1963 PLP 145 (PTD)
MANAGING TRUSTEES, NAGORE DURGAH Versus COMMISSIONER OF INCOME TAX, MADRAS
| Citation | 1963 PLP 145 (PTD) |
| Forum / Court | Madras India |
| Bench Members | Rajagopalan and Srinivasan, JJ |
| Parties | MANAGING TRUSTEES, NAGORE DURGAH Versus COMMISSIONER OF INCOME TAX, MADRAS |
| Primary Law | Income tax Act (XI of 1922) |
Q1: What are the key laws and sections cited in 1963 PLP 145 (PTD)?
This judgment primarily cites: Income tax Act (XI of 1922) as referenced in Pakistani case law index.
Q2: Which judicial bench decided the case 1963 PLP 145 (PTD)?
The case was heard and decided by the Madras India bench comprising: Rajagopalan and Srinivasan, JJ.
Q3: What is the official citation format for this judgment on Pakistan Law Portal?
Cite this legal precedent as: 1963 PLP 145 (PTD) (MANAGING TRUSTEES, NAGORE DURGAH Versus COMMISSIONER OF INCOME TAX, MADRAS). Read the full summary and cross-referenced laws free on Pakistan Law Portal.
Laws Cited
Representation
- V. K. T. Chari (Advocate General), S. Thyagaraja Iyer and M. M. Ismail for the Assessees.
- "(1) That the relevant clause providing for the appointment of a managing trustee was only permissive in its scope ; and (2) that the body of trustees are the persons in whom the property of the Durgah vests, while in the case of a manager, the property does not vest in him." The depart ment relied upon Jainulabdeen Sahib v. Commissioner of Income‑lax ((1944) 12 I T R 285 (Mad.)). In that case, certain persons were appointed as managing agents at the request of parties in respect of a business, which was the subject‑matter of a suit and a com promise. In the assessment proceedings the claim was put forward that section 41 applied. The learned Judges held that an order passed on the terms agreed upon will still remain an agreement between the parties and not an order within the contemplation of section 41. It seems to us that this decision has no application to the present case. The learned counsel for the respondent does not put forward the plea, nor was it so specifically found either by the departmental officers or the Tribunal that the settlement of the scheme was the result of a compromise between the parties. Under the clauses relating to the appointment or the election of a managing trustee, which have been set out earlier, even assuming that those clauses are permissive in their scope, it is undeniable that when the liberty so granted by the relevant clause is exercised, it has to be related to the power that has been specifically granted by the clause in the scheme. If the body of trustees, without any such provision being made therefor in the scheme, chose to elect one among themselves as the managing trustee, the liability for the management of the trust estate would still be that of the body of trustees alone. But where such a power to elect or appoint a managing trustee is conferred by a scheme framed by Court, the position seems to us to be fundamentally different. Here is a case where the order of Court authorises the appointment of a managing trustee, and when such an appointment is made, it is obviously referable to the order of the Court and must be regarded as having been made under the order of Court. Learned counsel for the department urges that there is no specific appointment by the Court itself and that, therefore, the relevant part of section 41 will not apply. If his argument is to be accepted, there would appear to be no difference between an appointment made by a Court and one made under any order of Court. The section itself con templates different cases‑one of a direct appointment by Court and another an appointment made in pursuance of a direction given by a Court. It should, therefore, follow that where the managing trustees are so appointed in pursuance of a direction or authorisation contained in the scheme, such appointment has necessarily to be regarded as an appointment made under the order of Court. The view taken by the officers below that this clause will not apply is incorrect.
