1. This is an originating summons taken out by the administrator with the Will annexed of the estate of Donald Eraser Mackenzie, deceased, and by the executors of his Will which has been proved in England to determine a question which arises in the administration of his estate. The question is as to the liability of the estate to pay to McNeill & Co., a certain sum of money paid by them in circumstances which I will presently state. In my view the procedure by originating summons is not applicable to a contentious matter of this nature which is really a claim by McNeill & Co., to recover from the estate, the sum in question. The procedure should have been by suit but as ail parties agree to the matter being decided on originating summons I propose to decide it.
2. The facts which I take from the plaint are not, I understand, in dispute. Donald Fraser Mackenzie died on the 14th June 1924. At the date of his death he was a partner in the firm of McNeill & Co., but on his death his interest in that firm ceased as from the 31st March 1924. His income from the firm for the financial year 1923-24 was assessed to income-tax and income-tax has been paid on that sum. A return for the purposes of income-tax was made to the revenue authorities by the administrator on the 14th March 1925. On the 20th March 1925 the revenue authorities purported to assess Donald Eraser Mackenzie's estate to super-tax for the year 1924-25. The assessment was made on Donald Fraser Mackenzie's estate, c/o Messrs. McNeill & Co., under Section 29 of the Indian Income Tax Act (XI of 1922), and a notice was issued under the said Act. By Clause 5 of the notice the assessee was informed that an appeal might be presented under Section 30(1) of the said Act within 30 days.
3. Details of the assessment were given at the end of the notice and they were described as 'details of super-tax assessment for 1924-25.'
4. The administrator wrote demurring to the assessment on the 11th May 1925 on the ground that the estate took no interest in the profits of the firm for 1924-25. The revenue authorities replied that the assessment for 1924-25 was made on the income of the previous year ending the 31st March 1924, which income was received by Donald Eraser Mackenzie or by his estate.
5. The plaint states that the executors intended to contest the claim on the following additional grounds to that stated in the latter, namely, (1) that the assessment was invalid as not having been made on any individual, (2) that the Act does not provide for making an assessment on a dead man's estate, and (3) that the income of a dead man was not income of his executors.
6. Thereafter the revenue authorities demanded payment of the amount from McNeill & Co., who paid the sum on the 19th September 1925. No assessment was made on that firm in respect of this sum.
7. Under these circumstances McNeill & Co., have demanded repayment to them of this sum from Donald Eraser Mackenzie's estate.
8. The following questions are raised by the summons : - (1) Whether the plaintiffs as representing the estate are liable to pay the said sum to McNeill & Go.? (2) Whether the payment was a voluntary payment? (3) Whether the plaintiffs, as administrators and executors, were legally bound to pay the said sum? (4) Whether the assessment was a valid assessment? (5) Whether McNeill & Co.' had any interest in the payment? (6) What are the respective legal rights and liabilities in respect of the said sum?
9. 'Assessee' is defined in the Indian Income Tax Act, 1922, as a person by whom income-tax is payable. Section 3 provides that where any Act of the legislature enacts that income-tax shall be charged for any year at any rate or rates applicable to the total income of an assessee, tax at that rate shall be charged for that year in accordance with the provisions of the Act in respect of all income, profits and gains of the previous year. Section 22 deals with the making of a return and provides for service of notice on a person required to make a return. Section 26 provides that when any change occurs in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment. Section 30 fixes the time of appealing against the amount or rate of assessment or against liability for assessment ordinarily as 30 days from the notice of demand. Section 44 provides that when any business has been discontinued, every person who was a member of a firm at the time of discontinuance shall be jointly and severally liable for the amount of the tax payable in respect of the profits and gains of the firm.
10. Chapter IX of the Act deals with1 super-tax. Section 55 provides that in addition to the income-tax charged for any year there shall be charged, levied and paid for that year in respect of the total income of the previous year of any individual, unregistered firm, Hindu undivided family or company an additional duty of income-tax at the rate or rate3 laid down for that year by Act of the Indian legislature.
11. Section 56 provides that the total income for super-tax is to be the total income assessed for income-tax, and a proviso to that section provides that in computing the total income of a member of a registered firm (which is defined) in Section 2(14) where any change occurs in the constitution of the firm, the profits or gains of the firm during the previous year shall be deemed to have been received in that year by the members of the firm as constituted at the time of the making of the assessment to super-tax in proportion to their shares in the firm at that time. Section 57(1) provides that in case of an assessee who is a member of a registered firm and whose share is liable to super-tax residing out of British India, the remaining members of the firm are jointly and severally liable to pay the super-tax due from the non-resident member.
12. Section 58(1) makes all the provisions of the Act applicable to super-tax except (inter alia) Section 3, and Sub-section (2) of tha1; section provides that super-tax is payable by the assessee direct except as provided in Section 57.
13. Now, nowhere in the Act can I find that any provision is made for the assessment to income-tax or to super-tax of the estate of any deceased person, and Section 55 which imposes super-tax expressly provides that it shall be charged, levied and paid on the total income of the previous year of any individual, unregistered firm, Hindu undivided family or company. Consequently in my opinion it was not within the competence of the income-tax authorities to assess Donald Eraser Mackenzie's estate to super-tax and there was no liability on the estate to pay such tax. It is true that the assessment was made and not appealed against within the 30 days fixed by Section 30, but that section uses the words 'ordinarily' and there was nothing to prevent the authorities entertaining an appeal preferred after the expiration of 30 days.
14. This being so, as the estate was under no liability to pay the tax, the payment by McNeill & Co., was a voluntary payment so far as the estate is concerned and does not fall within the provisions of Section 69 of the Indian Contract Act. Some point was made that McNeill & Co., made the payment without any assessment being made as the surviving members of the firm, but I think that nothing turns on that as under the proviso to Section 56 they could not have escaped from payment and doubtless this was known to them when they made the payment, and it may have been in their interest to make the payment on the assessment made on Donald Eraser Mackenzie's estate rather than await an assessment on themselves which possibly would have involved a higher payment if Donald Eraser Mackenzie's share of profits for 1923-24 was aggregated with their own shares of profit for that year and super-tax at a higher rate thereby became payable on such aggregated income.
15. In the view I take it is not necessary for me to decide whether the super-tax in question was payable in respect of the profits of 1923-24 or whether such profits were only taken as a measure of taxation for the tax imposed for 1924-25.
16. I answer the first question raised by the summons in the negative and the second in affirmative so far as the estate of Donald Eraser Mackenzie is concerned. I answer the third question in the negative as also the fourth, but of course I have had no opportunity of hearing the income-tax authorities on this question. Questions five and six require no answer.
17. The plaintiffs can retain and pay their costs out of the estate as between attorney and client. I make no order as to the costs of McNeill & Co.