1. This is a reference under sub-section (1) of section 66 of the Indian Income-tax Act, 1922 (hereinafter referred to as 'the Act'). The assessee before us is a court receiver appointed by this court in a suit filed on its Original Side, Suit No. 3415 of 1947. The assessment years with which we are here concerned are 1948-49, 1949-50 and 1950-51; the relevant account years are financial years ending 31st March, 1948, 31st March, 1949 and 31st March, 1950, respectively. The dispute relates to 1/3rd share of the income of the property in those relevant accounting years and the question that arises for decision is whether the said income is liable to be taxed under the provisions of the Indian Income-tax Act and of so whether the applicant before us is liable to be assessee in respect of the said income. The question arises thus : One Haji Alimohamed Haji Cassum owned extensive properties. He died testate on November 6, 1946, having made a will of the date November 30, 1944. We would later advert to the various clauses of this will. Suffice it to say that by the said will he left 1/3rd share of his property to certain charities. By the said will also he appointed, (1) his wife Bai Fatmabai, (2) Rustomji Dhanjishaw Dallas, (3) Navroji Merwanji Mehta and his two sons (4) Sulleman and (5) Cassum in case and when they shall respectively attain majority, executors and trustees of the will. After the death of the testator, one of the executors and trustees, namely, Rustomji Dhanjishaw Dallas, declined to act as an executor. After certain time, certain disputes and differences arose among the heirs of the testator as to the division and distribution of the estate left behind by the testator in accordance with the terms of the will. The executors felt that it would be in the interests of all the parties to have the estate administered under the directions of the court, and to have a receiver appointed in the manner provided in the will. On October 7, 1947, therefore, they filed the aforesaid suit, namely, Civil Suit No. 3415 of 1947, for the aforesaid purpose. A copy of the plaint is annexed as annexure 'D' to the statement of case. Paragraph 4 of the plaint mentions 'the plaintiffs in the course of administration of the said estate got the immovable properties left by the testator valued by Messrs. N. R. Wadia & Co., Architects Civil Engineers. According to the valuation made by the said architects as also according to the view of plaintiffs, the 1/3rd of the estate left by the testator will considerably exceed in value the payments directed to be made and set apart for charitable purposes, by the testator by his said will.' Paragraph 4 of the plaint further mentions that the testator for about 7 years prior to his death was ill and his said business was looked after by two of his said sons and the business had been continued even after the death of the testator under the supervision of these two sons with the mutual consent of an major heirs of sound mind. It has also been mentioned in the said paragraph that there are certain liabilities of the estate which have to be met, and outstanding to be recovered. Paragraph 6 mentions that 15 properties worth over Rs. 12 lakhs have been handed over to the heirs of the deceased according to their shares and allotment has been made in accordance with valuation made by the architects as against their respective shares, and remaining properties that still remain to be distributed or divided are of over Rs. 20 lakhs in value and in respect of division of this remaining properties there are certain disputes between the heirs. Some of the heirs proposed that these properties should be sold by public auction, while some other heirs proposed that these properties should be sold by private contract with the consent of major heirs. This paragraph, however in the terms mentions that there was no dispute amongst the heirs as regard the amount as directed by the testator to be set apart and utilised for charitable purposes and they proposed to put the said directions as regards applications of the moneys for charitable purposes on a proper footing by having regular declaration or declarations of trust prepared with plaintiffs as trustees. Under these circumstances the plaintiffs felt and were advised that it would be in the interest of all the parties and a saving of considerable sum of moneys to the estate and consequently also to charity if the estate is administered by and under the directions of this court and a receiver is a appointed with power to sell the remaining properties and to divide the net estate divisible among the heirs according to their shares. In paragraph 7 the plaintiffs stated that they were ready and willing to account for the administration and management by them of the said estate up to the time for the receiver is appointed. By an order dated July 15, 1949, made by this court Sulleman Haji Alimohamed Haji Cassum, i.e., the son of the testator as well as the executor under the will, who also was a 2nd plaintiff to the suit, and Mariambai, wife of the testator and also the executrix and trustee under the will, who was 3rd defendant to the suit, were appointed private receivers. Subsequently, by an order of this court dated June 30, 1950, the joint receivers were discharged and in their stead a court receiver was appointed as a receiver of the estate.
2. The Income-tax Officer issued notices for assessment of the income earned by the estate, and the returns for the aforesaid three assessment years were filed by the joint private receivers. Return for the assessment year 1948-49 was filed by the joint receivers on January 19, 1950 of assessment year 1949-50 on February 3, 1950, and of assessment year 1950-51 on April 24, 1952 (return is dated August 30,1951). After the returns were received in the office, the Income-tax Officer however issued notice under sections 23(2) and 23(3) of the Act to the court receiver. In pursuance of this notice, the court receiver appeared before the Income-tax Officer. Neither before the Income-tax Officer nor before the Appellate Assistant Commissioner the court receiver had raised any objection as to the competence of the Income-tax Officer to assess the income in the hands of the court receiver. However, when the matter came before the Tribunal, the court receiver raised an objection that in the circumstances of the case, assessment on the court receiver for the aforesaid three assessment years was bad and invalid in law. Even otherwise, he contended that he was not liable to be assessee for the income which has been received by the joint receivers in the previous years relevant to the assessment years. On an application by the court receiver, he was allowed by the Tribunal to raise these contentions. The argument advanced on his behalf was that the (court receiver) was not in receipt of the profits during the period the income was earned and, therefore, he was not assessable in respect thereof. The Tribunal rejected this contention on the ground that there was continuity in the office of the receiver and the change of the incumbent of that office did not alter the position. The decision in Asit Kumar Ghose v. Commissioner of Agricultural Income-tax, which was cited on behalf of the court receiver before the Tribunal, was held by the Tribunal as not applicable to the facts of the case. The decision of the Tribunal on this aspect of the case has given rise to the question as regards the liability of the court receiver to be assessee on the income in respect of these aforesaid three assessment years.
