Case: W. O. Holdsworth And Others Vs. The State Of Uttar Pradesh

2. The appellants are the trustees of the Estate settled on trust under the last will and testament dated 17th May, 1917, of one J. J. Holdsworth which inter alia comprised of a certain zamindari Estate known as the lehra Estate situate in the District of Gorakhapur, Uttar Pradesh.3. The clauses of the will so far as they are relevant for the purpose of this appeal provided that the trustees were to take possession of all real property in the United Provinces of Agra and Oudh and elsewhere in British India (including the houses at Lehra and Gorakhapur and the grounds thereof) and all live and dead stock in or about his estate in British India or any buildings thereon and the contents of any houses or stabling in British India belonging to him (which was called his estate) and manage the same in all respects and in such manner as they shall deem most advantageous and with all the powers of absolute owners. The trustees were to stand possesses of the net rents and profits of the settled estate after payment of the Government Land Revenue Tax, and of all management expenses, upon trust to pay thereout certain annuities to 12 annuitants therein mentioned. If the net rents and profits of the said Estate were less than seventy thousand rupees in any year or if the said Estate or any portion thereof shall be sold at less than twenty years purchase of the net rent of seventy thousand rupees or an equivalent proportion thereof in respect of the proportion so sold, the annuities bequeathed as above and for the time being payable except annuities Nos. (1), (2) and (3) were to abate proportionately and no such annuitant was entitled to have the deficiency of his or her annuity made good out of the rents and profits of the said estate in respect of any subsequent year. If there was no survivor alive then it was to go to William Orlando Holdsworth, the son of the testator. Seven of the said annuitants died and at the relevant period the following annuities were payable:(i) Mrs. J. C. Holdsworth) Mr. W. O. Holdsworth) Miss Lucy Marion Holdsworth – Rs. 50/(iv)Lt. Col. L.R.J.C. Wilkinson – Rs. 500/(v) Mr. Horace Claud Holdsworth – Rs.The trustees entered upon the trust and managed the trust properties in accordance with the terms of the said will. The Act came into force in 1949 and a notice of assessment of Agricultural50).5. The Additional Collector, Gorakhapur, the assessing authority for the area in question, by his order dated 14th December 1950, assessed the trustees to Agriculturalupon the total agricultural Income received by them, overruling their contention that the tax should be computed in accordance with the method of computation laid down in S. 11 (1) of the Act and that they should be called upon to pay the aggregate of the sums payable as Agriculturalby each of the five annuitants.6. The trustees preferred an appeal before the AgriculturalCommissioner, Lucknow, who by an order dated 22nd November 1951 upheld the order of the Additional Collector. He observed that the beneficiaries were neither jointly interested in the land held by the trustees nor in the agricultural income derived therefrom, and that the agricultural income of the Lehra Estate accrued to the trustees and not to the beneficiaries directly as it left the hands of the various tenants who paid rent or fromthat was done by the trustees themselves.7. The trustees then moved an application under S. 24 (2) of the Act before the AgriculturalBoard, U. P. for reference of certain questions of law to the High Court for its decision. The said Board however decided to act under the third proviso to S. 24 (2) of the Act and to consider the questions of law itself instead of referring them to the High Court for its decision. In the exercise of this power the Board held inter alia that the entire property vested in the trustees and that the latter could not claim the benefit of S. 11 of the Act and refused to make a reference.8. The trustees moved an application under S. 24 (4) of the Act before the High Court of Judicature at Allahabad praying that the High Court may be pleased to require the AgriculturalBoard, U.P. Lucknow, to state a case and to refer to the High Court certain questions of law arising in the case. The application was allowed by the High Court on 5th February 1953, and an order was passed directing the said Board to refer the relevant question of law to the High Court.9. Accordingly a statement of case was drawn up by the AgriculturalBoard and submitted to the High Court and the following question of law was referred for itson the facts and in the circumstances of the case the trustees can be said to be holding land on behalf of beneficiaries and can the beneficiaries be said to be jointly interested in the land or in the agricultural income derived therefrom within the meaning of S. 11 (1) of the U. P. Agricultural Income Tax Act,The said reference was heard by the High Court and by its judgment dated 19th April 1955, the High Court held that the trustees could be said to be holding land on behalf of beneficiaries but the beneficiaries could not be said to be jointly interested in the land or in the agricultural income derived therefrom within the meaning of S. 11(1) of the Act and accordingly answered the first part of the question in the affirmative and the latter half in the negative.11. Thereupon the trustees filed an application before the High Court under Art 133(1) of the Constitution for leave to appeal to this Court which was rejected with the result that the trustees applied for and obtained on 16th April 1956, special leave to appeal against the judgment of the High Court.

Court's reasoning:
23. These definitions emphasize that the trustee is the owner of the trust property and the beneficiary only has a right against the trustee as owner of the trust property. The trustee is thus, the legal owner of the trust property and the property vests in him as such. He no doubt holds the trust property for the benefit of the beneficiaries but he does not hold it on their behalf. The expressions "for the benefit of" and "on behalf of" are not synonymous with each other. They convey different meanings. The former connotes a benefit which is enjoyed by another thus bringing in a relationship as between a trustee and a beneficiary or cestue que trust, the latter connotes an agency which brings about a relationship as between principal and agent between the parties one of whom is acting on behalf another. Section 11(1) therefore only come into operation where the land from which agricultural in come is derived is held by such common manager, receiver, administrator or the like on behalf of, in other word as agent or representative of persons jointly interested in such land or in the agricultural income derived therefrom. Even though such persons were the beneficiaries cestui que trust under a deed of trust, they would not be comprised within the category of persons on whose behalf such land is held by the trustees and the trustees would not be included in the description of common manager, receiver, administrator or the like so as to attract the operation of S. 11(1). Trustees do not hold the land from which agricultural income is derived on behalf of the beneficiaries but they hold it in their own right though for the benefit of the beneficiaries.24. The beneficiaries are also not necessarily persons who are jointly interested in such land or in the agricultural income derived therefrom. The term "jointly interested" isin law and predicates an undivided interest in the land or in the agricultural income derived therefrom as distinguished from a separate or an individual interest therein. If on a true reading of the provisions of the deed of trust the interest which is created in beneficiaries is a separate or individual interest of each of the beneficiaries in the land or in the agricultural income derived therefrom, merely because they have a common interest therein, that cannot make that interest a joint interest in the land or in the agricultural income derived therefrom. The words "jointly interested" have got to be understood in their legal sense and having been used in a statute are not capable of being understood in a popular sense as meaning a common interest or an interest enjoyed by one person in common with another or others.25. If regard be had to the above construction put upon the terms of S. 11(1) of the Act, it follows that the appellants who were trustees of the deed of trust in the present case did not hold the land from which agricultural income is derived as common manager, receiver, administrator or the like on behalf of the annuitants and the annuitants were not jointly interested in the land or in the agricultural income derived therefrom with the result that S. 11(1) of the Act did not come into operation at all. The appellants were the legal owners of the trust estate and did not hold the land from which agricultural income was derived "on behalf of" the annuitants. Each of the annuitants, moreover, was separately or individually interested in the agricultural income derived from the land comprised in the trust estate to the extent of the annuity payable to him under the deed of trust and the interest of one annuitant was not affected by whatever happened to the interest of the other. There was thus no fulfillment of either of the two conditions prerequisite before S. 11(1) of the Act could come into operation at all.