Trust income and indeterminate beneficiary shares attracted taxation at the maximum rate under section 41(1).

Trust income received by trustees was held to fall within section 41(1) of the Indian Income-tax Act, 1922 where the statutory phrase "receive on behalf of" was read contextually as meaning "for the benefit of" persons beneficially entitled. The court noted that trustees were the legal owners under the trust deed, but the provision still applied to income derived from trust property. Because the beneficiaries' shares were not fixed in definite proportions during the relevant years, and additional beneficiaries could not be excluded, the first proviso requiring taxation at the maximum rate applied. The construction was therefore against the assessee and in favour of the Revenue.

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Issues: Whether the first proviso to section 41(1) of the Indian Income-tax Act, 1922 applied to income derived from trust properties where the beneficiaries' shares were indeterminate.

Analysis: The income in question arose from properties settled under a valid trust deed and was received by trustees. The beneficiaries under the trust were not fixed in definite shares during the relevant assessment years, and the possibility of additional beneficiaries could not be excluded. Although trustees are legal owners under trust law and do not hold property in the same sense as a common manager acting on behalf of jointly interested persons, the expression "receive on behalf of" in section 41(1) was construed in context and harmoniously with the proviso as meaning "for the benefit of" persons beneficially entitled. On that construction, trust income falling within the statutory language was covered by section 41(1), and where the beneficiaries' shares were indeterminate, the proviso requiring taxation at the maximum rate applied.

Conclusion: The first proviso to section 41(1) was rightly applied, and the answer was against the assessee and in favour of the Revenue.

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