Court-framed scheme appointments can attract representative tax liability where a trustee manages identifiable beneficiaries' income.

A managing trustee appointed under a court-framed scheme can fall within section 41 of the Income-tax Act, 1922, because the appointment is referable to the court's order and not merely to a private arrangement. The provision extends to a manager appointed by or under an order of court, and it is aimed at fastening liability where a person manages property or income on behalf of identifiable beneficiaries. Where the trustee controls surplus income for beneficiaries with definite and ascertainable shares, the trustee is treated as managing that income in a representative capacity. Section 41 therefore applied on these facts.

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Issues: Whether the managing trustee appointed under a court-framed scheme could be treated as a manager appointed by or under an order of court so as to attract section 41 of the Income-tax Act, 1922.

Analysis: The relevant scheme authorised the trustees to elect or appoint a managing trustee, and the appointment made in exercise of that authority was referable to the court's order. Section 41 covers not only a direct appointment by court but also an appointment made under an order of court. The managing trustee's functions in relation to the surplus income were distinct from his position as a trustee of the Durgah estate, and in substance he managed the surplus on behalf of the kasupangudars, whose shares were defined and identifiable. The provision was intended to fasten liability on the person managing property on behalf of others in the special cases described in the section.

Conclusion: Section 41 applied to the assessee, and the answer to the referred question was in the affirmative, in favour of the assessee.

Ratio Decidendi: Where a scheme framed by court authorises the appointment of a managing trustee and the trustee actually manages income on behalf of identifiable beneficiaries with definite shares, the appointment is treated as one made under an order of court and section 41 applies.

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