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Smt. Santimoyee Bose and ors. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 69 of 1965
Judge
Reported in[1969]74ITR133(Cal)
ActsIncome Tax Act, 1922 - Sections 41 and 41(1)
AppellantSmt. Santimoyee Bose and ors.
RespondentCommissioner of Income-tax
Appellant AdvocateS.K. Mitra and ;S.D. Ghosh, Advs.
Respondent AdvocateB.L. Pal and ;N.L. Pal, Advs.
Cases ReferredGuru Estate v. Commissioner of Income
Excerpt:
- .....be said to have been received by them in specified portions by each one of them. according to the tribunal maintenance was not awarded on the basis of the shares falling on the inheritance but on the basis of the needs. the tribunal held that the income-tax authorities were justified in assessing the said sum jointly as an association of persons. the tribunal therefore confirmed the orders of assessments made. the assessee made an application under section 66(1) of the indian income-tax act, 1922, for reference of certain questions. in view of the contentions made before us, it is necessary to set out the questions suggested by the assessees in their application under section 66(1) of the indian income-tax act, 1922, to the tribunal. the questions were : (1) whether, in the facts and.....
Judgment:

Sabyasachi Mukharji, J.

1. This reference arises out of the assessments for two assessment years, i.e., 1955-56 and 1956-57, for which the corresponding accounting periods were the financial years ending 31st March, 1955, and 31st March, 1956, respectively. The assessees are Smt. Santimoyee Bose, the widow, Smt. Rekha Bose, Smt. Ella Bose, Sri Asoke Bose, Sri Ajoy Bose, Sri Amit Bose and Sri Arabinda Bose, the daughters and sons of one Bhupendra Nath Bose, deceased. They have been assessed in the status ofan 'association of persons'. It appears that a suit being Suit No. 4059 of 1948 was filed in the High Court at Calcutta in December, 1948, by Smt. Santimoyee Bose on behalf of self and as the guardian and next friend of her six children, Rekha Bose, Ella Bose, Asoke Bose, Ajoy Bose, Amit Bose and Arabinda Bose, who were then minors, against her husband, Bhupendra Nath Bose, claiming for separate residence and suitable maintenance including arrears of maintenance for herself and her children. A special referee was appointed by this court and the special referee made a report which was confirmed by this court* in the said suit on the 1st February, 1955. By the order confirming the report of the special referee it was provided that a sum of Rs. 750 per month be allowed to the plaintiffs for their maintenance during the term of the natural life of the plaintiff, Smt. Santimoyee Bose, and until all the other plaintiffs attained majority. It further provided that a sum of Rs. 650 per month be allowed to the plaintiffs, Smt. Santimoyee Bosc, Asoke Bose, Ajoy Bose, Amit Bose and Arabinda Bose, for their maintenance after the plaintiffs, Smt. Rekha Bose and Smt. Ella Bose were married and a further sum of Rs. 500 per month be allowed to the plaintiff, Smt. Santimoyee Bose, as her maintenance after the two daughters have been married and all the sons had attained majority. It was further provided that under the said order a sum of Rs. 15,000 be allowed to each of the daughters, Smt. Rekha Bose and Smt. Ella Bose, for their marriage expenses. The premises No. 15, Nayan Chand Dutt Street, Calcutta, was declared to be suitable for the residence of the plaintiffs. The defendant in suit being Bhupendra Nath Bose was further ordered to pay to the plaintiffs a sum of Rs. 39,220 for arrears of maintenance up to 31st March, 1955. The Income-tax Officer served a notice on Smt. Santimoyee Bose and others in the status of 'association of persons' for the assessment years 1955-56 and 1956-57 under Section 34 of the Indian Income-tax Act, 1922, Thereafter, the Income-tax Officer completed the reassessment of the income of the assessees for these two years. The main contention before the Income-tax Officer was that under the decree the share of each of the plaintiffs was specific and determinate and as such the decretal amount could not be assessed in the status of the 'association of persons'. For the assessment years 1955-56, the Income-tax Officer determined the decretal amount accrued from the institution of the suit till 31st May, 1955, less payments made by the receiver, at Rs. 39,220 and the income from the dwelling house under Section 9(2) at Rs. 3,566 and determined the total income at Rs. 42,791. For the assessment year 1956-57 the Income-tax Officer determined the income from other sources, being the allowance in terms of the High Court figure at Rs. 750 per month, at Rs. 9,000 and the income from the dwelling house under Section 9(2) of the Indian Income-tax Act at Rs. 818 and determined the total income atRs. 9,839 and assessed these amounts on Smt. Santimoyee Bose and others in the status of 'association of persons'.

