Case: Commissioner Of Wealth Tax, Bihar Andorissa Vs. Kirpashankar Dayashankar Worah

(1962) Supp 2 SCR 902 = (AIR 1963 SC 433 ) this Court again proceeded on the basis that S. 41 applied to the trustees. 14. In Commissioner of Income-tax, Madras v. Managing Trustees, Nagore Durgha, 57 ITR 321 = (AIR 1966 SC 73 ), this Court was called upon to interpret the scope of S. 41 (1). Therein the question was whether Nattamaigars of Nagore Durgha who are considered as trustees in whom the properties of the Durgha vested and they would come within the scope of S. 41 (1) of the Indian Income-tax Act 1922. This Court answered that question in the affirmative. Therein also it was contended that as the property is vested in the managing trustee and he received the income in his own right and not on behalf of the beneficiaries though for their benefit the income in the hands of the managing trustee fell outside the scope of S. 41 (1) of the Act. Repelling that contention Subba Rao J. (as he then was) speaking for the Court, observed: There are two answers to this contention. The doctrine of vesting is not germane to this contention. In some of the enumerated persons in the section the property vests and in others it does not vest, but they only manage the property. In general law the property does not vest in a receiver or manager but it vests in a trustee, but both trustees and receivers are included in section 41 of the Act. The common thread that passes through all of them is that they function legally or factually for others; they manage the property for the benefit of others. That the technical doctrine of vesting is not imported in the section is apparent from the fact that a trustee appointed under a trust deed is brought under the section though legally the property vests in him. 15. In G. T. Rajamannar v. Commissioner of Income-tax, Mysore, (1964) 51 ITR 339 (Mys) while dealing with the scope of S. 41 (1), the High Court of Mysore had to deal with a contention similar to the one advanced in this case. Therein also the assessee relied on the decision of this Court in Holdsworths case, AIR 1957 SC 887 (supra). While rejecting the contention of the assessee the High Court held that the observations made by this Court in Holdsworths case must be understood in the light of the provision that this Court was considering in that case. The Court held that S. 41 (1) of the Income-tax Act 1922 is applicable to a case where income is derived from the trust property even though the trustee does not strictly speaking receive such income on behalf of the beneficiaries but is the legal owner of that income; the words on behalf of in S. 41 (1) must be construed as being equivalent to for the benefit of and further in the case of a trust where the beneficiaries are indeterminate, the income must be assessed at the maximum rate in the hands of the trustee in view of the first proviso to S. 41 (1). In the course of that judgment it was observed: But in the present case if we do not read that expression in the manner I have indicated, then a good portion of section 41 (1) and the first proviso thereto becomes otiose. It is not proper to construe that any portion of a provision in a statute is superfluous. Such a construction should be avoided except in extreme cases. Though as a normal rule the courts should give to the words used in the statute its normal meaning, occasions do arise when it becomes necessary to give a special meaning to a word. For the reasons mentioned above, I interpret the words on behalf of found in section 41 (1) and the first proviso thereto as equivalent to for the benefit of. 16. In Suhashini Karuri v. Wealth Tax Officer, Calcutta, 46 ITR 953 = (AIR 1962 Cal 295 ) the High Court of Calcutta held that the words on behalf of used in S. 21 (1) of the Act are synonymous with the expression for the benefit of. It further held that notwithstanding that the trustees hold property for the benefit of beneficiaries and not on their behalf, S. 21 (1) applies to them and they are liable to wealth tax only in the like manner and to the extent as it would be leviable upon and recoverable from any such beneficiary. The Calcutta High Court distinguished the decision of this Court in Holdsworths case, (AIR 1957 SC 887 ). The Bombay High Court in Trustees of Gordhandas Govindram Family Charity Trust, Bombay v. Commissioner of Income-tax, Central Bombay, (1968) 70 ITR 600 (Bom) disagreeing with the decision under appeal and following the decision of the Calcutta High Court in Suhashini Karuris case, AIR 1962 Cal 295 (supra) took the view that a trustee also came within the scope of S. 21 (1) of the Act. The same view was taken by the Allahabad High Court in Chintamani Ghosh Trust v. Commissioner of Wealth Tax, U. P. We think that the view taken by the Calcutta, Bombay and Allahabad High Courts is the correct view. 17. Now coming to the question whether the shares of the beneficiaries under the trust deed on the relevant valuation dates are determinate or indeterminate we have to bear in mind the fact that on those dates the Settlor as well as his wife were alive. They had a right to be maintained out of the income of the trust properties. They had also a right of residence in house, situate in that property. The two sons of the Settlor had a right to be maintained and educated. That being so, there is no doubt that on the relevant dates, the shares of the beneficiaries were indeterminate. Hence the trustee had to be assessed under S. 21(4) as it stood at the relevant time.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. Leaving out the unnecessary words, Section 21 to the extent material for our present purpose can be recast thus :In the case of the assets chargeable to tax under this Act which are held by a trustee appointed under a trust deed by a duly executed instrument in writing whether testamentary or otherwise, the wealth tax shall be levied upon and recoverable from the trustee in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf the assets we held and the provision of this Act shall apply accordingly8. It is plain from the language of Section 21 (1) that a trustee is also brought within its scope. But that section proceeds on the basis that a trustee is holding the trust property on behalf of one or more beneficiariesIn our opinion the ratio of that decision does not bear on the point under consideration though certain observations found therein may give some assistance to the respondent. Section 11 of the U. P. Agriculturaldoes not refer to trustees at all whereas Section 21 (1) of the Act specifically refers to trustees.It is true that it refers to a trustee as holding a trust property on behalf of other persons. The conception that the trustee is holding the trust property on behalf of others may not be in conformity with the legal position as contemplated by the Trusts Act but the legislature is competent in the absence of any restrictions placed on it by the Constitution to give its own meaning to the words used by it in a statute. There can be hardly any doubt that the Parliament while enacting Sec. 21 (2) of the Act proceeded on the basis that for the purpose of that Act the trustee is holding the trust property on behalf of the beneficiaries. The mere fact that this conception does not accord with the provisions of the Trusts Act does not invalidate Section 21 (1)It is true that a taxing provision must receive a strict construction at the hands of the Courts and if there is any ambiguity, the benefit of that ambiguity must go to the assessee. But that is not the same thing as saying that a taxing provision should not receive a reasonable construction. If the intention of the legislature is clear and beyond doubt then the fact that the provision could have been more artistically drafted cannot be a ground to treat any part of a provision as otiose.If the construction contended for on behalf of the respondent is accepted then a part of S. 21 (1) would become otiose. So long as the intention of the legislature is clear and beyond doubt, the courts have to carry out that intention. In our opinion the High Court did not take a proper view of the decision of this Court in Holdsworths case, AIR 1957 SC 887   (supra)17. Now coming to the question whether the shares of the beneficiaries under the trust deed on the relevant valuation dates are determinate or indeterminate we have to bear in mind the fact that on those dates the Settlor as well as his wife were alive. They had a right to be maintained out of the income of the trust properties. They had also a right of residence in house, situate in that property. The two sons of the Settlor had a right to be maintained and educated. That being so, there is no doubt that on the relevant dates, the shares of the beneficiaries were indeterminate. Hence the trustee had to be assessed under S. 21(4) as it stood at the relevant time.