3. Turning to the second aspect of the case, the court receiver contended before the Income-tax Officer that the income to the extent of 1/3rd of the estate was exempt under section 4(3)(i) of the Act on the ground that the said share of the estate, namely 1/3rd, was held for charitable purposes. Thus, according to the court receiver, out of the total income arrived at for the three years the 1/3 part thereof was exempt from taxation under section 4(3)(1) of the Act. The exemption claimed was in respect of amounts Rs. 57,512, Rs. 57,113 and Rs. 51,922 respectively in the assessment of the aforesaid three years. The Income-tax Officer held that certain dispositions in clause 4 of the will were in the nature of a private trust and, therefore, the trust in respect of 1/3rd property could not be said to be wholly for charitable purposes. The exemption would apply only in respect of that portion of the income which is only used for religious or charitable purpose or which is actually set apart for such purposes. On the material before him, the Income-tax Officer held that there was no evidence establishing these facts and he therefore taxed 1/3rd of the income in the hands of the court receiver under section 41 of the Indian Income-tax Act. The statement of case does not show what the Income-tax Officer did in respect of the remaining 2/3rd share of the income. However, a copy of the assessment order made for the assessment year 1948-49 has been produced before us and it shows that the income has been divided in two parts : 1/3rd under the head charity and 2/3rd under the head other beneficiaries 1/3rd income is assessee in the hands of the nine heirs separately according to their share in the estate under the Mohammadan law. The 1/3rd share of income has been shown Rs. 67,517 and 2/3rd share of income has been shown as Rs. 1,51,836. We have been informed that the assessment of other two years were also on the same lines. In appeal the Appellate Assistant Commissioner took the view that no trust or legal obligation on any specific property was established and in this view of the case, he rejected the applicant's claim. The Appellate Assistant Commissioner however did not record his finding on the question as to whether the legacies mentioned in clause 4 of the will were for public charitable purposes or not. In a further appeal before the Tribunal, the Tribunal took the view that unless the administration of the estate was complete no trust or legal obligation could emerge. The administration was not complete during the relevant years and the executors were not, therefore, holding the properties as trustees for and on behalf of the clients. In this view of the matter, the Tribunal dismissed the appeal. The Tribunal also did not record its findings as to whether the legacies mentioned in clause 4 of the will were for public charitable purposes or not. On an application made by the court receiver, the Tribunal has drawn up a statement of the case and has referred to us the following two questions of law :
'(1) Whether on the facts and in the circumstances of the case the assessment made for these assessments years 1948-49,1949-50 and 1950-51 on the court receiver appointed by orders of the court dated August 30, 1950, are validly passed
(2) Whether on the facts and in the circumstances of the case, 1/3rd of the remaining property mentioned in clause 4 of the will dated November 30, 1934, could be said to be held under trust or other legal obligation within the meaning of section 4(3)(1) of the Indian Income-tax Act ?'
4. When the reference came for hearing before us, we felt some difficulty in answering the second question, because the Tribunal had not recorded its findings on the question as to whether the legacies mentioned in sub-clauses (a) to (g) of clause 4 of the will, or any one or more of them, were for religious or charitable purposes within the meaning of section 4(3)(i) of the Act. We, therefore, directed the Tribunal to submit a supplemental statement of the case regarding its finding on the aforesaid question. The findings recorded by the Tribunal in the supplemental statement of the case are on the various sub-clauses of clause 4 of the will are as follows :
(1) The Purpose of sub-clause (a) is religious. (2) The Purpose of sub-clauses (b), (c) and (e) is charitable. (3) The purpose of sub-clauses (d) and (f) was not wholly charitable nor was any recognized part set apart for charitable purpose till the scheme has been framed by the High Court. From October 17, 1950, i.e., the date on which the scheme has been framed by the High Court, the purpose is wholly charitable.
(4) The purpose of sub-clause (g) is not charitable.
5. The arguments advanced by counsel before us were first on the 2nd question and then on the first question. We would proceed to consider these questions in that order. We, therefore, consider the second question first. Mr. Kolah contends that the Tribunal was in error in holding that unless the administration of the estate was complete no trust or legal obligation would emerge and that the executors would not be holdings the properties behind by the testator as trustees for and on behalf of the legatees unless and until the entire administration of the estate was complete. According to Mr. Kolah, each case will have to be judged on its own facts. It cannot be said as a rule of universal application that unless the administration is complete the executors could not hold any part of the property left behind by the testator for and on behalf of the legatees. According to Mr. Kolah, a trust or legal obligation would emerge when the executor assents to hold a specified property for the benefit of the legatees. The assessment of the executor may be either express or could be inferred from his course of conduct Mr. Kolah placed reliance on a decision in Commissioner of Income-tax v. Estate of late Sri. T. P. Ramaswami Pillai.