- Counsel for the department places considerable reliance upon these observations. In so far as the first part of the above extract is concerned, there is material available before us setting out what the functions of the managing trustees are, particularly, in relation to the disposal of the surplus income of which the beneficiaries are the kasupangudars. The learned counsel for the department emphasises that a managing trustee continues to be a trustee and that he cannot be regarded as a manager coming within the scope of section 41. It is common ground that if the managing trustees or the board of trustees are regarded as trustees simply, the benefit of section 41 will not be available to them, as section 41 deals with the case of trustee or trustees appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise. There is no document of trust in this case and this part of the provision cannot accordingly apply to these trustees. The short question then is whether the managing trustee appointed 'in the circumstances set out can be regarded as "manager (including any person whatever his designa tion who in fact manages property on behalf of another) appointed by or under any order of a Court . . . ." What was held, in the Trustees, Nagore Durgqh v. Commissioner of Income‑tax, was that in so far‑, as this.' Durgah is concerned, it is a public trust, but the surplus is a private trust for the benefit of the kasupangudars. We are concerned only‑with the surplus, which goes to the benefit of the kasupangudars, and the provisions of the scheme give no room for doubt that the managing trustee is placed in charge of the management of this surplus income on behalf of the kasupangudars, who are entitled to definite fractional shares. The right of the managing trustee in his capacity of a member of the board of trustees of the eight nattamaigars is entirely unrelated to his function as the manager of this surplus income. The contention of the learned counsel for the department that not withstanding his appointment as the managing trustee and the specific allocation of powers and duties in relation to the surplus income, he does not cease to be a trustee and must be regarded only as a trustee, seems to us to be unacceptable. To the extent to which the managing trustee is the manager and manages the property on behalf of the kasupangudars, he would come within the scope of section 41. It may further be pointed out that though the estate of the Durgah might vest in the body of trustees, the surplus income is really owned by the kasu pangudars.
- Learned counsel for the department, also referred to Holdsworth v. State of Uttar Prapesh ((1958) 33 I T R 472 (S C)). That was a case where, agricultural land was held by trustees under a will. The will made provision for payment of the income in certain defined shares to certain beneficiaries. But the trustees held the property with powers of absolute owners. It was claimed by the beneficia ries that they should be assessed in accordance with section 11(1) of the U. P. Agricultural Income‑tax Act, 1948, which forms a close parallel to section 41 of the Indian Income‑tax Act. That section provided that where any person holds land on behalf pf persons jointly interested in such land, agricultural income‑tax shall be assessed upon such person to the extent of the interest of each of the persons on whose behalf he so held the land. Their Lordships of the Supreme Court in dealing with the case observed that a trustee is the legal owner of the trust property and the property vests in him as such. He may hold the trust property for the benefit of the beneficiaries, but he does not hold it on their behalf. On the facts of the particular case before them their Lordships noticed that the beneficiaries under the trust were not persons who were jointly interested in the land, and section 11 (1) of the U. P. Agricultural Income‑tax Act did not, therefore, apply. We are unable to derive any assistance from this decision in so far as the present case is concerned. That decision went on specific wording of the provisions of the Agricultural Income‑tax Act.
- On the facts, we answer the question in the affirmative and in favour of the assessee. The assessee will be entitled to his costs. Advocate's fee Rs. 250.
Headnotes / Summary
