TaxTMI 
TaxTMI 
1957 (9) TMI 2
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....all live and dead stock in or about his estate in British India or any buildings thereon and the contents of any houses or stabling in British India belonging to him (which was called his estate) and manage the same in all respects and in such manner as they shall deem most advantageous and with all the powers of absolute owners. The trustees were to stand possessed of the net rents and profits of the settled estate after payment of the government land revenue tax, and of all management expenses, upon trust to pay thereout certain annuities to 12 annuitants therein mentioned. If the net rents and profits of the said estate were less than seventy thousand rupees in any year or if the said estate or any portion thereof shall be sold at less than twenty years purchase of the net rent of seventy thousand rupees or an equivalent proportion thereof in respect of the proportion so sold, the annuities bequeathed as above and for the time being payable except annuities Nos. (1), (2) and (3) were to abate proportionately and no such annuitant was entitled to have the deficiency of his or her annuity made good out of the rents and profits of the said estate in respect of any subsequent year. ....
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.... application under section 24(4) of the Act before the High Court of Judicature at Allahabad praying that the High Court may be pleased to require the Agricultural Income-tax Board, U.P., Lucknow, to state a case and to refer to the High Court certain questions of law arising in the case. The application was allowed by the High Court on February 5, 1953, and an order was passed directing the said Board to refer the relevant question of law to the High Court. Accordingly a statement of case was drawn up by the Agricultural Income-tax Board and submitted to the High Court and the following question of law was referred for its decision : " Whether on the facts and in the circumstances of the case the trustees can be said to be holding land on behalf of beneficiaries and can the beneficiaries be said to be jointly interested in the land or in the agricultural income derived therefrom within the meaning of section 11(1) of the U.P Agricultural Income-tax Act, 1948 ? " The said reference was heard by the High Court and by its judgment dated April 19, 1955, the High Court held that the trustees could be said to be holding land on behalf of beneficiaries but the beneficiaries could n....
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....come-tax under the charging section. That liability to pay income-tax would however be on the trustees as a " person " without anything more. Where however section 11(1) comes into operation the agricultural income-tax would be assessed not on the ordinary computation but on the computation specified therein which has the effect of reducing the incidence of the tax by reason of the person being liable to pay only the aggregate of the sums payable as agricultural income-tax by each of the persons jointly interested in such land or in the agricultural income derived therefrom. Two conditions are requisite before section 11(1) can come into operation : (i) that the person holds land from which agricultural income is derived, as a common manager appointed under any law for the time being in force or under any agreement or as receiver, administrator or the like on behalf of other persons and (2) such persons should be jointly interested in such land or in the agricultural income derived therefrom. If both these conditions are satisfied the person holding such land is liable to be assessed in the manner specified in section 11(1) of the Act and the aggregate of the sums payable as agri....
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....ested in such land or in the agricultural income derived therefrom and received by him. The agricultural income-tax in such cases is determined with reference to each of the persons jointly interested in such land or in the agricultural income derived therefrom, and the agricultural income-tax payable by each of such persons is computed on the actual amount of the agricultural income derived from such land and received by him and the aggregate of the sums payable as agricultural income-tax by each of such persons is assessed on such common manager, receiver, administrator or the like with the result that he pays agricultural income-tax which would be substantially lower than what he would have otherwise had to pay if the computation of such tax was on the total agricultural income derived from such land and come to his hands. Such common manager, receiver, administrator or the like would in the course of management or administration of such land debit to the account of each such person an aliquot share of the whole of the agricultural income-tax paid by him. If such common manager, receiver, administrator or the like were assessed on the total income derived from the land which com....
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....rcise the power for the benefit of some other person or object." (Vide Halsbury's Laws of England, Hailsham Edition, Vol. 33, page 87, paragraph 140). " The property affected by the confidence is called the trust property or trust estate. It is usually in the legal ownership or under the legal control of the trustee. The cestui que trust is said to have a beneficial or equitable interest in it. " (Ibid., page 89, paragraph 142). A trustee is thus usually the legal owner of the trust property or the trust estate and holds it for the benefit of the cestui que trust. Reliance was however placed upon an observation of Sir John Romilly, M. R., in Lister v. Pickford : " A trustee, who is in possession of land, is so on behalf of his cestui que trust, and his making a mistake as to the persons who are really his cestui que trust cannot affect the question." What the court was considering there was the question of limitation and adverse possession and these observations were made in that context. It is significant however to note the further observations of the Master of the Rolls in that very context at page 583 : " Suppose that they had imagined bona fide that they themselves....
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....from which agricultural income is derived is held by such common manager, receiver, administrator or the like on behalf of, or in other words, as agent or representative of, persons jointly interested in such land or in the agricultural income derived therefrom. Even though such persons were the beneficiaries cestui que trust under a deed of trust, they would not be comprised within the category of persons on whose behalf such land is held by the trustees and the trustees would not be included in the description of common manager, receiver, administrator or the like so as to attract the operation of section 11(1). Trustees do not hold the land from, which agricultural income is derived on behalf of the beneficiaries but they hold it in their own right though for the benefit of the beneficiaries. The beneficiaries are also not necessarily persons who are jointly interested in such land or in the agricultural income derived therefrom. The term " jointly interested " is well-known in law and predicates an undivided interest in the land or in the agricultural income derived therefrom as distinguished from a separate or an individual interest therein. If on a true reading of the provi....