Special statutory trust income is taxable in trustees' hands when they receive, control, and apply the income under the governing enactment.

A special statutory trust can make its trustees the taxable unit where they receive, control, set apart, and apply the income under the governing enactment, so the income never passes to any other hands. On that basis, the Bombay HC stated that the charging provisions of the Indian Income Tax Act, 1922 were broad enough to assess the trustees to income tax, and the special trustee provisions did not exclude assessment on these facts. The same reasoning was applied to super-tax because the charging provision was materially the same. The reference was answered against the assessee and the trustees' assessment was affirmed.

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Issues: Whether the trustees constituted under a special Act were properly assessed to income tax and super-tax for the relevant assessment year.

Analysis: The trust was created by a special enactment and the corporation of trustees held and managed the properties under that statute. The charging provisions of the Indian Income Tax Act, 1922 were wide enough to reach income of an individual, and the special statutory scheme required the trustees to receive income, defray outgoings, set apart funds, and apply the residue according to the Act. In such circumstances, the trustees were the persons in actual receipt and control of the income to the extent that it never reached any other hands, and the special provisions dealing with trustees did not exclude assessment in this case. The same reasoning applied to super-tax, whose charging provision was in substance identical.

Conclusion: The trustees were properly assessable to income tax and super-tax.

Final Conclusion: The reference was answered against the assessee and in favour of the Revenue, affirming the assessment made on the trustees under the special trust arrangement.

Ratio Decidendi: Where a special statutory trust requires the trustees to receive, control, apply, and retain part of the income, the trustees constitute the taxable unit and may be assessed on that income under the charging provisions of the Income Tax Act.

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