COMMISSIONER OF INCOME TAX Vs. SHYAMARAJU K TRUSTEE

JUDGEMENT

(1.) WE propose to dispose of these petitions by the following common order inasmuch as the questions of law involved are the same.

(2.) THE facts of the cases fall within a narrow compass depending on the trust deeds which are all more or less family trusts. THE trusts represented by the trustees have been assessed by the concerned Income-tax Officer under the provisions of sub-section (1) of section 161 of the Income-tax Act, 1961, and the corresponding provisions under the 1922 Act, viz., section 41 of the latter mentioned Act. It is held that as a representative assessee, the trustee or trustees, as the case may be, is/are liable to pay tax to the extent the beneficiary or beneficiaries would be liable and form whom such tax is/are recoverable. THE Commissioner of Income-tax, Karnataka, has considered that such assessment orders are prejudicial to the interests of the Revenue and has, therefore, set aside the orders of assessment and directed the Income-tax Officer to assess the liability of the trustee or trustees in their representative capacity as an association of persons calling upon them to pay tax on the total income of the trust as a single unit. Aggrieved by such orders, the assessee-trustee or trustees preferred appeals to the Income-tax Appellate Tribunal, Bangalore Bench. In all the cases. THE Tribunal has set aside the order of the Commissioner holding that the assessments concluded by the Income-tax Officer concerned were correct and did not call for interference by the Commissioner. In those circumstances, the applications made before the Tribunal to get certain questions referred to this court for answer by this court, came to be rejected by the Tribunal. THErefore, the present petitions under sub-section (2) of section 256 seeking a direction calling for reference by the Tribunal stating the cases.

(3.) IN the first of the cases, the Supreme Court indeed held that the business was carried on by an order of the court in a suit for dissolution of partnership by partners through receivers after the business of the partnership had come to an end by directing the business to be carried on by receivers and income derived was income of the firm the dissolution of which had been sought in the suit and it was so carried on with the consent of the partners and, therefore, it was on behalf of the partners and as such the income of the business in the hands of the receiver was the income of an association of persons. Similarly, in the second of the cases relied upon, the business was carried on by the widow of the deceased assessee who had, among other things, left besides the business other properties also. IN a suit for partition by the son of the first wife of the deceased assessee, the business carried by the deceased assessee, viz., manufacturing of beedis which was being carried on by the widow and another person was directed to be carried on by the receivers appointed by the court before whom the suit for partition was pending. Soon after the son had filed a suit for partition, the widow also came to file a separate suit for partition of the same estate and made an application for appointment of receivers. That application was opposed by her step-son, inter alia, on the ground that she wanted a change in the receivers. IN any event, the receivers appointed by the court were ordered to continue and the business was carried on as before. The income accrued by such business was held to be the income of all the heirs and as such should be treated as income of an association of persons in the hands of the receivers as it was being carried on with their consent, because none of the heirs had objected to the appointment of receivers to carry on the family business, it was in those circumstances that the Supreme Court, in those cases, held that the income as such was the income of the association of persons who carried on the business and on whose behalf the business was carried on in reality by the receivers appointed by the court.