vil Appeal Nos 80  81 of 1975
From the Judgment and Order dated 262781974 of the Gujarat High Court in IT Reference Nos 7 and 29 of 1973
SC Patel for the Appellant
Dr V Gauri Shanker and Ms A Subhashini for the Respondent
The Judgment of the Court was delivered by PATHAK CJ
The appellant is an assessee who derives income 867 from various sources including income from the Shrimati Arundhati Balkrishna Trust Ahmedabad
In assessment pro ceedings for the assessment year 1964 65 the Income Tax Officer found that a sum of Rs 10880 had been debited to the interest account maintained in the books of the Ahmeda bad Trust as interest paid to the Harivallabhadas Kalidas Estate Account
Upon further scrutiny he discovered that substantial debits totalling Rs219804 included withdraw als from the Estate Account by the Ahmedabad Trust on ac count of the personal expenses of the assessee
After taking into consideration earlier withdrawals from the Estate Account by the Ahmedabad Trust for the purpose of investment and making adjustments for deposits during the year the Income Tax Officer concluded that the net withdrawals from the Estate Account for personal expenditure were Rs310806 He held that the proportionate interest of Rs6199 out of the total interest of Rs 10880 paid by the Ahmedabad Trust to the Estate Account was referable to such withdrawals and
therefore constituted an inadmissible deduction
Similarly for the assessment year 1966 67 the Income Tax Officer found that a sum of Rs25496 had been shown in the books of account of the Ahmedabad Trust for the relevant previous year as interest paid to the Estate Ac count
He held that of this sum an amount of Rs12833 was referable to withdrawals for purposes other than investment and accordingly he disallowed the claim of interest to that extent
The assessee appealed to the Appellate Assistant Com missioner of Income Tax and failing there he proceeded in second appeal to the Income Tax Appellate Tribunal claiming that the entire amount of interest should have been allowed as a deduction for each year
An additional question raised in respect of the assessment year 1964 65 related to the point whether the assessee was liable to tax on the net income only received by her from the Trust or the income determined in accordance with the provisions of the Income Tax Act in the case of the Trust
The Appellate Tribunal dismissed the appeals of the assessee
At the instance of the assessee the Appellate Tribunal referred the following questions of law to the High Court of Gujarat in respect of the assessment year 1964 65 1 Whether on the facts and in the circumstances of the case the Tribunal was fight in not holding that out of the interest payment of Rs10880 Rs6199 was not an admissible deduction against the income from other sources 868 2 Whether on the facts and in the circumstances of the case the income includible in the total income of the assessee is income determinable as per provisions of the Income Tax 1961 in the case of the Trust or the income receivable by the assessee from the said trust The question referred to the High Court for assessment year 1966 67 was Whether on the facts and in the circumstances of the case the Tribunal was right in holding that out of the interest payment of Rs25496 Rs 12833 was not an admissible deduction against the income from other sources The High Court held that the question relating to the disallowance of part of the interest for the two assessment years was rightly decided against the assessee and in favour of the Revenue
On the second question in the reference for the assessment year 1964 65 the High Court held that the income includible in the total income of the assessee was income determinable in accordance with the provisions of the Income Tax Act in the case of the Trust and not the income actually received or receivable by the assessee from the Trust or according to the entries in the books of accounts of the Trust
In the result that question was also answered against the assessee and in favour of the Revenue
In regard to the question arising in each of the assess ment years 1964 65 and 1966 67 relating to the disallowance of part of the interest claimed as a deduction by the asses see the High Court relied on the view taken by it earlier in Shrimati Padmavati Jaykrishna vs Commissioner of Income Tax The judgment of the High Court was considered in appeal by this Court in Padmavati Jaikr ishna vs Addl
Commissioner of Income Tax Gujarat and this Court affirmed the view taken by the High Court
For the reasons which found favour with this Court in that case we must answer the question in the two appeals before us against the assessee and in favour of the Revenue
Turning to the additional question referred to the High Court fo r the assessment year 1964 65 it seems to us clear that what is assessable in the hands of the assessee must be the income of the Trust received by it on behalf of the asses see
It is apparent from section 1611 of the 869 Income Tax Act 1961 that a representative assessee that is to say a trustee as regards the income in respect of which he is representative assessee is subject to the same du ties responsibilities and liabilities as if the income were income received by or accruing to or in favour of him bene ficially and he is liable to assessment in his own name in respect of that income but any such assessment is deemed to be made upon him in his representative capacity only and the tax is levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him