S. 41 Manager Religious trust Surplus distributable to beneficiaries Board of trustees-Managing trustee appointed in pursuance of scheme framed by Court Duty to allocate and distribute surplus to beneficiaries-Whether such Managing trustee "manager appointed under order of Court" Assessment how made. The Nagore Durgah, which was consecrated to a Muslim saint, derived income from extensive properties and offerings made by devotees. The surplus of the income remaining after application for the purposes of the Durgah was, according to long usage, divided into 640 shares among the descendants of the foster son of the saint. There was no document of trust and the Durgah was managed by a body of hereditary trustees. In a scheme framed by the Court there was provision for the election by the board of trustees of one among the trustees as managing trustee for a period of three years. Under clause 43 of the scheme the managing trustee was entitled to receive all gifts intended for the Durgah and under clause 44 he had to prepare a balance sheet at the end of each Fasli year and declare the amount due to each beneficiary out of the surplus, prepare a list thereof and arrange for payment of the amount due to the beneficiaries. By a variation by the Court of the scheme the trustees were at liberty to appoint one or two of them as managing trustee or managing trustees for a period not exceeding five years : Held, (i) that even assuming that the clauses in the scheme framed by the Court were permissible in nature, when the power so granted was exercised by the trustees it had to be related to the power specifically granted by the scheme. The appointment of the managing trustee (under the clause of the scheme authorising such appointment) was referable; to the order of the Court and must be regarded as having been made under the order of the Court ; (ii) that though the estate of the Durgah might vest in the body of the trustees, the surplus income was owned by the beneficiaries and the mangaging trustee was placed in charge of the management of the surplus divisible amongst the beneficiaries and his right in his capacity as a member of the board of trustees was entirely unrelated to his function as manager of the surplus. To the extent to which the managing trustee was the manager and managed the property on behalf of the beneficiaries, he was a "manager appointed under an order of a Court" within the meaning of section 41 of the Income tax Act ; (iii) that, therefore, the provisions of section 41 applied to the managing trustees of the Nagore Durgah. Notwithstanding the residual power given to the Department to tax the beneficiary under section 41(2) assessments should be made on the managing trustee to the extent of the interest of each beneficiary in the surplus; (iv) that if in a case, which did not fall within the terms of section 41, one person managed the property on behalf of another, it was the latter that would be the assessable entity, and the manager if sought to be assessed could, both in fact and in law, deny that be was in receipt of any income. Where, however, a person coming within the scope of section 41 managed the property and derived income on behalf of another, the section provided a machinery whereby that income could be assessed, even at source, that is, in the hands of the person managing the property and receiving that income. The law provided that the assessment of the income in relation to each estate should be made to the same extent as upon the person on whose behalf the income was derived. Notwithstanding the residual power given to the Department to tax the beneficiary under section 41(2), the law contemplated that the assessment should be made on the manager only to the extent of the interest of the beneficiary in the income received by the manager. Holdsworth v. State of Uttar Pradesh (1958) 33 I T R 472 ; Jainulabdeen Sahib v. Commissioner of Income tax (1944) 12 I T R 285 and Trustees, Nagore Dnrgah v. Commissioner of Income tax (1934) 26 I T R 805 ref. STATEMENT OF CASE By these two applications, which are consolidated, the assessee requires the Appellate Tribunal to refer to the High Court a certain question of law, which is said to arise out of the Tribunal's consolidated order in I. T. A. Nos. 1882 and 1883 of 1955-56. Inasmuch as, in our opinion, a question of law arises out of the aforesaid orders of the Tribunal, we hereby draw up a statement of the case, agreed to by the parties and refer it to the High Court of Judicature at Madras under section 66(1) of the Indian Income tax Act. 2. The facts in relation to this Nagore Durgah have been set out in paragraphs 2 to 4 of the statement of the case in The Trustees, Nagore Durgah v. Commissioner of Income tax (1934) 26 I T R 805 (Mad.). By way of resume, it maybe said that the assessees are the managing trustees of the Nagore Durgah, which is situated in Tanjore district. It is a place: of pilgrimage resorted to by members of all faiths all over the country and offerings are received from worshippers. For the previous years relevant to the assessment years 1953 54 and 1954 55, the Durgah was managed, under the provisions of a scheme, to be shortly referred to, framed by the High Court, for the benefit of a body of persons who were said to be the lineal descendants of six sons and two daughters of Syed Yusuf Sahib, the foster son of the saint. Hazerath Sayed Sahib Hameed Quadir Ali Gangasavoy Andavan to whom the Durgah had been consecrated. The surplus income after all expenses had been met was divided among the descendants of the aforesaid Syed Yusuf Sahib who were called kasupangudars. There is admittedly no written document or trust or settlement deed. The affairs of the Durgah were looked after by what were called nattamaigars and