Trust deed construction and annual value taxation of trust property under section 9, with trustees treated as legal owners.

A trust deed must be construed as a whole to determine the settlor's intention, and where the operative clauses expressly transfer the properties to the trustees, the trustees become the legal owners rather than the deities. On that basis, the income from the trust properties is assessable in the trustees' hands under section 9 of the Indian Income-tax Act, 1922, because liability attaches to legal ownership, not merely beneficial interest or shebaitship. Restrictions on actual letting or partial religious use do not exclude the property from section 9, and the bona fide annual value may still be assessed on a notional basis.

---

---

Issues: (i) Whether the trust deed effected a transfer of the properties directly to the trustees; (ii) Whether the trustees were rightly assessed under section 9 of the Indian Income-tax Act, 1922; (iii) Whether the bona fide annual value of the house at No. 3, Amherst Street, Calcutta, was rightly included in the assessment of the trustees.

Issue (i): Whether the trust deed effected a transfer of the properties directly to the trustees.

Analysis: The deed had to be read as a whole and the settlor's intention was gathered from the entire instrument. The recitals and operative clauses showed that the properties were dedicated to the deities, but the trustees were appointed to carry out the dedication, manage the trust, and provide for shebaitship and worship. The deed contained an express transfer of the trust properties to the trustees, and the instrument satisfied the requirements for creation of a valid trust under the Trusts Act.

Conclusion: The transfer was directly to the trustees, not to the deities; the trustees became the legal owners of the properties.

Issue (ii): Whether the trustees were rightly assessed under section 9 of the Indian Income-tax Act, 1922.

Analysis: Once the trustees were held to be the legal owners, the income from the properties was assessable in their hands under section 9. The argument based on alleged repugnancy between clauses in the deed failed because there was no prior absolute vesting of ownership in the deities. The taxable unit under section 9 was the legal owner, and the liability depended on ownership, not on beneficial interest or shebaitship.

Conclusion: The trustees were rightly assessed under section 9 of the Indian Income-tax Act, 1922.

Issue (iii): Whether the bona fide annual value of the house at No. 3, Amherst Street, Calcutta, was rightly included in the assessment of the trustees.

Analysis: The house could not be excluded from section 9 merely because portions were restricted for religious use or because the deed limited letting in certain respects. The annual value could still be reasonably estimated on a notional basis, and restrictions on letting did not take the property outside the charging provision. The legal owner remained assessable on the bona fide annual value irrespective of actual letting or receipt.

Conclusion: The bona fide annual value of the house was rightly included in the assessment.

Final Conclusion: All the referred questions were answered in favour of the revenue, and the assessee's challenges to the assessments failed.

Ratio Decidendi: A trust deed must be construed as a whole to ascertain the settlor's intention; where the instrument vests the properties in trustees, the trustees as legal owners are assessable on the property's annual value under section 9, and restrictions on actual letting do not exclude the property from taxation on a notional annual value basis.

---