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TMI Blog1959 (12) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... trust properties and pay the rates, taxes and other impositions in respect thereof and the balance after such payments shall be received by the said Birendra Kumar Datta for the benefit and expenses in the manner following, that is to say, one-third thereof for the said Srimati Sudhamukhi Datta in her personal capacity and one-sixth each for himself, Suprovat Kumar Datta, Jyotsna Kumar Datta and Indrajit Kumar Datta. The said Srimati Sudhamukhi Datta shall receive her said share from the said Birendra Kumar Datta. In the event of her death her husband Kiran Chandra Datta shall receive the said share. The latter three, however, shall receive their said shares as soon as they attain majority respectively. In the event, however, God forbid, of the death of any of the said male beneficiaries the widow and/or the child or children, if any, shall receive such sums of money out of his said one-sixth share as the trustee, Srimati Sudhamukhi Datta or her husband Kiran Chandra Datta, shall decide. Clause 2 of the deed provides that on the death of both the parents, the trustees are to convey to Suprovat and Jyotsna each an undivided half share in premises No. 8/3, Alipore Park Roa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1948-49 were disposed of by the Appellate Tribunal by two separate orders dated the 28th September, 1953. In those, three appeals the Appellate Tribunal held that the conclusion that the trust deed is valid does not assist the assessee and that the single assessment of the whole income on him is correct whether the assessment be upon him in his personal capacity or as a trustee. The reasoning of the Appellate Tribunal appears to be as follows: An assessment under section 9 has to be made on the owner of the house property, and not on the person entitled to the income therefrom. The provisions of clauses 2 and 3 of the trust deed are not yet operative since both parents have not died and six years from the date of the deed have not expired. Until those provisions come into play the ownership of the properties is not disposed of, the beneficiaries have no sort of ownership, the beneficial ownership is vested in the settlor and that though the beneficiaries have shares in the income and are not hit by the proviso so far as it concerns such shares and they are not owners of the properties for purposes of section 9(3) and as such cannot bring themselves under the substantive provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid and operative instrument, the ownership of the three properties is vested in Birendra and Sudhamukhi as trustees. The trust deed has completely disposed of the ownership. The trustees hold the trust property as owners for the benefit of the beneficiaries and upon the trusts declared by the trust deed. The Tribunal erred in holding that the beneficial ownership of the properties vested in the settlor, Birendra. There is no question of any resulting trust in favour of the settlor under any of the sections of Chapter IX of the Indian Trusts Act. Birendra as settlor was riot the owner of the properties for purposes of assessment under section 9 and the whole of the income could not be assessed in the hands of Birendra on that basis. Indeed Mr. Meyer did not seek to justify the assessments on that ground or upon the footing that Birendra in his personal capacity is assessable in respect of the entire income. He sought to justify the assessments on the ground that Birendra in his capacity as a trustee is the owner of the trust properties and that the tax on the entire income is leviable in a single sum upon Birendra in that capacity. Dr. Pal on behalf of Birendra then argued that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trustees, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this Act shall apply accordingly: Provided that where any such income, profits or gains or any part thereof are not specifically receivable on behalf of any one person, or where the individual shares of the persons on whose behalf they are receivable are indeterminate or unknown, the tax shall be levied and recoverable at the maximum rate, but, where such persons have no other personal income chargeable under this Act and none of them is an artificial juridical person, as if such income, profits or gains or such part thereof were the total income of an association of persons : Provided further that when part only of the income, profits and gains of a trust is chargeable under this Act, that proportion only of the income, profits and gains receivable by a beneficiary from the trust which the part so chargeable bears to the whole income, profits and gains of the trust shall be deemed to have been derived from that part. (2) Nothing contained in sub-section (1) shall prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch property on their behalf. In my judgment the ratio of that decision has no application to the present case. It should be borne in mind that section 41 of the Indian Income-tax Act by its express language distinctly applies to the case of a trustee whereas there were no express words to that effect in section 11(1) of the U.P. Agricultural Income-tax Act, 1948. The language used in section 41 of the Indian Income-tax Act is very different from that used in section 11 of the U.P. Agricultural Income-tax Act, 1948. Though a trustee may not hold trust properties on behalf of the beneficiaries, he may be entitled to receive the income of the trust properties in his representative character as a trustee on behalf of the beneficiaries. Mr. Meyer next contended that section 41 can apply only to income in respect of which the tax is directly leviable upon the beneficiaries and that the section cannot apply to the income accruing to the trustee from the ownership of house properties vested in him and assessable under section 9, for the beneficiaries are not the owners of those properties and no tax is leviable upon them in respect of such income. He argued that it is impossible to app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x is directly leviable upon the beneficiaries in respect of income accruing from a house property owned by a trustee and assessable under section 9. For that purpose I shall assume that (a) the beneficiaries are not owners of the property for purposes of section 9, (b) that the income assessable under section 9 is a notional income which accrues and arises but it is not an income which is received on behalf of the beneficiaries and is not their income even applying the wide definition of income given in section 4, and (c) that sub-sections (1) and (2) of section 41 read together do not authorise a direct levy on the beneficiaries in a case where independently of that section there could be no such levy. On those assumptions where in the case of such income the section speaks of the tax which would be leviable upon the beneficiary it obviously speaks of the tax which would be leviable upon the beneficiary as if the income were his income. The expression would be leviable upon covers not only the case where the tax is directly leviable upon the person on whose behalf the income is receivable but also a case where the tax would be leviable upon him if the income were his income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent beneficiaries it may well be said that definite portions of the notional income are also specifically receivable by the trustee on behalf of those beneficiaries. The section speaks of income which is receivable or which the trustee is entitled to receive and an income which is not actually received by the trustee may be such an income. Mr. Meyer next contended that even assuming that the case is governed by the substantive part of section 41(1) the entire income is receivable on behalf of Birendra alone as clause 1 of the trust deed requires payment of the whole income to Birendra and, therefore, the tax on the income must be levied in a single sum. In my opinion there are at least two answers to this contention. Firstly, clause 1 of the trust deed properly read means that the beneficiaries under the trust are Sudhamukhi, Birendra, Suprovat, Jyotsna and Indrajit and that instead of both trustees making the payments to those beneficiaries the duty of making those payments is delegated to one trustee, namely, Birendra. In other words, Birendra is not the sole beneficiary on whose behalf the rents are receivable. The persons on whose behalf the income is receivable are Sudham ..... X X X X Extracts X X X X X X X X Extracts X X X X
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