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HIGH COURT OF CALCUTTA
S.C. LAHIRI, R.S. BACHAWAT, JJ.
Birendra Kumar Datta - Appellant
Versus
Commissioner Of Income-Tax, Calcutta - Respondent
Income-tax Ref. 45 and 106 of 1954
Decided on : Dec 22, 1959
INCOME TAX - Assessment - Trust - Income from house properties - Whether assessment should be made in a single sum upon the assessee in respect of the income from the house properties comprised in the trust deed - Held, no.
Fact of the Case:
The assessee, Birendra Kumar Datta, created a trust by a Trust Deed dated 5-2-1944, conveying three house properties to himself and his mother Sudhamukhi as Trustees. The beneficiaries mentioned in the Trust Deed were Birendra, his brothers Suprovat Jyotsna and Indrajit, his mother Sudhamukhi and his father Kiran Chandra Datta. The Income-Tax Officer rejected Birendra's contention that he should be assessed only in respect of one-sixth of the income from the three house properties and passed separate orders of assessment for the several years on the basis that the whole income of the properties should be assessed in his hands. The Appellate Assistant Commissioner confirmed the orders of assessment of the Income-Tax Officer. On appeal, the Appellate Tribunal held that the Trust deed is valid but the single assessment of the whole income on Birendra is correct whether the assessment be upon him in his personal capacity or as a trustee.
Finding of the Court:
The Appellate 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 not the owner of the properties for purposes of assessment under Section 9 and the whole of the income could not he assessed in the hands of Birendra on that basis.
Issues: Whether the assessment for 1945-46 was rightly made in a single sum upon the assessee in respect of the income from the house properties comprised in the said Deed.
Ratio Decidendi: Section 41 of the Indian Income-tax Act applies to all incomes chargeable under the Act which the trustee, receiver or manager is entitled to receive on behalf of any person. The tax must be levied upon the trustees in respect of all such incomes (a) where the substantive part of Section 41(1) is attracted in the like manner and to the same amount as it would be leviable upon the person on whose behalf such income is receivable, (b) where the first part of the proviso to Section 41(1) is attracted at the maximum rate and (c) where the second part of the proviso is attracted as if the income were the total income of an association of persons.
Final Decision: The question in both References is answered in the negative. The assessee do get the costs of Reference No. 45 of 1954 from the Commissioner of Income-tax, West Bengal. This Reference is certified for two counsel. There will be no order as to the costs of Reference No. 106 of 1954.
Bachawat, J.
1. REFERENCE No. 45 of 1954 relates to the assessment year 1945-46. REFERENCE No. 106 of 1954 relates to the assessment years 1947-48 and 1948-49. Both references arise out of the assessments of one Birendra Kumar Datta in respect of income from house properties under Section 9 of the Indian Income-tax Act.
2. BY a Trust Deed dated 5-2-1944, Birendra conveyed to himself and his mother Sudhamukhi as Trustees the house and premises Nos. 8/3 and 8/10 Alipore Park Road and 37 Syed Ameer Ali Avenue within the municipal limits of the town of Calcutta. The several beneficiaries mentioned in the Trust Deed are Birendra and his brothers Suprovat Jyotsna and Indrajit, his mother Sudhamukhi and his father Kiran Chandra Datta. Clause 1 of the Trust Deed is as follows;
"The Trustees shall realise the rents of the said 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 Dutta shall receive her said share from the said Birendra Kumar Dutta. 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 Road and to Birendra and Indrajit each an undivided half share in premises No. 8/10, Alipore Park Road. Clause 2 also provides that the widow of any of the brothers shall have no interest in any of the properties except the right to receive one-third of the net income arising out of the property allocated to her husband. Clause 3 provides that on the expiry of six years from the date of the Deed the trustees are to convey premises No. 37, Syed Ameer Ali Avenue to the mother and if she be dead to the father and if both be dead to Birendra and his three brothers in equal shares. Clause 4 empowers the trustees to sell the trust properties with the consent of the father Kiran Chandra Datta and to re-invest the sale proceeds in immovable properties. Clause 5 empowers the father Kiran Chandra Datta to nominate a trustee in place of a dead trustee.
3. IN his return for the assessment years 1945-46, 1946-47, 1947-48 and 1948-49, the assessee Birendra contended that he should be assessed Only in respect of one-sixth of the income from the three house properties. The Income-Tux Officer rejected this contention. He held that the trust deed is invalid, that in the circumstances the assessee Birendra remained the full owner of the properties and that the whole income of the properties should be assessed in his hands. He passed separate orders of assessment for the several years on that basis. The orders of assessment of the Income-Tax Officer in all the four assessment years were confirmed on appeal by the Appellate Assistant Commissioner. From these appellate orders there were four appeals before the Appellate Tribunal. In all the four appeals the Appellate Tribunal held that the Trust deed is valid. In the appeal relating to the assessment year 1946-47 the Appellate Tribunal by its order dated the 22nd January, 1953 held that one-sixth of the income which had been retained by the assessee himself should be assessed in his hands and directed that the balance f
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