2. On appeal by the assessees, the Appellate Assistant Commissioner held that for the assessment year 1955-56, the amount of Rs. 39,220 did not accrue to the assessee on the date of the decree. He directed that the income for that year be determined at Rs. 9,823 including the income from the dwelling house. A contention was made before the Appellate Assistant Commissioner that the amount receivable under the decree should be assessed in the hands of each of the plaintiffs according to his or her individual share of the amount and not jointly in the status of an association of persons. The Appellate Assistant Commissioner, however, rejected that contention. The Appellate Assistant Commissioner heard the assessees' appeals for six years 1956-57 to 1961-62 together and disposed of the assessees' contention in these six appeals by a common order and held that the Income-tax Officer was justified in making the assessment on the assessee in the status of an association of persons.

3. Both the assessees and the Income-tax Officer preferred appeals before the Income-tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner. The Tribunal by a consolidated order disposed of the said appeals. In the appeals preferred by the assessees it was contended that the assessees should have been taxed on the basis of the quantum of maintenance falling to the share of each maintenance holder and not on the basis of all the maintenance holders taken together as constituting an association of persons. The departmental appeal questioned the exclusion of the amount of Rs. 30,220 representing the arrears of maintenance provided for by the High Court decree for the assessment year 1955-56. The Tribunal held that the amount paid as maintenance jointly to two or more persons could not be said to have been received by them in specified portions by each one of them. According to the Tribunal maintenance was not awarded on the basis of the shares falling on the inheritance but on the basis of the needs. The Tribunal held that the income-tax authorities were justified in assessing the said sum jointly as an association of persons. The Tribunal therefore confirmed the orders of assessments made. The assessee made an application under Section 66(1) of the Indian Income-tax Act, 1922, for reference of certain questions. In view of the contentions made before us, it is necessary to set out the questions suggested by the assessees in their application under Section 66(1) of the Indian Income-tax Act, 1922, to the Tribunal. The questions were :

(1) Whether, in the facts and circumstances of the case, the shares of the decreeholders in the maintenance awarded in the decree dated 1st February, 1955, passed by an order of the hon'ble High Court in Suit No. 4059 of 1948 are equal.

(2) If the answer to question No. (1) is in the affirmative whether the assessment should be made rateably on the amount receivable by each of the decreeholders or otherwise.

3. The Tribunal has referred to this court the following question of law under Section 66(1) of the Indian Income-tax Act, 1922 :

' Whether, on the facts and in the circumstances of this case, the Tribunal was right in holding that the assessees were jointly entitled to the maintenance of Rs. 750 per month awarded by the decreee dated 1st February, 1955, of the Calcutta High Court in Suit No. 4059 of 1948, and that the assessments for the years 1955-56 and 1956-57 have been correctly made on the assessee in the status of the association of persons '

4. Before us, Mr. Sukumar Mitra, learned counsel for the assessee, contended that, in order to constitute an association of persons, the persons constituting the same must associate or join in common purpose or action. He drew our attention to the decision of the Supreme Court in the case of Commissioner of Income-tax v. Indira Balkrishna, : [1960]39ITR546(SC) . He urged that when recipients of joint decreeholders receive money pursuant to the decree of the court, the joint decreeholders do not join in any common purpose or join in any action which produces the income. In that view of the matter, Mr. Mitra urged that the assessment on the assessee as an association of persons was improper.

5. Section 41 of the Indian Income-tax Act, 1922, without the provisos, is in the following terms :

' In the case of income, profits or gains chargeable under this Act which are received by the Courts of Wards, the Administrators-General, the official trustees, or by any receiver or manager (including any person whatever his designation who in fact manages property on behalf of another) appointed by or under any order of court, or any trustee or trustees appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise, the tax shall be levied upon and recoverable from such Court of Wards, Administrator-General, official trustee, receiver or manager or trustee or trustees in the like manner and to the same amounts as it would be leviable upon and recoverable from any person on whose behalf such income, profits or gains are receivable and all the provisions of this Act shall apply accordingly. '

6. In this case, it appears to us that the Tribunal accepted the position that the income-tax authority was correct in taxing the income jointly under the provisions of Section 41 of the Indian Income-tax Act, 1922. The proviso to Section 41 of the Indian Income-tax Act, 1922, so far as is material for the present purpose provided, inter alia, as follows :

' Provided that where any such income, profits or gains or any part thereof are not specifically receivable on behalf of any one person, or where the individual shares of the persons on whose behalf they are receivable are indeterminate or unknown, the tax shall be levied and recoverable at the maximum rate; but, where such persons have no other personal income chargeable under this Act and none of them is an artificial juridical person, as if such income, profits or gains or such part thereof were the total income of an association of persons. '

