(1.) THIS reference made under Section 66(l) of the Indian Income-tax Act by the Appellate Tribunal raises the following three questions which were referred to this- court for decision:
1. Whether the decision of the Appellate Assistant Commissioner for the assessment year 1940-41 operates us res judicata in respect of proceedings for the assessment year 1944-45;
2. Whether the surplus income of the Durgah is exempt from income-tax, either under Section 4(3)(i) or tinder Section 4(3)(ii) of the Indian Income-tax Act; ' 1922;
3. If the answer to question (2) is in the negative, is such income assessable in the hands of the trustees in the status of an association of persons, or has it to be assessed directly in the hands of the kasupangudars?
(2.) THE assessee is described as Trustees, Nagore Durgah, by present Managing trustee M. S. Md. Banker Sahib, Nagore. THE Nagore Durgah, which is situate in Tanjore District, is of great historical and religious importance. Hazerth Saved Sahul Hameed Quadir Ali Gangasavoy Andavan, who lived about 400 years ago was a holy saint to whom it was consecrated. Tradition goes that he travelled far and wide and visited several places and he was a celibate and was held in great esteem not only by the Muhammadan public but also by persons belonging to other religions.
He had a foster son Saiyed Muhammad Eusoof Sahib and the Durgah contains the tomb not only of the saint but also that of his foster son Eusoof and his wife. Large extents of properties were endowed by the Rajahs of Tanjore to the Durgah. THE annual. Kandoori festival attracts large crowds, who make offerings. On every Thurday also offerings are matte to the saint.
From the immovcable properties and the shops possessed by the Durgah and also from the offerings in cash and kind made by the devotees, a large income is derived by the Durgah. THE Durgah is managed by a body of trustees called Nattamaigars. THE income is applied for the purposes of the Durgah and whatever surplus remains after meeting its expenses is divided into 640 shares among the descendants of Eusoof, who are called Kasupangu-dars. THEre" is no written deed of trust bnt the hereditary right of the Nattamaigars and the right of the Kasupangudars to the surplus has been recognised by custom and also by judicial decisions.
In O. S. No. 45 of 1918 on the file of the Sub Court, Nagapattinam, the right of the descendants of Eusoof i.e., the Kasupangudars to the surplus was recognised and it was held in that suit that the Durgah is a public trust but the surplus is a private trust for the benefit of the Kasupangudars.
In the assessment year 1940-41, the Income-tax officer found that while the income applied to the Durgah was impressed with the character of a charitable and religious trust, the surplus distributed among the Kasupangudars was not of such a nature to exempt it from the payment of tax. As there was no written deed of trust, it was held that Section 41 of the Act had no application and that the assessment for the year was made on the trustee in the status of an association of persons.
The assessee carried the matter on appeal to the Appellate Assistant Commissioner On the ground that the income should have been exempted from tax under Section 4(3)(i) or Section 4(3)(ii) of the Act and that in any event the assessment made on the trustees in the status of an association of persons was not justified and should have been made directly on the income which was distributed to the individual share-bolder, i.e. the Kasupangudars separately and individually.
The Appellate Assistant Commissioner, while holding that the income was not exempt from taxation under Section 4(3)(i) or (ii) of the Act agreed with the contention of the assessee that the assessment on the basis of an association of persons was not correct and that the income in the individual hands of the Kasupangudars should be separately assessed. The department filed appeals to the Appellate Tribunal but as the appeals were out of time they were dismissed on 12-12-1946.
During the assessment year 1944-45, with which this reference is concerned, the income-tax Officer was of opinion that the Appellate Assistant Commissioner in the previous year was wrong in applying Section 41 of the Act notwithstanding the absence of an instrument in writing constituting a trust and therefore, he made the assessment on the basis that the trustees were an association of persons.
This order was confirmed on appeal by the Appellate Assistant Commissioner, who was then a person different from the Appellate Assistant Commissioner, who dealt with the matter on the previous occasion and he agreed with the view of the Income-tax Officer and confirmed the assessment.
There was a further appeal to the Appellate Tribunal and it was contended before the Tribunal on behalf of the assessee that the assessment proceedings for the year 1944-45 were barred by res judicata in view of the decision of the Appellate Assistant Commissioner for the earlier assessment that the surplus income of the trust was exempt from taxation under Section 4(3)(i) or (ii) of the Act and that such income, even if assessable, should have been assessed in the hands of each, beneficiary, i.e., the Kasupangudars individually and not on the trustees as an association oi persons.
