1939 (5) TMI 19 - Other - Income Tax

Privy Council confirms High Court ruling on manager status & property income assessment under Income-tax Act.

Keshardeo Chamria Versus Commissioner of Income Tax, Bengal

Keshardeo Chamria Versus Commissioner of Income Tax, Bengal - 1939 AIR 163 PC Issues Involved:1. Whether the appellant and Ramprotap were managers of the properties appointed by or under any order of a Court within the meaning of Section 41, Income-tax Act, 1922.2. Whether the Income-tax Officer acted illegally in assessing the appellant in respect of his share of the property.Detailed Analysis:1. Appointment of Managers under Section 41, Income-tax Act, 1922:The primary issue was whether the appellant and Ramprotap were considered managers of the properties appointed by or under any order of a Court within the meaning of Section 41 of the Income-tax Act, 1922. The facts reveal that a consent decree dated 23rd May 1930, declared the appellant and Ramprotap as entitled to equal shares of the joint estate. An order on 28th July 1930 appointed the Official Receiver to manage the properties, but this was varied on 2nd April 1931, discharging the Official Receiver and allowing the appellant and Ramprotap to jointly manage the properties.The appellant contended that the joint management arrangement constituted an appointment by the Court, thus falling under Section 41. However, the High Court found that the arrangement did not equate to an official appointment of managers by the Court. The Privy Council concurred, stating that 'the respondent and Ramprotap were never appointed receivers or managers by or under any order of the Court,' and thus Section 41 did not apply.2. Legality of the Income-tax Officer's Assessment:The second issue concerned whether the Income-tax Officer acted illegally in assessing the appellant's share of the property income. The appellant argued that the income should have been assessed under Section 41, which mandates tax to be levied on managers appointed by the Court. The Income-tax Officer, however, assessed the appellant's income directly, including property income, despite the appellant's claim that the properties were under joint management.The Assistant Commissioner upheld the assessment, treating the appellant as the owner of an undivided half share of the properties. The appellant's appeal to the High Court resulted in a ruling that the assessment was correct, as Section 41 was inapplicable. The Privy Council affirmed this, noting that the appellant's contention under Section 41 was the only substantial argument raised before the Assistant Commissioner. The Privy Council concluded that 'the question referred was correctly answered by the High Court,' and the assessment was legally valid.Conclusion:The Privy Council dismissed the appeal, affirming the High Court's judgment that the appellant and Ramprotap were not managers appointed by or under any order of a Court within the meaning of Section 41, Income-tax Act, 1922, and that the Income-tax Officer did not act illegally in assessing the appellant's share of the property. The appellant was ordered to pay the respondent's costs of the appeal.