STATE OF KARNATAKA Vs. C P CHANDRASEKHAR

JUDGEMENT

(1.) The Division Bench consisting of Venkataramiah. J; and Venkatachala, J. has referred the following question of law for the opinion of the Full Bench:

(2.) The only other question that requires examination is as to whether Section 10 (1) (a) of the Act applies or Section 10 (2) (a) of the Act applies to the case of a trustee holding agricultural lands and receiving the agricultural income partly for his own benefit and partly for the benefit of others. For the sake if convenience, we extract the provisions of Section 10 (1) (a) and Section 10 (2) (a) of the Act:

(3.) The language of Section 10 (1) (a) of the Act makes it clear that in the case of agricultural income taxable under the Act which the trustee appointed by written agreement, is entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from the trustee, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such agricultural income is receivable and all provisions of the Act shall apply accordingly. Section 10 (1) (a) of the Act refers to receipt of income by the trustee on behalf of any person. But, under the law of trust, the trustee cannot be regarded as receiving income of the trust property on behalf of any person. The legal title vests in the trustee and he is entitled to receive the income of the trust property for the benefit of the beneficiaries. But, it appears to us that having regard to the context in which the expression "is entitled to receive on behalf of any person" is used, it has to be understood as meaning "entitled to receive for the benefit of any person." If the expression is not so understood, Section 10 (3) (a) of the Act, so far as trustees are concerned, cannot be given effect to and the provision to that extent becomes otiose. This Court had the occasion to construe Section 41 of the Indian Income-tax Act, 1922, in Rajamannar v. Commr. of Income-tax ((1964) 51 ITR 339) (Mys). Though in Section 41 (1) of the Indian I.T. Act. 1922, similar expression has been used, viz., "on behalf of as is used in Section 10 (1) (a) of the Act, their Lordships construed those words as meaning "for the benefit of", as otherwise, Section 41 (1) of the Indian Income-tax Act which relates to trust would be rendered otiose. The decision of this Court in Rajamannar's case has been affirmed, with approval, by the Supreme Court in Commr. of Wealth Tax v. Kripashankar Daya Shankar Worah AIR1971 SC 2463 , [1971 ]81 ITR763 (SC ), (1971 )2 SCC570 , [1971 ]SuppSCR968 . If the words "on behalf of any person" used in Section 10 (1) (a) of the Act are understood as meaning "for the benefit of any person" as laid down by this Court and the Supreme Court in the cases referred to above, it follows that Section 10 (1) (a) will apply to the case of a person who holds agricultural lands as a trustee and receives agricultural income for the benefit of others.