These contentions were rejected by the Appel- late Tribunal and at the instance of the assessee the above three questions were referred to this court for opinion.
We may answer the second question straightway as there was no serious argument before us on behalf of the assessee that the view taken by the department and the Appellate Tribunal that the surplus income of the Durgah was not exempt from income-tax either under Section 4(3)(i) or (ii) of the Income-tax Act is not correct. In view of the evidence of the usage as well as the previous finding of the Sub Court that in regard to the surpius the Durgah was a private trust, counsel for the assessee, in our opinion, was justified in taking the altitude that the decision was unassailable.
The question, therefore, must be answered in the negative and against the assessee.
(3.) IN view of our answer to question No, 2, we should have thought that the answer to question No. 3 should also be against the assessee but Mr. Subbaraya Aiyar, learned advocate for the assessee raised the contention that the matter is really covered by Section 41 of the Act & the assessment should have been made on the individual income of the Kasupangudars and not on the basis that the trustees were an association of persons.
The foundation for the argument is not that there is a deed of trust wheteunder any trustees were appointed and a trust declared but that case falls under the earlier part of the section which provides:
".... .manager (including any person whatever his designation who in fact manages properties on behalf of another) appointed by or under any order of a court ....."
and that, therefore, individual assessment should have been made. The basis for this contention is that in the scheme decree in the suit, O. S. No. 1 of 1923, which, came up on appeal to this court in A. S. No. 354 of 1923, under one of the clauses liberty was given to the trustees to appoint one or two of them as managing trustees for a period not exceeding five years.
It is, therefore, contended that as managing trustees were appointed under that clause, which reserves liberty, such managing trustees should be treated as managers appointed by or at any rate under any order of a court by whatever designation they may be called. The scheme decree was not filed before the Appellate Tribunal or even earlier. On the other hand, it is evident from the order of the Appellate Tribunal that the learned counsel, who appeared for the assessee before the Tribunal conceded that the provisions of Section 41 would not directly apply to the facts of the case as the 'sine qua non' for the applicability Of that section was that in the case of a trust it must have been declared by a duly executed instrument in writing.
The contention then pressed however was that as there was no provision in the Act to cover an oral trust, there was no alternative to the department but to apply the principle underlying Section 41 as far as possible. The Tribunal held that the trustees were within the general charging section and as they were an association of persons, the assessment was rightly made on that fooling.
Under Section 66 the Tribunal could refer only questions of law arising out of the order of the Appellate Tribunal and not other questions in view of the expression "arising out of this order". It has been held that a question of law can be said to arise out of an order of the Appellate Tribunal only it such an order discloses that the question was raised before the Tribunal. In other words, a question would arise out of an order, only if it had been raised and dealt with before the Appellate Tribunal.
The scope of the jurisdiction was considered recently by the Calcutta High Court in -- 'Allahabad Bank Ltd. v. Commissioner 'or Income-tax', 1952-21 I. T. R. 169 (Cal) (A) and by this Court in an earlier case -- 'Abboy Chefti and Co. v. Commissioner of Income-tax Madras', AIR 1948 Mad 181 (B). It was pointed out by the Supreme Court in a recent case -- 'Commissioner of Income-tax, West Bengal v. Calcutta Agency Ltd.', (C), that as the statement of the case prepared by the Appellate Tribunal -under the rules framed under the Income-tax Act is prepared with the knowledge of the parties concerned and they have a full opportunity to apply for any addition or deletion from that statement, the High Court in dealing with the question should confine and restrict if self to the facts contained in the statement of the case.
The High Court must start by looking at the facts found by the Tribunal and answer the question of law on that footing. It should not depart from that rule and convert itself into a fact finding authority, which is not part of its advisory jurisdiction.
In view of these weighty pronouncement, it is, in our opinion, not open to us to allow the counsel for the asscssee to raise the question that Section 41 of the Income-tax Act applies to the facts of the case notwithstanding the express concession made by the counsel for the assessee before the Tribunal that Section 41 in terms has no application. The Question was not one, which was raised and debated and considered by the Appellate Tribunal and by no stretch of language can it be said that the applicability of Section 41 is a question of law arising out of such order. It is, therefore, not open to us to consider the applicability of Section 41 to the facts of the present case.
We do not know what exactly are the functions of the managing trustee or trustees and it may be a point for consideration whether a managing trustee could aptly be described as a manager or as a person by whatever designation known, who in fact manages the property. Having regard to the essential difference between a manager and a trustee viz, that in the former the estate does not vest while in the latter it does, the two are different. It is unnecessary to pursue the matter further in this case.