6. Mr. Joshi appearing for the Revenue on the other hand in the first instance contends that the statement of case shows that the contention raised by the court receiver before the income-tax authorities and the Tribunal was that 1/3rd income of the property was held on trust for charitable purposes which shows that the case put forward by the Income-tax Officer and the Tribunal was that a charge was created on the 1/3rd income for charitable purposes. According to Mr. Joshi, there was no case put forward before the Tribunal that any property was held under trust or under legal obligation the purpose of which was religious or charitable. When the charge is created merely on income and no trust is created in respect of property, no exemption under section 4(3)(i) of the Act was available to the assessee. He placed reliance on a decision in Raja's P. C. Lall Chaudhary v. Commissioner of Income-tax. Mr. Joshi's alternative contention is that till the legacies are assented to by executors expressly or by necessary implication either by handing over the properties to the legatees or by setting apart properties for being handed over to the legatees, it cannot be said that the executor is holding a property under trust or under legal obligation. According to Mr. Joshi further properties that stage is reached only when the administration is complete and the properties allotted to the respective legatees are ascertained. Mr. Joshi further argues that the will directs the executors to set out apart 1/3rd property, to carry out the directions given by the testator in sub-clauses (a) to (g) of paragraph or clause 4 of the will. That setting apart is to take place after the debts have paid. The plaint shows that certain debts have still remained to be paid. The administration is thus not complete not has any property been set apart for religious or charitable purposes. and unless administration is complete it cannot be said that any property is held under trust or legal obligation the purpose of which is religious or charitable. According to Mr. Joshi, unless the administration is complete, the executors cannot assume the character of trustees. In support of his contention he referred us to an unreported decision of this court in Income-tax Reference No. 28 of 1959 Executors of the Estate of the late Bai Dossibai N. Belgaumwalla v. Commissioner of Income-tax decided on 19th September, 1961. It is necessary first to consider whether the contention raised by the court receiver before the income-tax authorities or the Tribunal was that a charge was created on 1/3rd income in favour of charity and not that the 1/3rd property was held under the legal obligation the purpose of which was charitable. In support of his argument, Mr. Joshi referred us to the following sentences in paragraph 11 of the statement of case :
'On the strength of the clause 4 it was claimed before the Income-tax Officer that income to the extent of one-third of the estate is exempt under section 4(3)(1) on the ground that it is held for charitable purposes.'
7. Laying emphasis on the word 'it' Mr. Joshi argues that the word 'it' refers to income and what was said to be held for charitable purposes was the income and not the property yielding that income. This is the only material on the basis of which Mr. Joshi has advanced his argument. With respect, we find it difficult to accept his argument. The assessee claimed exemption in respect of income 'to the extent of one-third of the estate' and the exemption was claimed under section 4(3)(1). When we turn to section 4(3)(i) it becomes clear that the exemption is claimable only when it is urged that property is held under trust or under legal obligation and not merely when the income of the property is held under trust or under legal obligation. The word 'it' refers to estate and not to the word income. No doubt is however left when we turn to the appellate order of the Tribunal which is annexure 'C' to the statement of the case. We find that the contention raised was that the 1/3rd share in the property was held under trust. This aspect of the case the Tribunal dealt with in paragraph 12 and 13 of its order and the material observations of the Tribunal are as under :
'Thus, the position is clear that until the estate is fully administered, i.e., all the expenses have been discharged and the legacies have been paid off, there can be no ascertainment of the residence. We have already quoted a portion of paragraph 5 of the plaint wherein the executors themselves stated that there were certain liabilities of the estate which had to be met and outstanding to be recovered. We have also already extracted the relevant passage from the written statement filed by the Advocate-General of Bombay. These, read with paragraph 4 of the will-on which the claim for exemption under section 4(3)(i) is founded-show that during the material time, the administration of the estate was not complete and no trust or to other legal obligation had emerged. No material was placed before us to show that the administration was complete and that a trust or legal obligation in the nature of trust had come into existence. In the absence of any such material, we are not in a position to hold that the provisions of section 4(3)(i) will apply.'
8. These observations leave no doubt that the contention that was raised on behalf of the court receiver before the Tribunal was that 1/3rd property, and not merely the income of 1/3rd property, was held trust. The Tribunal taking the view that unless the administration is complete, no trust emerges, has rejected this contention. It is therefore necessary to consider whether in each and every case completion of administration of the estate is a condition precedent to the emergence of a trust or legal obligation. As already stated, Mr. Joshi has placed reliance on our decision in the Belgaumwalla Trust case referred to above. We have carefully gone through the judgment and we are unable to find that we have laid down any such rule of universal application. No doubt, we have held in that case that in the circumstances of the case the trust would not emerge till the administration was complete. Now the dispute in that case related to the income of certain factory and income of certain other property. The claim on behalf of the assessee was that the executors had held the factory and the other property as trustees under a trust for charitable purposes and, therefore, the income of the factory was exempt under section 4(3)(i) of the Act. After examining the provisions of the will in detail at page 12 of the typed copy of the judgment, we held, 'regarding the will as a whole and the two clauses in particular, in our opinion, the first charge created by her on the said income is for the payment of legacies, if necessary, and it is only as and when found that the income of this property is not required for payment of legacies that a legal obligation is created for application of the income to the purposes mentioned in clause 12 of the will. In our opinion, therefore, on the construction of the will, it appears that the trust in respect of the Hubli factories comes into existence on the ascertainment that its income is not required for payment of legacies'. We then examined clause 4 of the will under which, according to us, a trust has been created. We further observed that 'this construction finds further support from the language of clause 14 and in our opinion the trust is really created by clause 14 of the will. In this clause she has directed that as to whatever properly there may be left belonging to her, she gave all that to her trustees for being utilised for charitable purposes mentioned in clause 12 above. Had she by clause 12 created a trust in respect of the Hubli Factory as from her death, clause 12 would have been couched in different language. clauses 14 in that case would have been restricted to properties other than the Hubli factories mentioned in clause 12. Such, however, is not the case. Clause 14 relates to all her property, that is, left after the expenses mentioned in the will have been incurred and the legacies purposes, in our opinion, therefore, comes into existence on the conclusion of the administration of the estate, i.e., after all the expenses have been incurred and the legacies mentioned in the will had been paid or at the most at the point of time when it is ascertained that the funds in the hands of the executors were sufficient to carry out the bequests made in the will.'
