Bombay High Court
Assistant Commissioner Of Income Tax vs A.K. Menon on 19 April, 1995
Equivalent citations: 1995(4)BOMCR416
Author: S.N. Variava
Bench: S.N. Variava
JUDGMENT S.N. Variava, J.
1. The points raised by this application have already been answered by an order dated 20th February, 1995. In that order the Court has inter alia held as follows:
"82. Dr. Balasubramanian also submitted that by virtue of sections 2 and 11 of the Special Courts Act, in effect a Notified Party was put into a civil death. He submitted that the Notified Party has an absolute disability. He submitted that the Custodian became a Representative Assesse on behalf of the Notified Parties. He submitted that now it was the duty and the obligation of the Custodian to file returns and pay taxes.
83. At this stage Mr. Bobde interrupted and informed Court that these must not be deemed to be arguments on behalf of the Income Tax Department. One Mr. K.V. M. Pai, Commissioner of Income Tax, II Circle also asked Mr. Bobde to inform Court that Dr. Balasubramanian was not instructed by the Tax Department to make any such submissions on their behalf. Dr. Balasubramanian then stated that he was merely assisting the Court. In my view this last submission of Dr. Balasubramaninan i.e. that the Custodian is a Representative Assessee, merely needs to be stated to be rejected. All that has happened is that the properties stand attached under the provisions of the Special Courts Act. There is no vesting of properties in the Custodian. The Custodian is neither an agent nor a guardian nor a manager nor an administrator nor a trustee of the Notified parties. The Custodian does not become the owner of the property nor does he step into the shoes of a Notified party. The Custodian is merely an Officer of this Court and nothing more. He has to deal with the property as per the directions of the Court.
2. Mr. Bobde however requested the Court to reconsider certain aspects. He submitted that the decision of the Court that the Custodian is not a Representative Assessee is not correct. He submitted that under section 160(1)(iii) of the Income Tax Act any person who manages property on behalf of another and receives income on behalf of another is a Representative Assessee. He submitted that under section 3 and 4 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, the Custodian was authorised to deal with the properties which were attached. He submitted that after notification the Notified Parties were under a disability as all their properties were now under the control of the Custodian. He submitted that the Custodian was receiving income on behalf of the Notified Parties and therefore the Custodian was a manager as contemplated by section 160(1)(iii) of the Income Tax Act. Mr. Bobde relied on the case of Emperor v. B.H. Desouza, reported in I.L.R. Vol. 35 Bom. 412, wherein on page 417 it has been held that it is a recognised rule with regard to interpretation of clauses of comprehensive nature that they are not to be taken as strictly defining what the meaning of a word must be under all circumstances, but merely as declaring what things may be comprehended within the term where the circumstances require that they should.
3. Mr. Bobde submitted that therefore what the Court has to see is what is required under section 160(1)(iii) of the Income Tax Act. He submitted that under section 160(1)(iii) of the Income Tax Act any person who manages property and/or receives income would be included. He submitted from this point of view the Custodian was a Representative Assessee.
4. On the other hand Mr. Mistry and Mr. Joshi submitted that Custodian could never be a Representative Assessee. They submitted that before section 160(1)(iii) of the Income Tax Act could apply certain conditions had to be fulfilled viz.,
a) that a person should have been appointed by or under the order of the Court. They submitted that this also becomes clear from the categories of person mentioned in section 160(1)(iii) of the Income Tax Act.
b) that the person should be managing the property on behalf of another.
c) Income should be received and
d) the income should be received under a right to receive income and for and on behalf of the Notified Party.
5. In support of the submission that the appointment must be by or under the Order of Court reliance was placed upon the case of Keshardeo Charmria v. Commissioner of Income Tax, Bengal, . In this case Consent Terms were entered into in a suit between two persons. Under these Consent Terms both parties were at liberty to jointly realise the rent, to meet necessary expenses and to even file suits in respect of property jointly held by them. They were also entitled to keep joint Custody of the documents of title and to jointly invest monies which came into their hands or divide the same equally. The Income Tax Officer assessed the share received by one of the parties as income of the party. That party claimed that he was merely a Representative Assessee under the provision of then section 41 of the then Income Tax Act 1922 (which was equivalent to section 160(1)(iii) of the Income Tax Act). The Privy Council negatived this contention. The Privy Council held that even though income was received under Consent Terms filed in Court, the parties had not been appointed managers by and under orders of the Court. The Privy Council held that under these circumstances section 41 of the Income Tax Act could never apply.
6. Mr. Mistry and Mr. Joshi next submitted that 2nd condition is that the person should be managing the property on behalf of another. It was submitted that Custodian is not at all managing any properties. It is submitted that under Special Court (Trial of Offences Relating to Transactions in Securities) Act there is a Statutory attachment of all properties of Notified Parties. It is submitted that those properties can be dealt with only under directions of this Court. It was submitted that the Custodian has no power or right to manage or even deal with these properties on his own.
