Commissioner of Income Tax vs Sri K. N. K. V. R. V. Venkatachalam Chettiar

Leach, C.J.—Facts which have been disclosed in this Court make it clear that the assessment in this case has proceeded on a wrong basis.

The assessment was made on the assessee under proviso 1 to Section 41 (1), Income Tax Act. The account year is the year 1940-1941 and the

assessment year 1941-1942. The section was amended by Act 23 of 1941 and the amendment came into force on 26th November 1941, which

was after the assessment. Consequently Section 41 did not apply which means that the Income Tax Officer had no power to levy the maximum

rate. The assessee is the executor of the will of one Kannammal Achi, who died on 5th August 1940, leaving a will dated 25th April 1940. She

was survived by her husband and her son. She had decided not to leave any part of her property to her son. Out of a sum of Rs. 1,17,700

belonging to her she left Rs. 50,000 to her husband. She left the balance to son''s son, natural or adopted. At the time of her death her son had no

issue and had made no adoption. It has been accepted that by reason of the Hindu Transfers and Bequests Act (Madras Act, 1 of 1914) and the

Hindu Disposition of Property Act (imperial Act 15 of 1916) the bequest to an unborn grand-son is good and it has also been accepted that if the

son adopted a son after the testator''s death he would be a lawful beneficiary. Before its amendment, Section 41 did not apply to a testamentary

trust. The amendment was made in order to bring such trusts within the purview of the section. Before, the words were

any trustee or trustees appointed under a duly executed trust deed."" Now the words are ""any trustee or trustees appointed under a trust declared

by a duly executed instrument in writing whether testamentary or otherwise.

Assuming that the assessee is here to be regarded as functioning as a trustee for the unborn grandson and not merely as the executor of the will, he

would still not be within the section. When the order of assessment was passed, the amendment had not come into force and the Income Tax

Officer overlooked this fact as did the assessee. We are told that the mistake was discovered when the Commissioner was applying to the Income

Tax Appellate Tribunal for an order of reference to this Court. There is certainly no mention of the matter in any part of the record before us. The

question referred is whether in the circumstances of this case the income received by the executor to the estate of Kannammal Achi was assessable

at the maximum rate u/s 41(1), proviso 1, Income Tax Act, 1922, and it must be answered in this way : The section does not apply to the present

assessment and, therefore, the assessee is not liable to be assessed at the maximum rate. We consider that both sides are to blame for the pre-sent

position and consequently we make no order as to costs.