7. It appears, therefore, that in the contingency contemplated by the proviso even though there is no association of persons, as contemplated under Section 3 of the Act, it will be deemed to be an association of persons, if the person who manages or receives the income on behalf of other persons whose shares are indeterminate or unknown and the person who receives the income fulfils the character mentioned in the main part of Section 41(1). While there is good deal of force in Mr. Mitra's argument that joint decree-holders like the plaintiffs in the present suit do not associate to produce the income, we are of the opinion that in view of the deeming provision contemplated by the proviso to Section 41, even though they do not associate to produce the income, if the person who is in actual receipt of the income fulfils the conditions mentioned in the main part of Section 41(1) and if the share of the persons on whose behalf the income is received is indeterminate, then such income can be taxed as if it was an income of an association of persons even though, in fact, they are not an association of persons. In that view of the matter, the principle or ratio of the case of Commissioner of Income-tax v. Indira Balkrishna cannot have any application to the facts of this case, if on a consideration we come to the conclusion that the shares of the joint decrecholders were indeterminate. Reading the decree as a whole, it appears to us that it cannot be contended that the share of the individual plaintiff was determinate or fixed. In that view of the matter and reading the decree as a whole, it is apparent that the maintenance was not given to any of the plaintiffs on the basis of any proportionate share but the decree had given the plaintiffs jointly the right to receive certain sums of money; but the shares of the individual plaintiffs were indeterminate or unknown. Indeed, it was not argued by Mr. Mitra that, on a proper construction of the decree, it can be urged that the shares of the different plaintiffs in the said decree were determinate and known. If that is the position, then under the proviso to Section 41 of the Income-tax Act, 1922, even though the assessees did not associate or join in any endeavour or any purpose to produce the income, they would be deemed to be an association of persons, if provisions of Section 41(1) are otherwise attracted in respect of this assessee.

8. Applicability of provisions of Section 41(1) depends upon the question whether the plaintiff, Smt. Santimoyee Bose, in this case fulfils one of the categories mentioned in Section 41(1) of the Income-tax Act, 1922. This aspect of the matter, it appears, was never raised or disputed by the parties before the income-tax authorities or before the Income-tax Tribunal. Whether Smt. Santimoyee Bose, in fact, manages property on behalf of other plaintiffs or she was in fact, appointed by or under an order of any court will involve examination of both factual aspect, and legal consequences of the matter. The parties proceeded on the basis that she was receiving the said income on behalf of others. The contention had all along been that she was receiving the income on behalf of persons whose shares are determinate and known. Whether there was any evidence for the Tribunal to come to the conclusion that Section 41(1) of the Income-tax Act, 1922, can be attracted to the facts of this case, that question, it seems to us, was never raised. Moreover, that question has not been referred to us. Reference may be made to the decision of the Supreme Court in the case of Guru Estate v. Commissioner of Income-tax, : [1963]48ITR53(SC) .There the Supreme Court observed that the High Court was bound to accept in disposing of a reference under Section 66, the findings of the Tribunal that the receipts were in the nature of income from a business carried on by the assessees and that no trust was ever intended to be created by the pilgrims, and had to decide the question of law on the basis of those facts. The function of determining the facts rested with the Tribunal, and the High Court had to advise the Tribunal as to the law applicable on the facts found by the Tribunal and based on a review of the evidence. In that case also the Tribunal had recorded a finding that there was in fact no trust intended to be created by the pilgrims. The Supreme Court observed that it was open to the assessees to demand a question that the finding was based on no evidence or that it could not reasonably be arrived at by any person acting judicially and properly instructed as to the relevant law. The Supreme Court found in that case that the High Court ignored the finding that the income received as Annadan was part of the income or properties of a business carried on by the assessees, and on the assumption that a trust was created, they regarded the trust as a private religious trust. The Supreme Court observed that in doing so the High Court did not in substance answer the question. Here, in the instant case before us, it is apparent that the income-tax authorities proceeded to apply the maximum rate by applying the proviso to Section 41 of the Income-tax Act, 1922. The applicability of the proviso was challenged and agitated. The applicability of Sub-section (1) to Section 41 was never challenged or disputed before the Tribunal. The Tribunal recorded that ' the departmental authorities were correct in taxing it jointly under the provisions of Section 41 of the Income-tax Act.' That carried with it the assumption or the finding of fact that Sub-section (1) of Section 41 applies. If it was the assessee's grievance, that that assumption of fact was incorrect and improper, it was open for the assesses to raise a question of law that there was no evidence to support that finding. No question to that effect has been raised. In that view of the matter we have to proceed on the basis that Section 41(1) of the Income-tax Act applies. The questions suggested by the assessees in their application under Section 66(i) to the Tribunal also confirm that point of view.

9. In the view we have taken that the said decree was a joint decree and the maintenance was not on the basis of the shares for each of the plaintiffs we are of the opinion that the income was received on behalf of the persons whose shares were indeterminate. As such, the proviso to Sub-section (1) of Section 41 of the Income-tax Act, 1922, applies. In that view of the matter the assessees may be deemed to be an association of persons even though they are not an association of persons in fact.

10. Some argument was advanced by Mr. B.L. Pal, learned advocate for the revenue, to the effect that in fact also the assessees associated inasmuch as by joining in the suit they associated in creating this income. In the view we have taken of the matter we do not think it necessary to consider this aspect of the matter. In the above view of the matter the question referred to us must be answered in the affirmative. In the facts and circumstances of the case, each party will pay and bear its own costs.

Deb, J.

11. I agree.


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