7. It was next submitted that before section 160(1)(iii) of the Income Tax Act can apply income must be received. It was submitted that the Custodian received no income at all. It was submitted that whatever income or returns were received were in the name of Notified parties and put into accounts of the Notified parties. It was submitted that there is no vesting of the properties in the Custodian and that the properties continue to belong to Notified parties. It was submitted that all that had happened was that there was a statutory freezing of the property so that Notified parties cannot dispose off the properties any further.
8. It was next submitted even if a income was received by the Custodian it was not on behalf of the Notified Party. It was submitted mere incidental receipt of the income was not sufficient. It was submitted that income should have been received in capacity as Administrator General or Receiver or Manager. It was submitted that the Custodian does not receive any income under any right to receive income or for and on behalf of the Notified Party nor as a Administrator General or Receiver or Manager. In support of this submission reliance is placed on authority in case of Administrative General of West Bengal v. Commissioner of Income Tax, West Bengal, reported in 56, I.T.R. 34. In this case the question was whether the Administrator General who was appointed administrator and to whom Letters of Administration 'de bonis non' of the estate were granted was a representative assessee within the meaning of section 41 of the Indian Income Tax Act 1922. The Supreme Court held that the income was received by the Administrator General on his own behalf and not on behalf of the heirs. The Supreme Court held that the fact that section 41 expressly referred to Administrator General did not conclude the matter. The Supreme Court held that another condition was prescribed by section 41. The Supreme Court held that income must be received on behalf of a person or persons. The Supreme Court held that this condition must be fulfilled before section 41 becomes applicable.
9. I have considered these rival submissions. I see no reason to differ from what is already held in order dated 20th February, 1995. In my view Mr. Mistry and Mr. Joshi are absolutely correct. Section 160(1)(iii) of the Income Tax Act can only apply provided the person is appointed by and under any order of the Court. The Custodian is not appointed by the Court. The Custodian is appointed by the Central Government by virtue of the provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act. The Custodian does not manage any of the properties or assets of the Notified Parties. In fact all Notified parties continue to use some assets in as much as they continue to reside in their flats, use their offices, cars etc. All that has happened is that by virtue of the Statutory Attachment they cannot dispose or alienate their properties and assets. The Custodian is therefore, neither a Administrative General nor a Official Trustee nor a person who is managing properties on behalf of another. Undoubtedly what one has to see is the substance of the section. However even then it is clear from the wording of section 160(1)(iii) of the Income Tax Act that persons proposed to be included are only those who have been appointed by and under the order of a Court and who are managing the property and/or receiving income under some order or right. A mere incidental receipt of income or merely acting as a post office is not sufficient. Even if some debtors send monies or dividends to the Custodian, it is always in the name of Notified Parties. The same is then mechanically put into Bank Accounts maintained by the Notified Party. If payments have to be made, the Notified Party makes out and signs a cheque. The Court then directs the concerned Bank to release payments. The Custodian merely forwards the order of the Court to the Bank. The Custodian does not fulfill any of the conditions of section 160(1)(iii). I therefore still maintain the earlier ruling that the Custodian is not a Representative Assessee.
10. So far as prayer (b) is concerned, in my view, it is not for this Court to direct a Notified Party to file a return. It is for the Notified parties to decide what they want to do. The Court has already clarified that there is no disability under the Special Court (Trial of Offences Relating to Transactions in Securities) Act in filing a return and that the consequences of not filing a return will follow. In the order dated 20th February, 1995 the Court has held as follows :
98........However where the Special Courts Act does not prevent a party from doing something required to done under some other Act/contract and the Notified party does not perform his obligation he will be liable to pay interest and/or penalty. Just by way of example under the Income Tax Act penalty can be levied for not filing a return; penalty can be levied for failure to produce evidence to support the return of income. These are not matters where any disability is imposed on a Notified party by the Special Courts Act. There is nothing in the Special Court Act which prevents a Notified party from filing his returns within time. There is nothing in the Special Court Act which prevents a party from producing evidence in support of his return. If a Notified party has failed to file his return in time and/or failed to produce evidence in support his return, he does so at his own peril. In this case, there is no conflict between the Special Court Act and the Income Tax Act. If there is no conflict, the provisions of the Income Tax Act will continue to apply. Of course in such cases, the Court may not release amounts for payment of interest/penalty or only release it after discharge of other liabilities. But merely because this Court may not release amounts does not mean that interest/penalty cannot be imposed. As stated above these are mere examples. In each case, the Court would have to examine whether there is a legal disability by reason of the Special Court Act. If the Special Court Act prevents a Notified Party from doing a certain thing, then there can be no interest/penalty. If on the other hand, the Special Court Act has not prevented or disabled a person nor abrogated any right, then the provisions of other Laws/contracts will continue toapply."
In my view apart from this clarification nothing further needs to be said. Prayer (b) stands rejected.
11. Mr. Bobde fairly states that in view of the order dated 20th February, 1995, prayer (c) cannot be pressed in this Court.
12. Application stands disposed off accordingly.