9. It would be seen that our finding in that case that the trust did not emerge till the administration was complete was in the context of the facts of that case and not as a general proposition of law of universal application.
10. Now, to entitle a person to, claim exemption under section 4(3)(i), as it then stood, of the Act in respect of income from any property, it is necessary for him to establish :
(1) that the property from which the income is derived was held under a trust or legal obligation,
(2) the purpose of the trust or legal obligation was of a religious or charitable nature, and
(3) in the case of property so held in part only for such purpose the income-tax has, in fact, been applied for such purpose and finally set apart for application thereto.
11. For creation of a trust, the following facts should, with certainly, be established :
(1) intention on the part of the author of the trust to create a trust. (2) the trust property or the subject of the trust, (3) purpose or object of the trust, and (4) beneficiary under the trust.
12. On ascertaining these facts it has been found at what point of time these conditions are fulfilled giving rise to a trust or legal obligation. We would therefore first examine the relevant provisions of the will in the present case.
13. In paragraph 1 of the will, Haji Alimohamed Haji Cassum, the testator, has stated that he had revoked all former wills, codicils and testamentary instruments made by him and was making the last will. He appointed the aforesaid five persons as his executors and trustees. In paragraphs 2 he appointed his wife as guardian of his infant children during their respective minorities. In paragraph 3 he affirms the gifts made by him in his lifetime of all jewels, ornaments, trinkets, wearing apparels, etc., to his wife. The preamble to paragraph 4 provides :
'After paying and providing for my funeral expenses and the expenses of obtaining probate if probate is taken out and debts, if any, I direct that my executors and trustees shall set apart 1/3rd of my remaining property estate and effects movable and immovable whatsoever and wheresoever situate and I dispose of the said 1/3rd as follows :'
14. Then follow sub-clauses (a) to (g). It may be stated that we have already stated the findings of the Tribunal in respect of the said sub-clauses (a) to (g). It is further necessary to mention that in sub-clauses (g) there is no disposition of property. On the other hand that sub-clauses only relates to what should be done after the bequests mentioned in sub-clauses (a) to (f) are carried out. Sub-clauses (g) is in the following terms :
'After meeting and providing for the aforesaid legacies bequests and dispositions given or made in sub-clauses (a) to (f) above the rest and residue which may remain of the said 1/3rd of my property estates and effects movable and immovable shall fall into and form part of the remaining 2/3rd of my estate and effects to be divided and distributed among my heirs according to Sunni Mohamedan Law....'
15. It would be seen that the scheme of clause 4 of the will, in brief, is : First, to pay the funeral expenses, expenses for obtaining a probate and debts, if any, and then to set apart 1/3rd of the remaining property for carrying out certain dispositions mentioned in sub-clauses (a) to (f) of clause 4 of the will. If, after meeting and providing for these dispositions out of the 1/3rd property any is left, then that residue has to go to his heirs as would the remaining 2/3rd property. Clauses 5 of the will deals with what is to happen if 1/3rd share is not sufficient to carry out the dispositions made by the testator in sub-clauses (a) to (f) of clause 4 of the will. In brief, it directs that the dispositions mentioned in sub-clauses (a) and (b) should be carried out in full and the remaining dispositions should abate proportionately. Clauses 6 of the will gives the executors and trustees absolute discretion to carry out the bequests and legacies either by paying to the legatees in the shape of cash in the shape of movable or immovable property. Clause 6 further gives authority to the executors and trustees to get the movable and immovable property valued by independent experts or values. Clause 7 gives direction that the remaining 2/3rd share of the said estate and effects movable and immovable whatsoever and wheresoever situate shall be divided and distributed between his heirs according to the Sunni Mohamedan law. Rest of the clauses are not material.
16. Having regard to these material provisions of the will, it is clear that the case now before us is distinguishable on a very material particular from the case of Belgaumwalla Trust. The trust created there was of the residue of the estate after certain specific legacies had been paid. Here, in the instant case, the trust is not created of the residue, but on the other hand, the trust created by the testator is of a specified share of the property, namely, the 1/3rd share of the property. It would be noticed that the testator was a Muslim and under the Mohamedan law he could dispose of by will only 1/3rd share of his property. In other words, the testator had disposing power over only 1/3rd share of his property. Having regard to the limitations on the testator disposing powers, it is apparent that he has created the trust of the entire property over which he had disposing power. It is also clear that the persons whom he appointed executors were also appointed by him as trustees for giving effect to the trust which he intended to create by the will. The question next that arises is at what point of time the trust, which the testator intended to create of 1/3rd share of his property, had come into existence under the provisions of the will. It would be seen that according to clause 4 of the will all that is required to be done prior to setting apart 1/3rd property is to defray the funeral expenses, expenses for obtaining probate if probate was required to be taken out and the discharge of the debts, if any. When these things are done under clause 4 of the will, then the trust would come into being. We have already referred to the trust envisaged under clause 4 of the will. Now the testator dies on November 6, 1946. We are here concerned with the period April 1, 1947, to March 31, 1948, and onwards. It could hardly be said that any funeral expenses had to be incurred in these assessment years. The testator was dead about 4 or 5 months prior to the commencement of the first accounting period itself. It has also not been found that in the assessment years any amount had to be paid by way of funeral expenses in respect of the testator. It has been found as a fact that no probate has been taken. There was obviously no expense. The expression 'debts if any' indicates that, on the date the testator was making the will, he was not in debt. He has not made any mention of his indebtedness. However, a provision has been under made for the payment of debts, if at all it happened that he has some debts to pay. It has not been found as a fact by the Tribunal that there was any liability or any debts worth the name which had remained to be paid which would affect the position of bringing into existence of a trust under clause 4 of the will. The Tribunal as well as Mr. Joshi in the arguments have laid some stress on the recitals in paragraph 5 of the plaint which is as under : 'There are certain liabilities of the estate which have to be met, and outstanding