CHAKRAVARTTI, C.J. - (1.) THIS is a reference under s. 66 (1) of the Indian IT Act by the Calcutta Bench of the Tribunal of three questions of law, arising out of the assessment of a part of the income of a trust fund. The assessment was made in the hands of the trustee who is the Official Trustee of West Bengal and it is at his instance that the reference has been made. His learned counsel stated before us that if he had been assessed at the appropriate rate applicable to the income, he would have submitted to the tax without question; but since the Department assessed him at the maximum rate, he thought he could retaliate by raising some fundamental questions which were open to him under the law. Accordingly, he raised three questions all of which have been referred.
(2.) THE facts are as follows. On 21st Sept., 1943, the Maharajadhiraj of Darbhanga conveyed certain shares and securities unto a trust for the benefit of his step-mother, Maharani Rameshwarlata Saheba, shortly known as the Senior Rajmata. THE terms of the deed will have to be referred to in some detail later and it will be sufficient at this stage to say that, by the deed, the trustee was directed to pay the Maharani an allowance of Rs. 12,000 per month and to hold any surplus that might be left as a part of the trust fund. In the accounting years 1944-45 and 1945- 46, the full amount of the allowance was paid to the Rajmata and in each year a substantial balance was left in the hands of the Official Trustee. It is that balance which has been assessed at the maximum rate under the first proviso to s. 41(1) of the IT Act and it is the application of the maximum rate which is the principal grievance of the assessee. The Tribunal upheld the application of the maximum rate on the ground that the sum which the Official Trustee might receive from year to year as the surplus was an indeterminate one and it could not be said either that the amount was specifically receivable on behalf of any one person. Since there was the possibility that in some years there might not be any surplus at all and in some years the income received might not even be sufficient to pay the lady, the Tribunal thought that the case was one where all that could be said to be receivable by the trustee was an indeterminate sum and even that sum was not receivable specifically on behalf of any one person. That situation, the Tribunal thought, attracted the first proviso to s. 41(1) of the Act. As arising out of that order, the assessee formulated three questions of law to be referred to this Court and they have been referred in the following form : "(1) Whether, on the facts and in the circumstances of this case, the surplus in the hands of the Official Trustee, West Bengal, is taxable under the Indian IT Act ? (2) If so, are the provisions of s. 41(1) of the Indian IT Act applicable to such surplus and is tax leviable at the maximum rate under proviso to s. 41(1) of the Indian IT Act ? (3) Is such surplus liable to super-tax ?"
(3.) THE Tribunal does not deal, in its appellate order, with any question other than the one to which I have already referred. It would, therefore, seem that the first question referred to this Court does not arise out of the order at all. Mr. Mitra, who appears on behalf of the assessee, admitted that, as framed, the questions seemed to suggest that, in the view of the assessee, the income received by him by way of a surplus was not taxable income at all and that, so read, the question certainly did not arise out of the Tribunal's appellate order. He, however, explained that the point which he had meant to raise by the first question was that if, contrary to his contention, it was held that the first proviso to s. 41(1) of the IT Act was applicable to the surplus income, the consequence would be that the income would turn out to be not assessable at all under s. 41. It was such immunity from assessment that, Mr. Mitra explained, was intended to be raised by the first question. However, I shall deal with this matter further when taking up the questions for discussion. THE real question is the second one and that, as has been seen, bears upon the applicability or otherwise of the first proviso to s. 41(1) to the surplus income remaining in the hands of the Official Trustee after he had paid the allowance of the Rajmata. Before dealing with the question, it would be convenient to refer to the manner in which the actual assessment has been made. The assessments for both the years in question are in the same form. The name of the assessee is "Official Trustee, Bengal, for Trust of Maharajadhiraj Sir Kameswar Singh Bahadur of Darbhanga for the benefit of Maharani Rameshwarlata Saheba (Residue income)". The assessable income has been computed by taking first the total receipts during the relevant accounting year and then deducting from it the amount of the allowance paid to the Rajmata and the commission payable to the Official Trustee. The balance has been taken as the amount assessable in the hands of the Official Trustee as the "residue income". The sum of Rs. 1,44,000 paid to the Maharani and deducted in each of these assessments as expenditure, has been assessed separately but also in the hands of the Official Trustee as a representative of the Rajmata. The scheme of assessment followed by the IT authorities seems to have been that they took the amount of the allowance paid to the Maharani and therefore liable to be and capable of being assessed separately in the hands of the trustee on her behalf, or it may be that they took the amount as diverted to the Rajmata, even before it became income in the hands of the Official Trustee and, on that footing, they deducted the amount from the total receipts which came to the hands of the trustee during the year. The first, however, is the likelier basis. No question arises in this reference as regards the assessment of the amount of Rs. 1,44,000 which was the subject-matter of a separate reference which we have already disposed of. The whole question in the present case is whether the maximum rate was rightly applied to the surplus of Rs. 2,65,676 in the asst. yr. 1945-46 and the sum of Rs. 1,19,684 in the asst. yr. 1946-47.;