the High Court in the course of a scheme suit which came on appeal before it, had provided for the appointment of a budget committee on which the kasupangudars and nattamaigars were to be represented. Elaborate provision had been made in that scheme which is annexure `A' and forms part of the case, defining the rights and duties of the various persons concerned. Clause 17 of the schedule to the decree read as follows : "The trustees are at liberty to appoint one or two of them as the managing trustees for a period not exceeding five years." (It is stated that this period was subsequently varied). Another scheme was passed in 1923 copy of which is annexure `A' and forms part of the case. 3. It was contended before the Income tax Officer in the course of the assessment proceedings (i) that the beneficiaries who derived benefit from the administration of this trust should be directly taxed and that section 41 was not only applicable to trustees but also to a manager (including any person whatsoever his designation who in fact manages properties on behalf of another appointed by or under orders of Court and (ii) that the managing trustees of the Durgah appointed under clause 17 are only managers who manage the properties on behalf of the kasupangudars under orders of Court. The Income tax Officer held that there was an essential difference between a manager and a trustee in that the estate did not vest in the former while it did in the latter and that the difference was not merely one of designation and also that persons appointed by a Court as managers at the request of the parties and on terms agreed upon between them are not persons appointed by, or under orders of the Court within the meaning of section 41 of the Indian Income tax Act. He held that, in the instant case, there had been no direct appointment of managing trustees by the Court ; but that the Court merely allowed the trustees to appoint one or two of them as managing trustees for a stated period and that, therefore, section 41 had no application to the facts of the case and that the assessee must be treated as an "association of persons". 4. The assessee appealed to the Appellate Assistant Commissioner unsuccessfully, who, agreeing with the Income tax Officer, held that the option to appoint managing trustees had been left to the trustees themselves to choose any one or two of them an J that such an appointment though .approved by the Court in general terms would not be an order by or under the order of the Court. He held that the requirements of section 41 were riot satisfied in this case. 5. The assessee appealed in respect of both the assessment years to the Tribunal and contended : (i) that the provisions of subsection (1) of section 41 were applicable and that, therefore, a single assessment as on an "association of persons" was illegal ; (ii) that the managing trustees upon whom the assessment had been made were managers appointed by or under orders of Court in the scheme suit and that these managers in fact managed the properties on behalf of the various beneficiaries ; (iii) that there was no distinction between a managing trustee and a manager ; (iv) that an order of Court is not essential and that it is sufficient if the appointment is made by any person by or under orders of Court. 6. Subsection (1) of section 41 reads as follows "In the case of income, profits or gains chargeable under this Act, which the Courts of Wards, the Administrators-General, the Official Trustees or 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 a Court, or any trustee or trustees appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including the trustee or trustees under any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913) are entitled to receive on behalf of any person, 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 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." 7. The Tribunal held for reasons given in paragraph 5 of its order, a copy of which is Annexure "B" and forms part of the case, that section 41 applies only to the case of a person who was managing the affairs of another who was under legal disability and that, on the facts, the kasupangudars could not be said to have been under a legal disability and they also held that the managing trustees were neither trustees as there was no deed of trust, nor have they been appointed by or under an order of Court, as no Court had made the appointment. Further, they held that section 41 was only an enabling section to help the department to have recourre to in certain specified circumstances and agreed with the Appellate Assistant Commissioner in the result that the assessee had not come within the language of section 41. They confirmed the assessment and dismissed the appeals. 8. On these facts, the question of law that arises is : "Whether the provisions of section 41 can be said to apply to the assessee in this case ?" V. K. T. Chari (Advocate General), S. Thyagaraja Iyer and M. M. Ismail for the Assessees. S. Ranganathan for the Commissioner.
