. Commissioners for Partition were appointed and directions given for accounts and for mutual conveyances on the basis of the award to be made. Now from the language of the decree one would expect to find a list of admitted joint properties in the terms of settlement and on the other hand, if no properties were admitted to be joint, one would expect in the body of the decree directions on the commissioners to enquire what the joint estate consisted of. In fact there is no list of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 confirmed the orders of the Income-tax Officer. The matter was then taken to the Commissioner of Income- tax, before whom the assessee formulated certain questions of law (see appendices B and B(1) to the Statement of the cases). The Commissioner has taken the same view as the Assistant Commissioner and the Income-tax Officer, but has referred the following question of law to this Court:-- "Whether in the circumstances described above the present assessee and Rai Bahadur Ramprotap Chamria were the managers of the properties appointed by or under any order of a Court within the meaning of Section 41 of the Indian Income-tax Act, and whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has been filed, cannot of itself hold up an assessment ; otherwise it would be open to an assessee to delay assessment indefinitely by arranging for the institution of collusive proceedings. This difficulty is not met by pointing to S. 41, because as often as not in a suit for declaration of title and ejectment no Receiver is appointed, and the possession of the party remains undisturbed. It appears therefore that the Income-tax Officer had prima facie the power to decide that the assessee was the owner of a half share in the properties without waiting for the final determination of the High Court suit. It is hard to see in this case how the decision, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall be assessed in a like manner and to the same extent as the beneficiaries or wards may be assessed. Apart from the fact that these are not charging sections it may also be observed that they are enabling sections, i.e., the Income tax Officer can take steps to assess the trustees or guardians as representing their separate beneficiaries or wards as the case may be, if he so chooses. But the sections do not compel the Crown to resort to them. The question in the case before us is not whether the Income-tax Officer can proceed under Sec. 40 or not but, where he has not chosen to proceed under Sec. 40 but proceeded to assess on anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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