THE COMMISSIONER OF INCOME-TAX BOMBAY vs. MANILAL DHANJI, BOMBAY

CIVIL APPEAL No. 323/1961Supreme Court1962 INSC 3431 January 1962Bench: 3 JudgesAuthor: S.K. DAS, M. HIDAYATULLAH, J.C. SHAH16 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Tribunal held that neither of the two incomes could be included in the total income of the assessee. Regarding the Rs. 410, the Tribunal found that under Section 16(3)(b) of the Indian Income-tax Act, 1922, the assessee could only be taxed on income for the benefit of a minor child if the child received the income, it accrued to her, or she had a beneficial interest in the year of account. In this case, although income existed in the hands of the trustees, the minor daughter had no benefit in that year, thus the Rs. 410 was not includible. Concerning the Rs. 14,170, the Tribunal determined that the trust deed of 1941 created two trusts: one for paying income to the assessee, and another requiring the assessee to spend it for the maintenance of himself, his wife, and children. This constituted a binding obligation, not a mere wish. The assessee was a trustee, not the sole beneficiary, and since the beneficiaries' shares were indeterminate, the Department could levy tax at the maximum rate from the assessee as a trustee under the first proviso to Section 41(1), but not include the sum in his total income as if he were the sole beneficiary. The High Court's decision on both questions was affirmed.

What were the facts?

The assessee, Manilal Dhanji, was assessed for the assessment year 1954-55. The taxing authorities included two sums in his total income: Rs. 410 and Rs. 14,170. The Rs. 410 income arose from a trust created by the assessee on January 12, 1953, for his minor daughter, Chandrika. The trust stipulated that interest was to be accumulated and added to the corpus, with Chandrika to receive the income upon attaining 18 years of age. The Rs. 14,170 income originated from a trust created by the assessee's father on December 1, 1941, for the benefit of his four sons, including the assessee. Under this trust, the trustees were directed to pay the net interest and income to the assessee for the maintenance of himself, his wife, and his children.

What were the issues?

1. Whether the sum of Rs. 410, income from a trust created for the benefit of the assessee's minor daughter, is includible in the assessee's total income, considering the daughter had no right to or beneficial interest in the income in the relevant year of account, under Section 16(3)(b) of the Indian Income-tax Act, 1922. Assessee's contention: The Rs. 410 income is not includible as the minor daughter had no right or beneficial interest in the income in the relevant year, making Sections 16(3)(a)(iv) and 16(3)(b) inapplicable. Revenue's contention: Not recorded. 2. Whether the sum of Rs. 14,170, income from a trust created by the assessee's father, is includible in the assessee's total income as if he were the sole beneficiary, or if it should be taxed under the first proviso to Section 41(1) of the Indian Income-tax Act, 1922. Assessee's contention: The Rs. 14,170 should not be included as the beneficiaries are the assessee, his wife, and children, with indeterminate shares. The Department should proceed under the first proviso to Section 41(1) and levy tax at the maximum rate from the assessee as a trustee. Revenue's contention: The assessee was the sole beneficiary and accountable to no one, thus the amount was includible in his total income.

Which sections of the Income-tax Act were involved?

Section 16(3)(b),Section 16(3)(a)(iv),Section 41(1),Section 8

AI-generated summary — verify with the full judgment below

IHI v. n. o.g..i l;iMiqdl w ...... C.. L". w.-..w.J. J-.,Jl. 902 SUPRll:ME COURT REPORTS [1002] SUPP. '!'.here oa.n therefore be no escape from the concJu. BJOn tha.t the Act plainly intends that where the Representative Union appears in any proceeding under the Act even though that proceeding might have commenced by an employee under s. 42 (4) of the Act, the Representative Union alone can represent the employee and the employee oa.nnot '.l.ppear or act in such proceeding. . .

In this view o.f t~e mattn the appeal must tail and Is hereby d1sm1ssed.

In the circumstances we pa.as no order as to costs.

Appe.al dismiB&ed. THE COMMISSIONER OF INCOME-TAX BOMBAY v. l\IANILAL DHANJI, BOMBAY (S.K. DAs, M. liIDAYATULLAH and J.C. SHAH, JJ.)

Income Tax-Trmt crealed in favour of minor child-No benefit =ruing to ™nor in acwunting yoar-Whelher incomt from tnul la:etJbl< a.< i~ of a.<llUM~-Triut by aut.18tea fatMr- Aaae&U directed to iue it1COme for benefit of him8df, Ma wife and cAi/dron-Whtther income tazabl< a.< i•come of aaauaee-lndian lnconit·W Act 1922 (XI of 1922) as. 16(3) 41(1)-·Indian T"'81JJ Act, 1882 (11of1882) •· 8. In 1953 the assessee created a tru

The order continues below.

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