LAIK, J. - (1.) THIS is a reference under s. 66(1) of the Indian IT Act, 1922, for the determination of the following two questions : "(1) Whether, on the facts and in the circumstances of this case, the provisions of s. 33B of the Act were rightly applied by the CIT ? (2) Whether, on the facts and circumstances of this case, the profits and gains of the business carried on by the assessee as trustee were assessable under s. 10(1) of the Indian IT Act in the hands of the trustee as an individual carrying on business; or whether the provisions of s. 41 of the Indian IT Act were applicable in the facts and circumstances of this case and the assessment should be made upon an AOP of which the said Abdul Razzak was the trustee ? The facts are :
(2.) ON 20th March, 1937, one Baborally Sardar executed a deed of trust for maintenance of his sons and carried on the business as a trustee at Hogg Market, Calcutta, which is the subject-matter of the present reference. The said business was intended to be and actually carried on for the benefit of the assessee himself and his other three brothers in equal shares. ON 15th March, 1941, the said Baborally appointed the assessee as a new trustee in pursuance of the terms of the said deed of 1937. Baborally died in June, 1941. We are concerned here with the three assessment years, viz., the years 1951-52, 1952-53 and 1953-54. The ITO assessed the income under the provisions of s. 23(3) r/w s. 41 of the IT Act dividing the income into four equal shares, viz., of the assessee and of his three brothers, as stated above, for the purpose of taxation. The Commissioner cancelled the order of the ITO under the provisions of s. 33B of the IT Act and directed that a fresh assessment should be made on the assessee in the status of an individual, inter alia, holding that the tax should be payable by the assessee under the provisions of s. 10(1) of the Act relying on the observations of Saifudin Ali Mohamed vs. CIT (1954) 25 ITR 237. Appeals taken by the assessee before the Tribunal having failed, the instant reference was made. The same question of law arises in all the three assessment years and in the three applications for reference. We are told by Mr. Sen, appearing on behalf of the assessee, and not denied by Mr. Meyer, appearing on behalf of the Revenue, that for all the years prior to and as well as after the instant three years of assessment, the determination of the assessment was under s. 4I and not under s. 10(1) of the Act in respect of the same business, but in my view on the principles laid down by their Lordships of the Supreme Court in Maharana Mills (P) Ltd. vs. ITO (1959) 36 ITR 350 (SC), affirming those in the case of Karnani Industrial Bank vs. CIT (1954) 25 ITR 558 (Cal), and also on the principles laid down in another decision of the Supreme Court in CIT vs. C. Parekh and Co. (1956) 29 ITR 661 (SC), the said determination would not operate as estoppel or res judicata. So far as the first question is concerned, Mr. Sen, in his usual fairness, concedes that the said question, i.e., as to the application of s. 33B of the Act should be answered in the affirmative and against his client, the assessee. But he strenuously argued the second question, viz., that the provisions of s. 41 are applicable to the facts of the present case and not the provisions of s. 10(1) of the Act Mr. Sen develops his argument by saying that the provisions of s. 10(1) are generally controlled by the special provisions contained in s. 41 of the Act. He contends that the measure of the liability of the assessee as a trustee is the liability of each beneficiary and the assessment should be made at the individual rates of tax applicable separately to the total income of each beneficiary. He strongly relies on the decision of this Court, viz., Official Trustee of West Bengal vs. CIT (1954) 26 ITR 410 (Cal). Mr. Meyer on behalf of the Revenue says that the special provisions in s. 41 of the Act might have applied but as, according to him, the Supreme Court ruled in the case of W. O. Holdsworth vs. State of Uttar Pradesh (1958) 33 ITR 472 (SC), to the effect that the trustee is the owner of the property and holds the same "for the benefit" of the beneficiaries and not "on their behalf", the word trustee, wherever appearing in the said s. 41, should be deemed to be non est, that is to say, goes out of the said section. According to him, a trustee in s. 41 cannot, on the basis of the said Supreme Court decision, receive the income "on behalf of" the beneficiaries. In other words, when a trustee is the owner of the property, i.e., business, in the instant case, then the income out of the same must be his and he should be assessed as such. To appreciate the argument of Mr. Meyer and the effect of the said Supreme Court decision the provisions of s. 41 of the IT Act are set out below : "Sec. 41. (1) In the case of income, profits, or gains chargeable under this Act which the Courts of Wards, the Administrator-General, the official trustee or any receiver or manager (including any person whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a Court, or any trustee or trustees appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including the trustee or trustees under any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913), are entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from such Court of Wards, Administrator-General, official trustee, receiver or manager or trustee or trustees, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this Act shall apply accordingly : Provided that where any such income, profits or gains or any part thereof are not specifically receivable on behalf of any one person, or where the individual shares of the persons on whose behalf they are receivable are indeterminate or unknown, the tax shall be levied and recoverable at the maximum rate, but, where such persons have no other personal income chargeable under this Act and none of them is an artificial juridical person, as if such income, profits or gains or such part thereof were the total income of an AOP : Provided further that when part only of the income, profits and gains of a trust is chargeable under this Act, that proportion only of the income, profits and gains receivable by a beneficiary from the trust which the part so chargeable bears to the whole income, profits and gains of the trust shall be deemed to have been derived from that part. (2) Nothing contained in sub-s. (1) shall prevent either the direct assessment of the person on whose behalf income, profits or gains therein referred to are receivable, or the recovery from such person of the tax payable in respect of such income, profits or gains."
(3.) THE Supreme Court in the said decision of W. O. Holdsworth (Supra) did not consider the above provisions of s. 41 of the IT Act, but considered only s. 11(1) of the U. P. Agrl. IT Act, 1948, which runs as follows : "Where any person holds land, from which agricultural income is derived, as a common manager appointed under any law for the time being in force or under any agreement or as receiver, administrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income-tax by each person on the agricultural income derived from such land and received by him, shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income-tax so payable by each such person and shall be liable to pay the same." In dealing with the said section of the U. P. Act their Lordships of the Supreme Court (Bhagwati, S. K. Das and Gajendragadkar JJ.) considered the expression "trust" and "trustee" and referred to both English and Indian laws and ruled that the legal estate is vested in the trustee who held it "for the benefit of" the beneficiaries and not "on their behalf", because the said two expressions are not synonymous and conveyed different meanings.;