9911796707
TMI Blog1945 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... etime of my husband Dhunjibhoy Motabhoy Vakil, my trustees shall pay out of the net income of my moveable and immoveable properties such amounts as may be sufficient for the maintenance of my husband Dhunjibhoy Motabhoy Vakil, my daughter Motibai and my son Motabhoy Dhunjibhoy Vakil and the balance shall be accumulated and invested in Government Securities. During the lifetime of my husband Dhunjibhoy Motabhai Vakil my said husband, my daughter Motibai and my son Motabhoy shall have the right to use and occupy free of rent such portions of my immoveable property at Warden Road as are now occupied by me and the other members of the family. Besides these three such of my children and grandchildren as may be invited shall alone have the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o give the bungalow for occupation to the persons named in the clause free of rent. It was therefore contended that there being no income, Sections 3 and 4 of the Indian Income-tax Act could not be relied upon to tax the annual letting value of this bungalow, as was sought to be done by the taxing authorities. It was argued that under Section 41 of the Indian Income-tax Act the liability of the trustees was only to be taxed to the same extent as the beneficiaries were liable to be taxed, and as the right to occupy premises did not amount to receipt of any income, the beneficiaries would not be liable to be taxed in respect of this right of occupancy. In this connection the assessees relied on Tennant v. Smith [1892] A. C. 150, and particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act. It was contended that the actual receipt of the rent in the hands of the owner is quite immaterial for the purposes of assessment. The law has laid down a particular method of computation in respect of income from property and that must be applied to arrive at the figure to be inserted against the head "income from property" in the individual assessee's assessment 4. In my opinion the contention of the trustees is not correct. The word " income " has not been defined in the Act, but for the purposes of the Indian Income-tax Act the expression "total income" is defined in Section 2(15). The Legislature has used there the words "computed in the manner laid down in this Act." Therefrom i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rustees are prevented from letting out the property to any one by virtue of Clause 5 of the will itself. That, however, in my opinion, makes no difference. The liability to tax does not depend on the power of the owner to let the property, as it also does not depend on the capacity of the owner to receive the bona fide annual value of the property, The law has laid down an artificial rule by which the amount is to be considered the income of the assessee from immoveable property and provided that he should be taxed on that footing. In my opinion the argument of the Commissioner on this point is correct. 6. The observation of Lord Halsbury, Lord Chancellor, in Tennant v. Smith [1892] A.C. 150, 157 does not help the assessm, In that case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be considered his income. The report of the case shows that the recipient of the amount, was assessed on the amount received and that question was not before the Court. In this connection Mr, Setalvad drew our attention to In the matter of the Official Assignee (1937) 5 I.T.R. 253, In that' case on the insolvency of a party a certain house became vested in the Official Assignee. That was the only property of the insolvent. The Official Assignee disputed his liability to be taxed under Section 9. The Court rejected that contention. At p. 245, after noting the observations in The Commissioners of Inland Revenue v. Fleming (1928) 14 T.C. 78 the Court observed as follows:- In the present case the income was in the nature of statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is deemed to be vested in the beneficiaries, they could not avoid taxation on the ground that they themselves were occupying the property. It seems to me, therefore, that Section 41 of the Indian Income-tax Act does not help the assessees. 8. The question of rate of taxation is not relevant to the present discussion. If in making a settlement the settlor does not choose to define clearly the specific and individual shares of the beneficiaries, the assessment must be at the maximum rate. Whether the taxation should be at the highest rate or not is a matter of policy, with which we are not concerned. In my opinion, therefore, the answer to the question submitted to us is in the affirmative. 9. The assessees to pay the costs of the reference ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
