COMMISSIONER OF INCOME-TAX, CALCUTTA vs. KOKILA DEBI

CIVIL APPEAL No. 220/1967Supreme Court[1971] 1 S.C.R. 31220 April 1970Bench: 3 JudgesAuthor: J.C. SHAH, K.S. HEGDE, A.N. GROVER COMMISSIONER OF INCOME5 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that while one of the trust deeds referred to the trustees as beneficiaries, a reading of the entire deed clarified this as a misnomer, and they were not entitled to any benefit. Therefore, the Tribunal's finding that the sole beneficiary was the deity Sri Sri Iswar Gopal Jew was not open to challenge. Consequently, the case clearly fell within the main provision of Section 41(1) of the Income-Tax Act, 1922, and the first proviso to that section was inapplicable. The Court reasoned that the crucial factor for Section 41(1) was whether the income was received by the trustees on behalf of any person. Given the finding that the deity was the sole beneficiary and assuming a deity is a 'person' under Section 2(9) (a point not canvassed before the lower courts or the Supreme Court), the income was specifically receivable on behalf of one person. The fact that trusteeship might be considered 'property' for other purposes or that trustees have an interest in the trust was irrelevant in this context. The appeals were dismissed.

What were the facts?

This case involves appeals against a judgment of the Calcutta High Court concerning the assessment of income from properties dedicated to a deity, Sri Sri Iswar Gopal Jew. The assessee, Kokila Debi, and other trustees managed these properties under three trust deeds executed between 1944 and 1951. The Income-tax Officer assessed the income at the maximum rate, invoking the first proviso to Section 41(1) of the Indian Income-Tax Act, 1922, on the grounds that the beneficiaries were not specifically identifiable or their shares were indeterminate. The Appellate Assistant Commissioner upheld this order. The Income-Tax Appellate Tribunal, however, held that the sole beneficiary was the deity, making the first proviso inapplicable. The High Court concurred with the Tribunal.

What were the issues?

1. Whether, on the facts and circumstances and on a proper construction of the three trust deeds, the Tribunal was right in holding that there was only one beneficiary, namely, the deity Sri Sri Iswar Gopal Jew? (Question of law and fact, concerning the interpretation of trust deeds). 2. If the answer to question 1 is in the negative, whether the income of the trust was to be assessed at the maximum rate by virtue of the first proviso to Section 41(1) of the Income-Tax Act, 1922? (Question of law, concerning the applicability of Section 41(1) proviso). Assessee's contentions (implied by Tribunal's and High Court's findings): The sole beneficiary under the trust deeds was the deity. Therefore, the first proviso to Section 41(1) was not applicable, and the trustees should be assessed as individuals in respect of the income received on behalf of the deity. Revenue's contentions: The revenue relied on the fact that in one of the deeds, the trustees were referred to as beneficiaries. They argued for the applicability of the first proviso to Section 41(1) because the beneficiaries were not specifically identifiable or their shares were indeterminate.

Which sections of the Income-tax Act were involved?

Section 41(1),Section 2(9)

AI-generated summary — verify with the full judgment below

J\2 COMMISSIONER OF INCOME-TAX, CALCUTTA \'. KOKILA DEBl A pri/ 20, 1970 [J. c. StWI, K . s. l-JEGDE AND A. N. GROVER, JJ.] fll<li<lll t11colll<'·ttU: Act, 19:!.:!.-S. 41 (I l Prfll·isa-Sn>pc nf. 1!. :t Hindu £Ovcrncd b~ M_it'ak, hara S~hocil o~ Hin~u ~aw tlcdic:ucu certain >cl(-acquircc.l propcrues m fnvour ot the dctty _Sn Sn l•war Gopal Jew.

He cxccutcc.I a <.Iccc.I of trust anc.I supplemented ll _by two subsequent <.Iccc.Is.

Two-thirds of the income o( t~c trust. propcrttcs w:os unucr the ~aid c.Jccds to be utilised for the scva ot ~he dcoty and the remaining one- third w:os to he retained in the hands of the trustees. to meet the collec- tion charges. taxes and other incidcn~ al expense-s relillmg to the tnm pm. pertic.<.

Under the trust·<.lccus the lnst . trustee wns to be B s thtrJ wife .. ;1nJ each of his sons on attaining mujonty was to become 11 tru>tcc auto- mntically.

In proceedings for the a'scssment o'i inco~c-~ax , the Income- tax OITicer a•••mcd the income from all the proper11e~ 10 the l~<mtl' of the trustees at the maximum rate in nceortlance with the pro>ision con· tainctl in the first proviso to section 4 1 tIl of the Intlinn Income-Iii:<; Act

The order continues below.

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