to be recovered', and it is the argument of Mr. Joshi that these recitals in paragraph 5 of the plaint clearly show that there were still some liabilities to be paid and unless these liabilities were met, a trust under clause 4 would not come into being. The argument at first appears attractive, but it cannot be laid down as a general rule that when debts of the testator are not paid, a trust cannot come into being. It would depend on the facts and circumstances of each case. There may be cases where the indebtedness of the testator is such as would come in the way of the creation of the trust. On the other hand, the indebtedness may be such which would not in any manner come in the way of bringing into existence a trust. If the property be very large as in the present case and the indebtedness small it could hardly be said that the existence of a debt would come in the way of creation of a trust. There can hardly be any doubt that the property left behind by the testator in the present case is extensive and a valuable one. The will would show that the heirs of the testators are entitled to get only 2/3rd share in the property. The recitals in the plaint would show that the entire property has been valued and on the basis of this valuation property worth over Rs. 12 lakhs has been allotted to these heirs according to their shares, property with Rs. 20 lakhs still has remained to be divided and there is a dispute about it. One-third share in the testator property is of considerable value and would be sufficient to carry out the dispositions made by the testator in paragraph 4 of the will. No doubt, the plaint mentions that certain obligations have to be met but neither the Income-tax Officer nor the Tribunal has stated the extent thereof. Mr. Kolah in the course of his argument has mentioned that only a few electricity bills, sundry bills, etc., had to be paid at the time the plaint was filed and there was no indebtedness in its real sense. These being the circumstances, in our opinion, the mere fact that there were some liabilities to be met would not come in the way of bringing into existence the trust as envisaged by clause 4 of the will. We refer here to a decision in Commissioner of Income-tax v. Estate of Late Sri T. Ramaswami Pillai in which it has been held that there is no invariable rule that an executor cannot shed his character as an executor and assume the character of a trustee under the will, before all the debts are discharged and legacies are paid he can vest the property in legatees with mutual consent and hold the legacies as a trustee even before all the debts are discharged.
17. The question that next arises is whether the executors in the present case had shed their character as executors and assumed the character of the trustees under the will. In other words, whether the executors were holding a 1/3rd share of the property as trustees for carrying out the dispositions made by the testator in clause 4(a) to (f) of the will, or, at any rate, were holding 1/3rd share in the property under legal obligation to carry out the dispositions of the testator in sub-clauses (a) to (f) of clause 4 of the will. In our opinion, the test in each case is to find out whether the executors have assented to hold a property for the benefit of the beneficiaries. In other words, whether in the circumstances of the case it can be said that the executors had given their assent to vest the beneficiary interest in the 1/3rd property in the beneficiaries under sub-clauses (a) to (f) of clause 4 of the will. We have already said that such assent on the part of the executors could be inferred form the conduct of the executors. Regular conveyance or a deed indicating their assent is not necessary for the purpose of enabling them to hold property under a trust or legal obligation. Turning to the circumstances of the case, we find from the recitals in the plaint that the executors on entering the administration had got the property valued and, on the valuation made by independent surveyors, they found that 1/3rd share was more than sufficient to carry out the dispositions of the testator mentioned in sub-clauses (a) to (f) clause 4 of the will. About giving effect to the dispositions as well as about the valuation of the property there was no dispute amongst the heirs and they had all agreed to giving effect to the dispositions of the testator. Even in respect of properties worth about Rs. 12 lakhs there was no dispute amongst the heirs and property of that value was allotted to the various heirs of the testator towards their share. There was however some dispute relating to the division of the remaining property worth Rs. 20 lakhs. The mode suggested by some was that the property be sold by public auction, while the mode suggested by the others was to sell that property by private contract with the consent of the heirs who had attained majority, and it is principally this dispute that had brought the matter to the court. The plaintiffs have stated in the plaint that this position having been reached, they would now executing the regular conveyance to put on proper footing the directions given by the testator in paragraph 4 of the will. Recitals in paragraph 6 of the plaint in this respect are in the following terms :
'There is no dispute however as regards the amounts directed by the testator to be set apart and/or utilised for charitable purposes and the plaintiffs propose to put the said directions as regards application of the moneys for charitable purposes on a proper footing by having regular declaration or declarations of trust prepared with plaintiffs as trustees.'
18. From the aforesaid circumstances and these recitals in the plaint, there can hardy be any doubt that the executors had assented to hold 1/3rd property for the benefit of the legatees or beneficiaries under sub-clauses (a) to (f) of clause 4 of the will, prior to the date the plaint had been filed in the court. It would be seen that the plaint was filed in court on 7th October, 1947, prior to the completion of the relevant accounting year to the first assessment year 1948-49. There is also another circumstances in the case that gives support to this inference and, that is, the executors had kept in their hands only the 1/3rd share of the income. The remaining 2/3rd income was distributed by the executors to the heirs in accordance with their respective shares, and the order of the Income-tax Officer which has been filed shows that it is the heirs who had been taxed in respect of that income and not the court receiver. The order further mentions that the 1/3rd income in the hands of the executors was held by them for charity. Annexure 'F' is the preliminary decree made by this court in the aforesaid Suit No. 3415 if 1947. The decree directs the taking of certain accounts by the Commissioner for taking accounts and also, inter alia, directs 'AND THIS COURT DOTH FURTHER DECLARE that under the will of the said deceased dated the thirtieth day of November one thousand none hundred and thirty-four the legacies set out in the fourth paragraph of the will together with interest on such legacies at the rate of six per cent. per annum from the seventh day of November one thousand nine hundred and forty-seven are payable out of one-third of the estate left by the deceased as of seventh day of November one thousand nine hundred and forty-six and of the income of such one third from that date up to the time of distribution.'