Judgment & Decree
SRINIVASAN, J. The question referred under section 66(1) of the Act for the decision of this Court is "whether the provisions of section 41 can be said to apply to the assessee in this case." The assessments relate to the assessment years 1953-54 and 1954-55. The assessee is the managing trustees of Nagore Durgah. In order to appreciate the contention that has been raised, it is necessary to set out in brief the status of the trustees of Nagore Durgah. This Durgah situated in Tanjore District is of considerable historical and religious importance. A Muslim saint is entombed here. This Durgah has been endowed with large extents of properties. From these immovable properties considerable income is derived, and "hundial" offerings are also made by the devotees. The Durgah is managed by a body of trustees called the nattamaigars. After application of the income for the purposes of the Durgah surplus is available, which, according to long usage, is divided into 640 shares among the descendants of Yusuf, the foster son of the saint. These beneficiaries go by the name of kasupangudars. It is common ground that there is no document of trust. The nattamaigars are hereditary trustees and the right of kasupangudars to the surplus has been recognised both by custom and by judicial decisions. The history of this trust is set out in some detail in the decision in the Trustees, Nagore Durgah v. Commissioner of Income tax ((1954) 26 I T R 805 (Mad.)). Reference will made to this decision in due course. Up to and including the assessment year 1952-53, the surplus income of the Durgah was assessed in the hands of the trustees of the Durgah as an "association of persons". In the case of the assessment proceedings for the years now in question, it was claimed before the department that the assessment should be made under section 41 of the Act. It was urged that the managing trustees of the Durgah managed the properties on behalf of the kasupangudars under the orders of Court. This contention was not accepted partly for the reason that the estate vests in the trustees and also that even if managers have been appointed by the Court, it was on terms agreed between parties. Rejecting the claim that section 41 applied to the facts of the case, the Income tax Officer assessed the assessee as an "association of persons". The appeals to the Appellate Assistant Commissioner and to the Tribunal failed, and on the application of the assessee, the question set out above was referred to this Court. The Trustees, Nagore Durgah v. Commissioner of Income‑tax was decided in relation to the assessment year 1944‑
45. The question of the applicability of section 41 of the Act was pressed at the stage of the reference, but the learned Judges came to the conclusion, that that question did not arise out of the order of the Tribunal. It was also pointed out that the counsel for the assessee had in the proceedings before the departmental officers and the Tribunal conceded that section 41 in terms had no application. The question was, therefore, not one which was raised and debated and considered by the Appellate Tribunal and it was accordingly held that the applicability of section 41 was not a question of law arising out of the order of the Tribunal. The question was not further pursued in that case. On the facts it was decided that the assessment as an association of persons was correct. Chapter V of the Income‑tax Act deals with the liability to tax in special cases. Section 40 deals with the cases of assessees, who are either minors, lunatics or idiots and provides that when the guaraian or trustee of any such person is entitled to receive, or is in receipt on behalf of such person any income, profits or gains, the tax shall be levied upon or recoverable from such guardian or trustee in like manner and to the same extent as it would be leviable upon and recoverable from the beneficiary. Section 40(2) provides for a case where a person not being a minor, lunatic or idiot, is not resident in the taxable territories, but on whose behalf income, profits or gains are received by a trustee or agent. Section 41 deals with the case of properties of assessees managed in a particular manner by other persons. This section provides that where income, profits or gains are so received on behalf of another by the Court of Wards, the Administrator‑General, the Official Trustee or any receiver or manager 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 be recoverable from, such Court of Wards, Administrator‑General, etc. Subsection (2) of section 41 further provides that : "Nothing contained in subsection (1) shall prevent either the direct assessment of the person on whose behalf income, profits or gains therein referred to are receivable, or the recovery from such person of the tax payable in respect of such income, profits or gains." . It has been mentioned that there is a body of trustees known as nattamaigars, eight in number, who are entitled to manage the trust. According to the scheme that was framed as the result of a scheme suit, the management and administration of the affairs of the Nagore Durgah was vested hereditarily in the eight trustees or nattamaigars of the Durgah. This body constituted the board of trustees, each trustee being entitled to hold office for life and after him the trusteeship was to devolve on his next male heir in accordance with the prevalent custom. In the scheme, as it was originally framed, there was provision for the election of one among the trustees as the managing trustee. Clause (4) of the scheme set out as Annexure "A" to the statement of the case reads; "The board of trustees shall from amongst themselves elect one as a managing trustee and he shall hold office for a term of three years." There was a variation of this clause in the decree as framed in A. S. No. 354 of 1923 on the file of the High Court, clause 17 of which provided; "The