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TMI Blog1971 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the Chartered Bank. The assessee, thereafter, renewed from time to time the said deposit together with interest earned thereon, but whenever necessary he withdrew from the said current account small amounts, not exceeding three figures, to make up the amount of the fixed deposit to the nearest higher multiple of Rs. 1,000. During the four accounting years relevant to the four assessment years the assessee in that manner earned interest on the fixed deposits in the amounts of Rs. 11,472, Rs. 15,790, Rs. 23,032 and 25,328, respectively. The assessee, however, never adjusted the interest so earned by apportioning it to the different clients whose moneys were held in the said current account. The assessee did not show the interest so earned in any of the returns of his personal income filed by him for the said four years. The assessment was completed on the basis of the returns, but, thereafter, necessary proceedings were taken under section 34 to reopen the assessments for the purpose of including the amounts of the said interest in the relative assessments of the said four years on the ground that such interest had escaped assessment. The Income-tax Officer and the Appellant Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' a client ' account). Any attorney may keep one client account or as many such accounts as he thinks fit. 27. No money shall be paid into a client account other than : (a) money held or received on account of a client ; (b) such money belonging to the Attorney as may be necessary for the purpose of opening or maintaining the accounts ; (c) money for replacement of any sum which may by mistake or accident have been drawn from the account in contravention of rule 28 of these rules ; (d) a cheque or draft received by the Attorney representing in part money belonging to the client and in part money due to the Attorney, when such cheque or draft has not been split as provided by rule 26 hereof. 28. No money shall be drawn from a client account other than:- (a) money properly required for payment to or on behalf of a client or for or towards payment of a debt due to the Attorney from a client or money drawn on the client's authority or money in respect of which there is a liability of the client to the Attorney provided that the money so drawn shall not in any case exceed the total of the money so held for the time being for such client; (b) such money belonging to the Attorney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im from or on behalf of his clients is that of a quasi-trust and he holes such moneys in a fiduciary capacity. The case of a solicitor falls, in our opinion, within the provisions of section 94 of the Indian Trusts Act because he has not the whole beneficial interest in such moneys. He must, therefore, hold such moneys for the benefit of the persons having such beneficial interest, such persons being his clients whose moneys are deposited in the client 's account. A solicitor has, therefore, in view of the provisions of the said section 95, to perform the same duties and is subject to the same liabilities and disabilities as if he were a trustee in respect of the said moneys, his clients to whom the said moneys belong being the beneficiaries. The provisions of section 51 of the Indian Trusts Act would apply and a solicitor being a trustee of such a quasi-trust cannot use or deal with the trust property for his own profit or for any other purpose unconnected with the trust. He can deal with them only to the extent provided for under the said rules of this High Court. The corpus, i.e., the moneys credited in the client's account, is held by a solicitor in his fiduciary capacity and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition canvassed for before as by the revenue would lead to impossible, if not absurd, results. If there are more trustees than one of a particular trust and the income derived from the trust properties is to be included in the assessment of the personal income of the trustees, the question would arise : In the personal income of which trustee or trustees is such income of the trust properties to be included ? The trustees, if they are totally unconnected inter se, would each file a separate return. In which of the returns is the income of the trust properties to be shown, if at all ? Or, is it to be divided between the trustees, and if it is to be divided, in what proportions ? Is it conceivably possible that the position would be different if there be a single trustee or there be more than one ? It has been stated, borrowing the words put by Charles Dickens in the mouth of one of the characters created by him, that law is an ass. We refuse to believe that the law, if at all it is an ass, is such an ass as revenue would want it to be believed. This argument was clearly negatived by the provisions of section 40 of the Indian lncome-tax Act itself. It contemplates a separate return a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est was paid at a lower rate to clients who deposited money with the firm which retained the difference between the higher and lower rates of interest. The solicitor was assessed to income-tax on the deposit interest and on the difference between the interest charged and that interest allowed to clients on their accounts with the firm. The relevant principle laid down by the House of Lords in its judgment in that case is that if a person in a fiduciary position receives any financial benefit arising out of the use of the property of the beneficiary, he cannot keep it unless he is authorised to do so. Applying that principle the House of Lords held that on the facts of the case the solicitor was not authorised to keep the interest either by custom or by implied agreement, although, as a matter of fact, a similar practice had long been followed by a number of solicitors in the United Kingdom. As seen earlier, the relevant rules of this High Court do not permit a solicitor to treat the moneys received by him from or on accout of his clients as his personal moneys and such moneys are held by him in a fiduciary capacity. Even the income received from such moneys must equally be held by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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