19. The directions given by the court in the preliminary decree in respect of the 1/3rd income also is to utilise it in giving effect to the legacies mentioned in sub-clauses (a) to (f) of clause 4 of the will. Having regard to these circumstances and the conduct of the executors. We have no hesitation in holding that the executors had given their assent to hold 1/3rd property for the benefit of the beneficiaries or the legatees under clause 4 of the will prior to the completion of the first assessment year.
20. Mr. Joshi for the revenue however contends that the trustee's giving assent to hold 1/3rd property for the benefit of beneficiaries is not sufficient to hold that the said property is held under trust or legal obligation for the beneficiaries inasmuch as the 1/3rd share is not separated and specific items of properties are not allocated for this purpose. In other words, the argument is that it cannot be said with certainty that any particular property is held under trust for the said purpose and, therefore, no trust has come into existence. No doubt, 1/3rd share has not been partitioned and separated as such. But having known what the property is, there is no difficulty in knowing what its 1/3rd share is. It is a well-known principle that what can be ascertained is certain. In our opinion, it is not, in the circumstances of the case, possible to hold that there is any uncertainty about the trust property. It is indeed true that the executors had not executed a regular trust deed for the purpose of giving effect to the directions given by the testator in paragraph 4 of the will. Assuming that this factor would come in the way of bringing into existence of a full-fledged trust, there can hardly be any doubt that the executors having assented to hold 1/3rd share in the property vesting the benefits thereof in the beneficiaries, were holding it under a legal obligation to give effect to the dispositions mentioned in sub-clauses (a) to (f) clause 4 of the will.
21. The next question that arises is whether the purposes mentioned in sub-clauses (a) to (f) of clause 4 of the will are religious or charitable purposes. Sub-Clause (a) of clause 4 directs the executors and trustees to spend or cause to be spent up to Rs. 10,000 in reciting fatiahs and giving feasts, etc. The Tribunal has found the purposes of sub-clause (a) to be religious and there is no dispute about it. Sub-clause (b) directs the trustees to establish a lying-in hospital for poor Mohamedans and a dispensary at a cost of about Rs. 5 lakhs. The Tribunal has found this purposes to be charitable and for the benefit of the public. There is no dispute about it. Sub-clause (c) directs Rs. 1,00,000 to given to the trustees of the orphanage established by the testator's father. The Tribunal has found the said purpose as charitable and there is no dispute about it. Sub-clause (d) directs the trustees to give Rs. 50,000 to the trustees for the time being of the Muzafferbad Hall founded by the father of the testator to be held by them upon the following trusts, that is to say, to use the net profits and income thereof in repairs from time to time and in maintaining in good proper order and condition the said Muzafferbad Hall in replacing broken furniture, utensils, pots, pans, and other paraphernalia's therein which may be required to be replaced. Now the trust relating to Muzafferbad Hall was created under a deed of trust of date October 8, 1894, by the father of the testator. Annexure 'H' to the statement of the case is a copy of the remand report in which the relevant extracts from the aforesaid trust deed relating to Muzafferbad Hall and it reads thus :
'UPON TRUST to allow the any one member or members of the following five Memon Jamats being residents of Bombay, namely : ...'
22. It is not necessary to reproduce the entire clause. This clause indicates the manner in which the hall has to be utilised and the scheme is that certain Muslim Jamats who are residing in Bombay were, on permission being granted by the trustees, allowed to use the hall for the purpose of marriage, religious ceremonies, for holding meetings, etc., for a day, but not exceeding two days. If for any particular day no application was made by any member of the Jamat for holding any such ceremony, then the trustees in their discretion could grant the use of the hall to the members of other communities for the said purpose on paying certain charges. However, if there be days on which the hall is free, i.e., not having been given either to the members of the Jamat or to the members of their communities, then his son, Hajee Cassum Joosub, during his lifetime and after his death his nearest male descendants whether lineal or collateral were permitted to use the hall on permission being granted to them for use by the trustees. The clause further directs that if however again the use of the hall is required by any of the Jamats, then the Hajee Cassum Joosub or his male descendants must forthwith vacate the hall. On account of the aforesaid limited use of the hall granted to Hajee cassum Joosub and his male descendants, the Tribunal held that the purpose of sub-clause (d) was not entirely charitable. The Tribunal noticed that under a scheme framed by the High Court the said terms of the aforesaid trust deed of October 8, 1894, were varied. The scheme framed by the High Court took effect from October 17, 1950. The Tribunal held that from the date of scheme framed by the High Court it could be hardly said that the purpose of sub-clause (d) as varied by the High Court was not exclusively charitable, but till that date the purpose was not wholly charitable. Mr. Kolah contends that having regard to the terms of the trust deed dated October 8, 1894, the Tribunal was not justified in holding that even prior to October 7, 1950, the purposes of sub-clause (d) was not entirely charitable. There is considerably force in the contention of Mr. Kolah. It is indeed true that under certain circumstances and conditions, Hajee Cassum Joosub and his made descendants were allowed to use the hall. They were not members of the public but then it has to be noticed that the use of the hall granted to them was a very limited one and that was only when the hall was not wanted either by the members of any Jamat or members of any other community for the purposes of holding religious ceremonies and marriages, etc. In other words, the use granted to these persons was only if the hall was lying vacant and not wanted by the members of the public. Such a limited use of Muzafferbad Hall granted to Hajee Cassum Joosub or his male descendants cannot have the effects of changing the purpose of sub-clause (d) which was a charitable purpose, namely, effecting repairs to a hall predominantly intended for the use of the public. In our opinion, therefore, the purpose of sub-clause (d) is also in its entirely a charitable purpose. The purpose of sub-clause (e), the Tribunal has held, is charitable and there is no dispute about it. The Tribunal has held the purpose of sub-clause (f) not wholly charitable. Sub-clause (f) runs as follows :
'I give devise and bequeath my property at Abdul Rehman Street, bearing B-Ward No. 34(1), Street No. 274-277, on the ground floor on which I have at present my Pedhi, to the trustees of the deed of trust dated the 26th day of October, 1896, made between Hajee Cassum Joosub and others of the other part to be held by them for charitable purposes for Mohamedans, that is to say, upon the same trusts and with and subject to the same powers, provisions and declarations as those mentioned and contained in the said deed of trust of the 26th Day of October, 1896, which are known as the Kajipura Trust.'