trustees are at liberty to appoint one or two of them as the managing trustee for a period not exceeding five years." The principal contention that was advanced on behalf of the assessee was that the appointment or election of the managing trustees in the present case was in pursuance of this clause of the decree. That being so, this is properly a case, so it was claimed where it can be said that this appointment has been made under the order of Court. Before proceeding to construe this clause and deciding .whether this provision would bring the matter within the scope of section 41 of the Act, reference may also be made to certain other clauses of the scheme, which set out the functions of the board of trustees and the managing trustee in particular. Under clause 43 of the scheme, the managing trustee is entitled to receive all gifts intended for the Durgah. He has to keep a regular account of them. Clause 44 of the scheme as finally settled provides; "The managing trustee shall at the end of each fasli, prepare a balance‑sheet verified by the manager and ascertain the net amount available for payment to kasupangudars. The managing trustee shall declare the amount due for each kasupangu and the declaration shall be made with the customary fated between the 1st and 7th of July every year. After the amount due for each kasupangu has been ascertained, the managing trustee shall allocate the amount due to each kasupangudar in the list to be prepared for that purpose each year. The name of the kasupangudars entitled to receive payment shall be entered in the Tamil alphabetical order in that list. The manager shall pay the amount due to each kasupangudar in accordance with that list, except in the case of purdahnashin ladies who will be paid the amount due to them by money order sent by the manager at their cost." The plea that the managing trustees in the present case function as managers appointed under orders of Court by virtue of the relevant clause in the scheme was repelled by the depart ment on two grounds; "(1) That the relevant clause providing for the appointment of a managing trustee was only permissive in its scope ; and (2) that the body of trustees are the persons in whom the property of the Durgah vests, while in the case of a manager, the property does not vest in him." The depart ment relied upon Jainulabdeen Sahib v. Commissioner of Income‑lax ((1944) 12 I T R 285 (Mad.)). In that case, certain persons were appointed as managing agents at the request of parties in respect of a business, which was the subject‑matter of a suit and a com promise. In the assessment proceedings the claim was put forward that section 41 applied. The learned Judges held that an order passed on the terms agreed upon will still remain an agreement between the parties and not an order within the contemplation of section
41. It seems to us that this decision has no application to the present case. The learned counsel for the respondent does not put forward the plea, nor was it so specifically found either by the departmental officers or the Tribunal that the settlement of the scheme was the result of a compromise between the parties. Under the clauses relating to the appointment or the election of a managing trustee, which have been set out earlier, even assuming that those clauses are permissive in their scope, it is undeniable that when the liberty so granted by the relevant clause is exercised, it has to be related to the power that has been specifically granted by the clause in the scheme. If the body of trustees, without any such provision being made therefor in the scheme, chose to elect one among themselves as the managing trustee, the liability for the management of the trust estate would still be that of the body of trustees alone. But where such a power to elect or appoint a managing trustee is conferred by a scheme framed by Court, the position seems to us to be fundamentally different. Here is a case where the order of Court authorises the appointment of a managing trustee, and when such an appointment is made, it is obviously referable to the order of the Court and must be regarded as having been made under the order of Court. Learned counsel for the department urges that there is no specific appointment by the Court itself and that, therefore, the relevant part of section 41 will not apply. If his argument is to be accepted, there would appear to be no difference between an appointment made by a Court and one made under any order of Court. The section itself con templates different cases‑one of a direct appointment by Court and another an appointment made in pursuance of a direction given by a Court. It should, therefore, follow that where the managing trustees are so appointed in pursuance of a direction or authorisation contained in the scheme, such appointment has necessarily to be regarded as an appointment made under the order of Court. The view taken by the officers below that this clause will not apply is incorrect. We have referred earlier to the decision in the Trustees, Nagore Durgah v. Commissioner of Income‑tax. There, while rejecting the claim of the assessee that section 41 should be applied on the ground that that question did not arise out of the order of the Tribunal, the learned Judges pointed out : "We do not know what exactly are the functions of the managing trustee or trustees and it may be a point for con sideration whether a managing trustee could aptly be described as a manager or as a person, by whatever designation known, who in fact manages the property. Having regard to the essential difference between a manager and a trustee, viz., that in the former the estate does not vest while in the latter it does, the two are different. It is unnecessary to pursue the, matter further in this case." Counsel for the department places considerable reliance upon these observations. In so far as the first part of the above extract is concerned, there is material available before us setting out what the functions of the managing trustees are, particularly, in relation to the disposal of the surplus income of which the beneficiaries are the kasupangudars. The learned counsel for the department emphasises that a managing trustee continues to be a trustee and that he cannot be regarded as a manager coming within the scope of section
