Maximum-rate tax under section 41(1) applies where estate beneficiaries remain unascertained and shares are indeterminate.

Income received through the manager of the Court of Wards, Bettiah Estate, was treated as assessable on that manager, because the estate income was still being managed for the estate and the earlier basis of escheat had been displaced. The income was also chargeable at the maximum rate under section 41(1) of the Indian Income-tax Act, 1922, because the persons ultimately entitled to the estate had not yet been finally ascertained and their shares remained indeterminate or unknown while the succession dispute was still pending. The assessment on the manager and the application of the maximum rate were therefore sustained.

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Issues: (i) Whether assessment could be made upon the manager of the Court of Wards, Bettiah Estate, in respect of the income from the estate; (ii) whether the income was chargeable to tax at the maximum rate under section 41(1) of the Indian Income-tax Act, 1922.

Issue (i): Whether assessment could be made upon the manager of the Court of Wards, Bettiah Estate, in respect of the income from the estate.

Analysis: The prior basis for treating the estate as having escheated to the State had been displaced by the later judgment in the Bettiah litigation. On the fresh position, income was still being received and managed on behalf of the estate, and the reference proceeded on the footing that assessment on the manager was legally maintainable.

Conclusion: Assessment could validly be made upon the manager of the Court of Wards, Bettiah Estate.

Issue (ii): Whether the income was chargeable to tax at the maximum rate under section 41(1) of the Indian Income-tax Act, 1922.

Analysis: Section 41(1) applies where income is receivable by a manager on behalf of persons whose shares are indeterminate or unknown, in which event tax is leviable at the maximum rate. The question of succession to the estate remained under controversy because the appeal of the State of Bihar was still pending and the final inheritor had not been conclusively settled. The heirs therefore could not be treated as ascertained for tax purposes.

Conclusion: The income was rightly assessed at the maximum rate under section 41(1).

Final Conclusion: Both questions were answered against the assessee and in favour of the Department, thereby sustaining the assessment on the manager and the application of the maximum rate under section 41(1).

Ratio Decidendi: Where the persons entitled to receive income through a manager are not yet finally ascertained and their shares remain indeterminate or unknown, section 41(1) authorises levy of tax at the maximum rate.

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