23. Thus we find that there is a clear bequest to the Kajipura Trust of an ascertained item of the property of the testator. Mr. Joshi in the course of his argument conceded before us that it could be said that this item of the property was held in trust by the executors for charitable purposes. In view of this, it is not necessary to deal in detail with the findings of the Tribunal that the purpose of sub-clause (f) was not wholly charitable till 1950, i.e., till the date on which the High Court framed a scheme. The result thus is that the dispositions made in sub-clauses (a) to (f) of clauses 4 of the will are of a religious or charitable nature.
24. It is next contended by Mr. Joshi that having regard to the admission made by the executors themselves in the plaint, it cannot be said that the entire 1/3rd property was held by the trustees under a trust or legal obligation the purpose of which was exclusively religious or charitable. Now the argument is founded on certain admission made in the plaint filed by some of the executors in this court. Those admissions are that the property has been valued by independent valuers and on the valuation made by the valuers, and as also according to the view of the plaintiffs, the 1/3rd of the estate left by the testator would considerably exceed in value the payments directed to be made and set apart for charitable purposes by the testator in his will. The value of the entire estate would be about Rs. 35 lakhs. Property worth about Rs. 15 lakhs has been allotted to the various heirs in accordance with their respective shares and property worth Rs. 12 lakhs has still remained to be distributed. The value of 1/3rd of the entire estate comes to about Rs. 11 or 12 lakhs approximately. According to Mr. Joshi, to give effect to the disposition mentioned in sub-clause (a) to (f) of clause 4 of the will, property worth not more than Rs. 9.5 lakhs or Rs. 10 lakhs would be required, and the remaining property, namely, property to the extent of about Rs. 2 lakhs out of the said 1/3rd share cannot be said to be held in trust for religious or charitable purposes. There is some force in this contention. The matter however will have to be investigated by the Tribunal, when the case goes back to Tribunal in the light of the conclusions arrived at by us. The court receiver would be entitled to claim exemption in respect of income of that portion of the property out of the 1/3rd share which is required for the purpose of giving effect to the dispositions made by the testator in sub-clauses (a) to (f) of clause 4 of the will. Therefore, the answer to the second question will be that that part of the 1/3rd share as would be sufficient to give effect to sub-clauses (a) to (f) of clause 4 of the will could be said to be held under a trust or legal obligation. This brings us to the first question, and that is as regards the liability of the court receiver to be assessee in respect of these years.
25. The argument of Mr. Kolah is that the income of the relevant previous year relating to the three assessment years was not received by the court receiver at all, but on the other hand, the income of the first two years, namely, in respect of the relevant previous years for assessment years 1948-49 and 1949-50, was received by the executors. The income of the relevant previous year for assessment year 1950-51 was received partly by executors and partly by the private receivers. Therefore, the court receiver is not liable to be taxed. On facts it is clear that the income of the accounting year relevant to the assessment years 1948-49 and 1949-50 was received by the executors. The private receivers were appointed by the court on July 15, 1949. Even the private receivers had not received the entire income of the assessment year 1950-51. The private receivers had received part of the income of the accounting year relevant to the assessment year 1950-51. The private receivers were removed on June 30, 1950, and that was after the close of the relevant previous year relating to the assessment year 1950-51. The court receiver had not received any part of the income in any one of these three years. The assessment of the court receiver is under section 41 of the Act. Now the question to be considered is whether on the facts on record the income of these three years could be assessee in the hands of the court receiver. The argument of Mr. Kolah is that under the scheme of the Indian Income-tax Act as well as on the terms of section 41, under which the court receiver has been assessee, the person who could be assessee is only the person who has received the income. The person who has not received the income is not liable to be assessee save and except cases provided under section 24B of the Indian Income-tax Act. There is no provision in the Indian Income-tax Act which enables an Income-tax Officer to assess the receiver, who is for the time being in office, in respect of the income received by a person who was receiver in office during the relevant accounting year. Mr. Kolah in support of his contention has placed reliance on a decision in Asit Kumar Ghose v. Commissioner of Agricultural Income-tax.
