HARENDRA KUMAR ROY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference arises out of a deed creating a trust which was executed by the late Rai Harendra Kumar Roy Chowdhury Bahadur on 3rd Sept., 1930. By the deed of trust the settlor granted, conveyed, assigned and transferred unto the trustees several lands and other immovable property, mortgages of which he was the grantee, securities and investments and the goodwill of the settlor's banking and moneylending business as a going concern together with its assets, outstandings and liabilities. The properties are specified in schedules A, B, C and D and their value is expressed to be about rupees nineteen lacs. The first trustee was the settlor himself and upon his death or retirement his son Ganendra Kumar Rai Chowdhury should become the trustee and upon his death or retirement the grandsons of the settlor indicated in the instrument. The son, Ganendra Kumar Rai Chowdhury, is the present trustee. The deed directed the trustee to collect the income from all the trust properties and out of the income he should pay the costs and charges on the business and realising the income and outstandings, carry out the worship of the family deities in the same manner as the settlor had done up to the execution of the deed; maintain some specified educational institutions and a hostel on the same scale as the settlor; pay to charities (which are not described or indicated) up to the amounts stated; pay the expenses of pilgrimages of members of the family on such scale and at such times as the trustee in his discretion should think proper, and lastly, pay the cost of maintenance and medical attendance and treatment of the settlor, his sons, his grandsons and great grandsons and members of their respective families including their mothers, wives, and children and also the customary social ceremonies of any of them, the scale of expenditure being such as the trustee in his discretion should consider proper. Further the settlor's wife was to have the right of residence in the settlor's house; his daughters should be at liberty to reside in the house as long as their mother should live there. One daughter, named in the deed, was to receive Rs. 25 per month so long as she lived away from her mother during the latter's lifetime and from the rest of the family after her mother's death. A daughter in-law, the widow of predeceased son of the settlor, was to receive Rs. 25 per month and the son was to be paid Rs. 100 monthly whilst he acted as trustee. The trust was to continue for twenty five years from its creation and at the conclusion of that period the corpus of the trust property should devolve upon the settlor, if he were still alive, and it he had died meanwhile it would devolve upon the settlor's sons, grandsons and great grandsons as indicated in the deed.

(2.) THE settlor died in the year 1936. Until the Income-tax year 1939- 40 two assessments were made upon the income, one in respect of the profits from the business, which was in the hands of the trustee, and the other in respect of the income from the other sources and investments which also were in the hands of the trustee. THE first assessment was made upon the trustee as an individual and the second upon an HUF. In the year 1940-41 all the income of the trust was included in one assessment and tax was levied at the maximum rate. This reference concerns the last assessment and the points for decision are whether the inclusion of the whole of the trust income in one assessment is correct and also whether this income is subject to tax at the maximum rate.

(3.) THE learned Advocate on behalf on the respondent has contended that in so far as the present reference is concerned, since the income, profits are gains or any part thereof are not specifically receivable on behalf of any one person the operation of the proviso must apply without further consideration of the words which follow in the proviso. I prefer to rely upon the alternative, that where the individual shares of persons on whose behalf they are receivable are indeterminate the tax shall be levied and recoverable at the maximum rate. THE individual shares of the persons, namely, of the beneficiaries, on whose behalf the income of the trust is received by the trustee are certainly indeterminate and might well vary in respect of many of the cestui qui trusts from year to year according to the wish or even the whim of the trustee himself. That being so the provision of the proviso comes into operation and the tax which is leviable must be at the maximum rate prevailing during the year of the assessment.