Hamabai J.K. Mehta vs Commissioner of Income Tax

M.C. Chagla, C.J.—The assessee Mr. Jehangir K.B. Mehta is a beneficiary under a certain trust dated April 8, 1924, executed by his wife Bai Hamabai J.K. Mehta, and one of the benefits that the assessee receives under this trust is that he is entitled to reside rent free in the property known as "Persepolis." For the assessment year 1943-44 the Income Tax authorities, instead of assessing the trustees in respect of the income received by them on behalf of the beneficiary, elected, which right they undoubtedly had, under Sub-section (2) of Section 41, to assess the beneficiary directly, and in the assessment order that was served upon the assessee he was charged in respect of this property on the income of Rs. 12,637 which was assessed on the basis of the annual letting value. The assessee claimed the benefit of the proviso to Section 9(2) which entitles the assessee when he is in occupation of the property for the purposes of his own residence not to be liable to tax under this head in an amount which exceeds ten per cent of the total income of the assessee. This claim of the assessee was not accepted by the Income Tax Department and its decision was upheld by the Tribunal, and the Advocate General''s contention before us is that u/s 9(2) it is only the owner of the property that is entitled to the benefit conferred by that sub-section. The Advocate General argues that the assessee is not the owner of the property, the owners of the property are the trustees and therefore Sub-section (2) of Section 9 has no application. But the Advocate General overlooks the patent fact in this ease that the assessee has been assessed u/s 9 to the property tax as the owner of the property. It is only an owner of a property that can be made liable to assessment u/s 9. If the assessee is an owner for the purpose of Section 9(1), it is difficult to see why he is not an owner also for the purpose of Section 9(2). If he is liable to pay a tax under the heading "property tax," he is equally entitled to claim whatever benefit is given to him under Sub-section (2) of Section 9.

Sir Jamshedji Kanga has attempted to argue before us the larger question as to whether u/s 41(1) a trustee can ever be charged in a larger amount than a beneficiary and Sir Jamshedji''s contention is that even if the trustees were assessed as owners of the property u/s 9, they would be entitled to the same benefit under Sub-section (2) as the beneficiary would be, and Sir Jamshedji has also argued that the expression "owner" in Section 9(2) means not the legal owner but the beneficial owner. We do not think it necessary to decide either of these two questions raised by Sir Jamshedji and we confine our decision to the narrow point that as the beneficiary has been assessed to tax u/s 9(1), he is entitled to the benefit under Sub-section (2) in the same capacity, viz. that of the owner of the property. We, therefore, answer the question in the affirmative. Commissioner to pay the costs