41. It is common ground that if the managing trustees or the board of trustees are regarded as trustees simply, the benefit of section 41 will not be available to them, as section 41 deals with the case of trustee or trustees appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise. There is no document of trust in this case and this part of the provision cannot accordingly apply to these trustees. The short question then is whether the managing trustee appointed 'in the circumstances set out can be regarded as "manager (including any person whatever his designa tion who in fact manages property on behalf of another) appointed by or under any order of a Court . . . ." What was held, in the Trustees, Nagore Durgqh v. Commissioner of Income‑tax, was that in so far‑, as this.' Durgah is concerned, it is a public trust, but the surplus is a private trust for the benefit of the kasupangudars. We are concerned only‑with the surplus, which goes to the benefit of the kasupangudars, and the provisions of the scheme give no room for doubt that the managing trustee is placed in charge of the management of this surplus income on behalf of the kasupangudars, who are entitled to definite fractional shares. The right of the managing trustee in his capacity of a member of the board of trustees of the eight nattamaigars is entirely unrelated to his function as the manager of this surplus income. The contention of the learned counsel for the department that not withstanding his appointment as the managing trustee and the specific allocation of powers and duties in relation to the surplus income, he does not cease to be a trustee and must be regarded only as a trustee, seems to us to be unacceptable. To the extent to which the managing trustee is the manager and manages the property on behalf of the kasupangudars, he would come within the scope of section
41. It may further be pointed out that though the estate of the Durgah might vest in the body of trustees, the surplus income is really owned by the kasu pangudars. Learned counsel for the department, also referred to Holdsworth v. State of Uttar Prapesh ((1958) 33 I T R 472 (S C)). That was a case where, agricultural land was held by trustees under a will. The will made provision for payment of the income in certain defined shares to certain beneficiaries. But the trustees held the property with powers of absolute owners. It was claimed by the beneficia ries that they should be assessed in accordance with section 11(1) of the U. P. Agricultural Income‑tax Act, 1948, which forms a close parallel to section 41 of the Indian Income‑tax Act. That section provided that where any person holds land on behalf pf persons jointly interested in such land, agricultural income‑tax shall be assessed upon such person to the extent of the interest of each of the persons on whose behalf he so held the land. Their Lordships of the Supreme Court in dealing with the case observed that a trustee is the legal owner of the trust property and the property vests in him as such. He may hold the trust property for the benefit of the beneficiaries, but he does not hold it on their behalf. On the facts of the particular case before them their Lordships noticed that the beneficiaries under the trust were not persons who were jointly interested in the land, and section 11 (1) of the U. P. Agricultural Income‑tax Act did not, therefore, apply. We are unable to derive any assistance from this decision in so far as the present case is concerned. That decision went on specific wording of the provisions of the Agricultural Income‑tax Act. It seems to us that section 41 applies to the special class of cases where the person in receipt of income is the real assessee ; and in cases where the management of the estate on behalf of another is undertaken by the Court of Wards, Administrator -General, official trustee, receiver or manager appointed by or under order of Court, the section clearly indicates the extent of the liability to tax. As we have pointed out, if in a case, which does not fall within the terms of the section, one person manages the property on behalf of another, it is the latter that would be the assessable entity, and the manager if assessed can, both in fact and in law, deny that he is in receipt of any income. Where however, a person coming within the scope of section 41 manages the property and derives income on behalf of another, the law, provides the machinery whereby that income could be assessed, even at source, that is, in the hands of the person managing the property and receiving that income. The extent of the liability of such manager is specifically limited for the reason that such manager might in the generality of cases be in management of different estates on behalf of different persons. In such an event, the law provides that the assessment of the income in relation to each estate should be made to the same extent as upon the person on whose behalf the income is derived. This seems to us to be clearly a case where section 41 applies. Notwithstanding the residual power given to the department to tax the beneficiary under section 41(2), the law contemplates that in a case such as this the assessment shall be made on the manager only to the extent of the interest of the beneficiary in the income received by the manager. On the facts, we answer the question in the affirmative and in favour of the assessee. The assessee will be entitled to his costs. Advocate's fee Rs.
250. Reference answered in the affirmative.