The interpretation of S. 11(1) of the U. P. Agricultural Income Tax Act, 1948 and the conditions prerequisite for its application.

Headnote:
AGRICULTURAL INCOME TAX - U. P. AGRICULTURAL INCOME TAX ACT, 1948, S. 11(1) - TRUSTEES HOLDING LAND FOR BENEFICIARIES - WHETHER CAN CLAIM BENEFIT OF S. 11(1) - CONDITIONS - JOINT INTEREST IN LAND OR AGRICULTURAL INCOME - INTERPRETATION.
Fact of the Case:

The appellants were trustees of an estate settled on trust under a will. The trust property included a zamindari estate known as the Lehra Estate. The trustees entered upon the trust and managed the trust properties in accordance with the terms of the will. The Act came into force in 1949 and a notice of assessment of Agricultural Income-tax was issued to the trustees for the year 1857 Fasli (1949- 50). The trustees contended that the tax should be computed in accordance with the method of computation laid down in S. 11 (1) of the Act and that they should be called upon to pay the aggregate of the sums payable as Agricultural Income-tax by each of the five annuitants.
Finding of the Court:

The court held that the trustees did not hold the land from which agricultural income is derived as common manager, receiver, administrator or the like on behalf of the annuitants and the annuitants were not jointly interested in the land or in the agricultural income derived therefrom with the result that S. 11(1) of the Act did not come into operation at all. The appellants were the legal owners of the trust estate and did not hold the land from which agricultural income was derived "on behalf of" the annuitants. Each of the annuitants, moreover, was separately or individually interested in the agricultural income derived from the land comprised in the trust estate to the extent of the annuity payable to him under the deed of trust and the interest of one annuitant was not affected by whatever happened to the interest of the other. There was thus no fulfillment of either of the two conditions prerequisite before S. 11(1) of the Act could come into operation at all.
Issues: Whether the trustees could claim the benefit of S. 11(1) of the U. P. Agricultural Income Tax Act, 1948.
Ratio Decidendi: The court interpreted S. 11(1) of the Act and held that the two conditions prerequisite before S. 11(1) of the Act could come into operation are: (i) that the person holds land from which agricultural income is derived, as a common manager appointed under a law for the time being in force or under any agreement or as receiver, administrator or the like on behalf of other persons and (2) such persons should be jointly interested in such land or in the agricultural income derived therefrom. The court held that the trustees did not satisfy either of these conditions and therefore could not claim the benefit of S. 11(1) of the Act.
Final Decision: The appeal of the appellants was dismissed with costs.

Judgement

BHAGWATI, J.- This appeal with special leave against the judgment of the High Court of Judicature at Allahabad raises a question of the interpretation of S. 11 (1) of the U. P. Agricultural Income-tax. Act 1948, Act III of 1949 (hereinafter referred to as "the Act").

2. The appellants are the trustees of the Estate settled on trust under the last will and testament dated 17th May, 1917, of one J. J. Holdsworth which inter alia comprised of a certain zamindari Estate known as the lehra Estate situate in the District of Gorakhapur, Uttar Pradesh.

3. The clauses of the will so far as they are relevant for the purpose of this appeal provided that the trustees were to take possession of all real property in the United Provinces of Agra and Oudh and elsewhere in British India (including the houses at Lehra and Gorakhapur and the grounds thereof) and all live and dead stock in or about his estate in British India or any buildings thereon and the contents of any houses or stabling in British India belonging to him (which was called his estate) and manage the same in all respects and in such manner as they shall deem most advantageous and with all the powers of absolute owners.

The trustees were to stand possesses of the net rents and profits of the settled estate after payment of the Government Land Revenue Tax, and of all management expenses, upon trust to pay thereout certain annuities to 12 annuitants therein mentioned. If the net rents and profits of the said Estate were less than seventy thousand rupees in any year or if the said Estate or any portion thereof shall be sold at less than twenty years purchase of the net rent of seventy thousand rupees or an equivalent proportion thereof in respect of the proportion so sold, the annuities bequeathed as above and for the time being payable except annuities Nos. (1), (2) and (3) were to abate proportionately and no such annuitant was entitled to have the deficiency of his or her annuity made good out of the rents and profits of the said estate in respect of any subsequent year.

If there was no survivor alive then it was to go to William Orlando Holdsworth, the son of the testator. Seven of the said annuitants died and at the relevant period the following annuities were payable:

(i) Mrs. J. C. Holdsworth £ 2,500/-

(ii) Mr. W. O. Holdsworth £ 1,000/-

(iii) Miss Lucy Marion Holdsworth £ 50/-

(iv) Lt. Col. L.R.J.C. Wilkinson £ 500/-

(v) Mr. Horace Claud Holdsworth £ 400/-

4. The trustees entered upon the trust and managed the trust properties in accordance with the terms of the said will. The Act came into force in 1949 and a notice of assessment of Agricultural Income-tax was issued to the trustees for the year 1857 Fasli (1949- 50).

5. The Additional Collector, Gorakhapur, the assessing authority for the area in question, by his order dated 14th December 1950, assessed the trustees to Agricultural Income-tax upon the total agricultural Income received by them, overruling their contention that the tax should be computed in accordance with the method of computation laid down in S. 11 (1) of the Act and that they should be called upon to pay the aggregate of the sums payable as Agricultural Income-tax by each of the five annuitants.

6. The trustees preferred an appeal before the Agricultural Income-tax Commissioner, Lucknow, who by an order dated 22nd November 1951 upheld the order of the Additional Collector. He observed that the beneficiaries were neither jointly interested in the land held by the trustees nor in the agricultural income derived therefrom, and that the agricultural income of the Lehra Estate accrued to the trustees and not to the beneficiaries directly as it left the hands of the various tenants who paid rent or from self-cultivation that was done by the trustees themselves.

7. The trustees then moved an application under S. 24 (2) of the Act before the Agricultural Income-tax Board, U. P. for reference of certain questions of law to the High Court for its decisi

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Judicial Analysis