26. Mr. Joshi on the other hand contends that there is a continuity in the office of the receivership. Receiver is an officer of the court. The incumbents of the office may change but the office of receivership has a continuity, whosoever may be its incumbent. The court receiver was therefore liable to tax in respect of the aforesaid three assessment years. The argument advanced by Mr. Joshi can hardly be of any assistance to the revenue, at least in respect of the income of the first two assessment years which had been received not by the private receivers but by the executors. Nothing is shown from which we would come to the conclusion that there is any continuity in the office of an executor and the office of a receiver. The property vests in the executor appointed under a will and he holds the property for the purposes of administration of the estate and for the benefits of the legatees to whom bequests have been made or legacies given. The executor derives his title and rights from the will whereas a receiver appointed by a court holds the property by reason of the order of the court. The property is held by a receiver not on behalf of either parties but it is held for the purposes of safeguarding the property and delivering it to the party which is held entitled to it by the court. There is this basic difference between the two. It could hardly be said that there is any continuity between the executor appointed under the will and the receiver appointed by an order of a court. The Calcutta High Court in Asit Kumar Ghose v. Commissioner of Agricultural Income-tax has held that the income received by the executor under a will is not liable to be assessee in the hands of a receiver who at the time of the assessment happens to be the receiver in the office. But on the other hand the person who is liable to be assessee is the executor himself. The Tribunal held that the aforesaid decision in Asit Kumar Ghose v. Commissioner of Agricultural Income-tax has no application to the facts of the present case, and the reasons given by the Tribunal are in the following terms :
'In that case the residuary legatee applied to the court for appointment of a receiver in place of the executors appointed under the law. Therefore, in such a case it is the executors who were divested of their duties and the receiver came on the scene. It was, therefore, possible to successfully contend that there was no relationship between the receiver and the executors and that the assessment proceedings taken against the executors could not be continued in their hands. In this case, the appointment of joint receivers was made in 1949 only at the instance of the executors and, therefore, there was continuation of the personality of the executors.'
27. It is difficult to agree with this line of reasoning of the Tribunal, and indeed this line of reasoning has not been supported by Mr. Joshi before us. It is difficult to assume that if a receiver is appointed at the instance of the executor himself then that receiver has a continuation of the personality of the executors. It is indeed true that, in the instant case, the plaintiffs who were executors had applied for appointment of a receiver. But on appointment of the receiver at their instance it cannot be said that the receiver had become the plaintiff. The property is held by the private receivers in order to safeguards it and to make it available to such party as the court may direct or for such purpose as the court may direct. In the circumstances, the line of reasoning adopted by the Tribunal cannot be accepted and this disposes of the reference relating to the first two assessment years.
28. Turning to the third assessment year, we have already stated that the income in respect of this year, namely, 1950-51, was partly received by the private receivers and the court receivers was appointed after the completion of the accounting year. The statement of the case shows that by an order made by the court on June 30, 1950, the private receivers were removed from the office of the receivership and instead the court receiver was appointed. In other words, by the same order the private receivers were removed and the court receiver was appointed in their place. In that sense it is possible to say that there was no break in the management of the estate by a receiver. The question for determination, however, is whether merely because of continuity in this sense, the court receiver is liable to be assessee. The Income-tax Officer has purported to assess the court receiver under section 41 of the Indian Income-tax Act, 1922. The material part of that section reads as under :
'41. In the case of income, profits or gains chargeable under this Act which..... any receiver... appointed by or under any order of a court.... are entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from such..... receiver.... in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this Act shall apply accordingly.'
29. From the language of the section it is clear that to attract the liability under section 41 it must be established that the receiver who is sought to be assessee is a person who has in fact received the income in the previous year relevant to the assessment year or was a person who was entitled to receive the income in that year. Assuming that there us any continuity in the office of the receiver, it is difficult to say that a receiver for the time being in office is the person who has received the income or was entitled to receive the income in the year in which he was not in office. It must be noticed that the liability imposed by section 41 is on 'such receiver' i.e., the receiver who had received or was entitled to receive income, profits and gains in the relevant year. Had the legislature intended to fasten the liability to be assessee on a receiver who was in office at the time of the assessment, the section would have been differently worded. To accept the contention of Mr. Joshi, in our opinion, would involve violence to the language used in section 41 of the Act. Turning to the general scheme of the Income-tax Act enacted in the charging section 3 and 4 and the sections relating to the filing of return and assessment, i.e., sections 22 and 23, it is apparent that the tax is imposed on the different units of assessment in relation to his or its income, profits and gains, as the case may be, received by him or it, during the previous year relevant to the assessment year. The units of assessment are as follows :
(2) Hindu undivided family,
(4) local authority,
(5) firm itself or the partners of the firm individually,
(6) other association of persons or the members of the
30. The word 'individual' has been held to be wide enough to include a group of persons forming a unit and includes a corporation created by a statute. Private receivers appointed by the court and the court receiver do not fall under any of the aforesaid units except 'individual'. If that be the true position, it is clear that the private receivers and the court receivers are not the same entity. If even there be any continuity in the office of receiver, there is identity established to shift the liability of the private receiver on the court receiver. The scheme of sections 22 and 23 is also that the unit of assessment that has received income that is chargeable to tax has the liability to file a return, and powers are given to the Income-tax Officer to issue notices to the different units to appear before him and to produce documents and evidence before the income-tax authorities to support the return filed by the assessee. In the event the assessee failed to comply with the notices power is given to the Income-tax Officer to make a best judgment assessment. This in brief is the general scheme of the Act. Wherever the legislature has intended to hold a person, other than the person who has received the income, assessable to tax, there is an express legislation in that matter. It is not necessary to go in detail, but, by way of illustration, we mat refer to section 24B which provides for cases where a person dies before his assessment has been completed, or there is a change in the joint family, or succession to the partnership. Sections 25, 25A and 26 are such other instances. There is no provision in the Act fastening on the successor receiver the liability to be assessee in respect of the income received by his predecessor in office in the previous year relevant to the assessment year. That being the position, in our opinion, the mere fact that there may be continuity of the office of receiver would not by itself be sufficient to enable the Income-tax Officer to assess the court receiver as he has purported to do in the present case.
31. For the reason stated above, we find it difficult to sustain the view taken by the Tribunal.
32. In the result, the answer to the first question is in the negative and the answer to the second question is in the affirmative in respect of that portion of the 1/3rd share of the property which is required to be held for the purposes of giving effect to the dispositions made in sub-clauses (a) to (f) of clause 4 of the will. The Commissioner of Income-tax shall pay the costs of the assessee.