And section 166 of the
Act clarifies that the provisions relating to the liability of a representative assessee will not prevent either the direct assessment of the person on whose behalf or for whose benefit income is receivable or the recovery from such person of the tax payable in respect of such income
The Income Tax Officer has the option to proceed either against the trustee or against the beneficiary but in either case the income to be assessed must be in the same figure
What the trustee receives as the income pertaining to the beneficiary is received by him under an obligation to pass on that income to the beneficiary
However in most cases administration charges and expenses have to be met out of the Trust s income and it is only the net income which reaches  the beneficiary
If the income had to pass directly to the beneficiary and not under trust through a trustee the beneficiary would have equally to meet those outgoings leaving a net income in his hands which for the purposes of the Income Tax Act would have been computed after reducing the gross income by the deductions admissible under the Act
It seems to us clear that it is not the income shown in the books of account of the Ahmedabad Trust actually paid to the assessee after deduction of the outgoings from the income received in the hands of the Ahmedabad Trust but the real income of the Ahmedabad Trust has to be included in the total income of the assessee after taking into consideration the different items of permissible deductions in relation to that income
We are of opinion that the High Court is right in the view which it has taken
In the result the appeals fail and are dismissed with costs
HLC Appeals dismissed


Summary:
A letter petition in regard to the Mental Hospital at Ranchi was considered as a public interest application under Article 32 of the Constitution and the Court called upon the State of Bihar to file its counter affidavit
At the same time the Court directed the Chief Judicial Magistrate to visit the hospital and submit a report about the conditions prevailing there
The hospital was in the sole management of the Health Department of the State of Bihar
The State of Bihar received financial contributions from the States of West Bengal and Orissa on the basis of the number of beds reserved for each State
The report submitted by the Chief Judicial Magistrate made a painful reading
In the affidavit submitted by the State of Bihar it was stated that the Government was aware of the conditions and had since taken some steps to improve the working of the hospital and had also drawn up a scheme to develop the hospital on the lines of NIMHANS in Bangalore
From time to time the Court had issued directions and made specific orders regarding provision of better food
clothing medical treatment housing and improvement of sanitation etc
While keeping the matter pending the Court HELD 1 In a welfare State it is the obligation of the State to provide medical attention to every citizen
The State has to realise its obligation and the Government of the day has got to perform its duties by running the hospital in a perfect standard and serving the patients in an appropriate way
318D E 2 It is clear that inspite of several orders made by this Court and assurances held out by the State Government of Bihar
the defects were not being remedied
The awareness PG NO 307 of the governmental authorities of the sordid situation prevailing in the hospital as admitted in the scheme furnished to the Court the non compliance in an effective way with the directions made from time to time by the Court and the general lethargy shown in rising from slumber leaves a clear impression that the institution cannot be run as a mental hospital of that magnitude unless there be change in the administrative set up the control is altered and a new service to patient oriented thrust given to the institution
3I8 C 3 The scheme which was furnished to the Court was a halfhearted one and no attempt therein was made to bring about any improvement except attending to certain obvious deficiencies and short falls
The Court had looked forward to a scheme of re orientation which the scheme did not even remotely touch
318F G 4 The State Government authorities have not been able to assess the priorities
There does not seem to be the slightest interest on the part of the persons handling the matter to improve the environment
In these circumstances it is difficult to leave the management exclusively to the Health Department of the State of Bihar if the institution has to run as a good and useful hospital
Association of the States of West Bengal and Orissa in the management is likely to bring about some positive result
It would therefore be much better if a Committee of Management is appointed with full powers to look after all aspects of the institution
319A B D 5 The Court accordingly constituted a Committee of Management for the Mental Hospital and gave directions regarding the financial contribution from the participating States and also laid down guidelines regarding the functioning and management of the hospital
The Court further directed that the Committee shall take expeditious steps to explore the possibility of transforming the hospital into the pattern obtaining in the hospital run by NIMHANS at Bangalore
321C D