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TMI Blog1996 (10) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provisions contained in section 8(2)(a) of the Kerala Agricultural Income-tax Act, 1950 ?" On hearing counsel for the parties, the question is whether the provisions of section 8(1)(a) or section 8(2)(a) of the Kerala Agricultural Income-tax Act, 1950, would govern the factual matrix. It is necessary to see and examine the indenture of trust executed on March 8, 1977. It is at page 21. The trust is founded by one K. P. Pillai, appointing P. Sathrughnan Pillai and his wife, K. Vasantha, as the trustees thereunder. The preamble thereto gives preliminaries stating that the founder constituted the trust by paying to the trustees a sum of Rs. 5,000 in the first instance in their capacity as nominees of the beneficiaries. The said beneficiaries are, viz., (i) V. Parvathy, aged 13 ; (ii) V. Ani, aged 8 ; (iii) S. Anu, aged 10 ; and (iv) S. Aniyan alias S. Kannan, aged 6. These transfers were made to the trustees as nominees of these beneficiaries and the two trustees came to be appointed in pursuance thereof. It is thereafter specified that beneficiaries of the trust would be the above children of Mr. P. Sathrughnan Pillai. In paragraph 5 of the document, beneficial interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on behalf of the beneficiaries, although assessable at the hands of the trustee. It was submitted that the beneficiaries may not have title over the trust properties. But the trust has received the amount wholly for the benefit of the beneficiaries, virtually for and on behalf of the beneficiaries. It was further urged that in such a situation, the assessee-trustee could be liable for tax, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such agricultural income is receivable. In other words, with reference to the document, it was submitted that the trustee-assessee would have to be understood with reference to the amount of tax as if the amount is leviable upon and recoverable from the four beneficiaries on whose behalf such agricultural income is receivable. The submission, if further spelt out, would mean precisely that the assessee-trustee cannot be understood for levy of tax as a single individual because the agricultural income is receivable for and on behalf of four beneficiaries in proportion to their shares specified in the document. It was submitted that under the law of trust, the trustees though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that ownership ever vested with the beneficiaries. The Tribunal has further observed that the trustees were not in the position of guardians in relation to their status for the purpose of agricultural income-tax assessment. In our judgment, this is a product of the approach contrary to the idea of a trust. There is no dispute that the trustee is the owner of the trust property. The beneficiary is considered to be an equitable owner because the undisputed position is that the trustee holds the trust property wholly for the benefit of the beneficiaries in accordance with the provisions of the deed of trust. It is in these circumstances that the questions are before us mainly with regard to the legal situation as to which of the two provisions-section 8(1)(a) or section 8(2)(a) of the Agricultural Income-tax Act, 1950, would govern the situation. It would be necessary to reproduce the two statutory provisions separately. They are as follows : " 8. Liability of Court of Wards, Administrator-General, etc.---(1)(a) In the case of agricultural income taxable under this Act which the Court of Wards, Administrator-General or Official Trustee or any receiver, administrator, executor, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This expression does not leave any manner of doubt that the manner of levy and recovery of the agricultural income-tax from the trustee has a necessary relation to the beneficiary, undoubtedly because the trustee receives the agricultural income on behalf of the beneficiary as is available from the very position of the trustee under consideration. Apart therefrom, the document clearly specifies the share as well as the number of beneficiaries. In other words, the agricultural income taxable which the trustee is entitled to receive on behalf of the beneficiary is required to be understood as the receipt of the agricultural income in question which is receivable on behalf of the beneficiaries although by the trustees. If the beneficiary is one, the trustee can be considered as a single unit. If the beneficiaries are more than that, the trustee will have to be understood in proportion to the number of beneficiaries for and on whose behalf the agricultural income is receivable as far as the trustee is concerned. In this context, the fact of vesting of the property in the trustees would not at all be relevant to determine the liability. The doctrine of vesting is not germane. The si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgha and its Muthavallis to the same effect that the income has to be understood for the benefit of others and has nothing to do with the fact of vesting afford us the necessary situation. In fact, the statutory provision of section 8 of the Agricultural Income-tax Act, 1950, in the matter of consideration of levy and recovery of agricultural income-tax was the subject of consideration of this court in Girigamma v. Agrl. ITO [1963] KLT 266. This was in relation to an assessment taking into consideration the entire total income of the four shares owned by the minor beneficiaries treating them as a single unit for the purpose of making the assessment. This court also was dealing with the similar situation of the Agricultural Income-tax Officer making assessment in respect of the property of a minor on the guardian under section 8 of the Act. It was observed that in the process, there is a mistake in proceeding on the basis of clubbing the income of the minors and proceeding to assess the guardian as a single unit. In a situation dealing with the position of the trustees, the position would be still more rigorous on account of its effect. In fact, an identical situation came up be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of application of section 8(2)(a) of the Act to the factual matrix. It is not possible to agree with the Tribunal that the decision of this court in Girigamma's case [1963] KLT 266 is not applicable. The Tribunal has sought to observe that the decisions of this court in G. Thankammal v. State of Kerala [1964] 52 ITR 634 and of the apex court in Holdsworth v. State of U. P. [1958] 33 ITR 472 ; AIR 1957 SC 887 are relevant to the occasion. The Tribunal has observed so because the decisions defined the legal position of a trustee, vis-a-vis, a guardian in regard to the situation of holding land on behalf of another and holding land for the benefit of another. In the first instance, as we have emphasised earlier, the very language of the provision under consideration requires the person sought to be taxed having connection with the land, holding land from which agricultural income is derived. If the decision of this court in Thankammal's case [1964] 52 ITR 634 was considered, it would show that therein the assessee executed a gift deed of certain agricultural lands in favour of her minor children assigning separate items of property to each of them as a result of which each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, jointly interested in such land or in the agricultural income derived therefrom. In the course of reasoning in regard to the trust property, it is observed that the trustee holds the property for the benefit of the beneficiaries, but it cannot be understood that he holds it on their behalf. In fact, thereafter, the apex court in CWT v. Kripashankar Dayashanker Worah [1971] 81 ITR 763 had an occasion to appreciate in consonance with the law relating to the idea of trust that the conception with reference to section 21(1) of the Wealth-tax Act, 1957, that the trustee is holding the trust property on behalf of others though may not be in conformity with the legal position as contemplated by the Trusts Act and observed that the Legislature is competent to give its own meaning to the words used by it in a statute and that it would be so because the Legislature is competent in the absence of any restriction placed on it by the Constitution. It is observed that Parliament, while enacting the section, proceeded on the basis that for the purposes of that Act, the trustee is holding the property on behalf of the beneficiaries and, therefore, the mere fact that this conception does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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