1953 (9) TMI 31 - HC - Income Tax

Court rules prior decision not binding for later years. Durgah's income not tax-exempt. Trustees assessed as association of persons.

The Trustees, Nagore Durgah Versus Commissioner of Income-tax

The court held that the decision of the Appellate Assistant Commissioner for the assessment year 1940-41 did not operate as res judicata for the ... - Issues Involved:1. Whether the decision of the Appellate Assistant Commissioner for the assessment year 1940-41 operates as res judicata in respect of proceedings for the assessment year 1944-45.2. Whether the surplus income of The Durgah is exempt from income-tax, either under Section 4(3)(i) or under Section 4(3)(ii) of the Indian Income-tax Act, 1922.3. If the answer to question (2) is in the negative, is such income assessable in the hands of the trustees in the status of an association of persons, or has it to be assessed directly in the hands of the kasu-pangudarsRs.Issue-wise Detailed Analysis:1. Res Judicata:The court addressed whether the decision of the Appellate Assistant Commissioner for the assessment year 1940-41 operates as res judicata for the assessment year 1944-45. The court concluded that the principle of res judicata does not apply to income tax assessments for different years. The court cited the Full Bench decision in Sankaralinga Nadar v. Commissioner of Income-tax, Madras, which held that each year's assessment is independent and not bound by previous years' decisions. The court emphasized that the assessment process is inherently of a passing nature and not a permanent determination of rights. Therefore, the first question was answered in the negative and against the assessee.2. Exemption from Income-tax:The court examined whether the surplus income of The Durgah is exempt from income-tax under Section 4(3)(i) or Section 4(3)(ii) of the Indian Income-tax Act, 1922. The court found that the surplus income of The Durgah, which was distributed among the kasu-pangudars, was not exempt from income-tax. The court noted that the usage and previous judicial decisions established that the surplus constituted a private trust for the benefit of the kasu-pangudars. Consequently, the court answered the second question in the negative and against the assessee.3. Assessment of Income:Given the negative answer to the second question, the court considered whether the income should be assessed in the hands of the trustees as an association of persons or directly in the hands of the kasu-pangudars. The court discussed the applicability of Section 41 of the Indian Income-tax Act, which pertains to the assessment of income in the hands of a manager or trustee appointed by or under an order of a court. The court noted that the scheme decree in O.S. No. 1 of 1923 allowed trustees to appoint managing trustees, but this did not constitute a written trust instrument as required by Section 41. The court emphasized that the trustees were within the general charging section of the Act and were correctly assessed as an association of persons. Therefore, the third question was answered against the assessee, affirming the assessment of the trustees in the status of an association of persons.In conclusion, the court held that the decision of the Appellate Assistant Commissioner for the assessment year 1940-41 did not operate as res judicata for the assessment year 1944-45. The surplus income of The Durgah was not exempt from income-tax under the relevant sections. The trustees were rightly assessed as an association of persons, and the income was not to be assessed directly in the hands of the kasu-pangudars. All three questions were answered in the negative and against the assessee.