Representative assessment of interest on court-held company assets upheld as income attributable to the company.

Interest earned on deposits and investments made by a court-appointed District Magistrate holding a company's assets was treated as income arising from property managed on behalf of the company. The representative-assessment provisions in section 41 of the Indian Income-tax Act, 1922, and sections 160(1)(iii), 161 and 166 of the Income-tax Act, 1961, permit assessment in the hands of the person managing the property as receiver or manager, while preserving attribution to the beneficial owner until lawful distribution. On that basis, the interest income was taxed as the company's income in the hands of the District Magistrate as representative assessee, in favour of the revenue.

---

---

Issues: Whether interest earned on deposits and investments made by the District Magistrate, appointed by court to take over the assets of the company, was assessable as the income of the company.

Analysis: The assets had been taken over under court orders, and the District Magistrate was acting in the character of a receiver or manager of property. Under section 41 of the Indian Income-tax Act, 1922, and the corresponding provisions in sections 160(1)(iii), 161 and 166 of the Income-tax Act, 1961, income received by a person managing property on behalf of another could be assessed in the hands of the representative assessee, with power to make direct assessment on the person beneficially entitled. The deposits and the interest accrued remained part of the assets held for the company until distribution to depositors, and the company could not be treated as divested of ownership merely because the funds were intended to be applied for depositors.

Conclusion: The interest income was correctly taxed as the income of the company in the hands of the District Magistrate as representative assessee, and the question was answered in favour of the revenue.

Ratio Decidendi: Income arising from property held under court orders by a receiver or manager is assessable in the hands of the representative assessee under the representative-assessment provisions, and remains attributable to the person on whose behalf it is received until legally distributed.

---