C. R. NAGAPPA versus THE COMMISSIONER OF INCOME-TAX, MYSORE

Citation: [1969] 1 S.C.R. 979 · Decided: 04-09-1968 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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C. R. NAGAPPA 
v. 
THE COMMISSIONER OF INCOME-TAX, MYSORE 
September 4, 1968 
[J.C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] 
Income-tax Act, 1961, s. 161(1) and (2)-Scope of-Whether trust 
income must be assessed in the hands of the trustee as 'representative 
assessee'-Or can be assessed in settlor's hands under s. 64(v) or in the 
beneficiary's ha·nds. 
The appellant settled certain properties for the benefit of his minor 
children under several deeds of trust and vested the properties in four 
trustees of whom he was one. Under each deed of trust a portion of the 
income of the tntSt was to be utilized immediateiy for the benefit of the 
beneficiaries and the balance accumulated. In the course of the appellant's 
assessment to income~tax for the year 1962-63, the income arising from 
the trust properties and used for the immediate benefit of the beneficiaries 
was included in the appellant's total income. The Commissioner directed 
under s. 263 of the Act that the income for the deferred benefit of the 
minor beneficiaries be also included in the appellant"s total income. 
It was contended on behalf of the appellant that the Tncome-tax Officer 
was bound to as·sess the income under each deed of trust sepa'rately in the 
hands of the trustees as "representative ass·.essew" and was inLompetent 
in view of the express enactment of s. 161(2) to assess the income in the 
hands of the app·ellant or of the beneficiaries; that notwith&.landing the 
express direction in ·s. 64(v) of the Act to incluJe the income under the 
trust in the total income of the settlor. the Income-tax: Office'r \Vas obliged 
to assess the income used or accumulated for the benefit of minors in the 
hands of the trustees; and that the assessments on the minor beneficiaries 
for the year 1962-63 having been completed there was a bar to the assess-
ment of the income in the hands of the appellant for the same year. The 
Income-tax Appellate Tribunal rejected the appellant's contentions and the 
High Court', upon a 1reference, also decided i1.gainst him. 
On appeal to 
this Conrt, 
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HELD. dismissing the appeal : 
It is implicit in the terms of s. 161( 1) that the Income-tax Offi'*'r 
may assess a representative asses·see as regards income in respect of \\:hich 
he is a representative assessee, but he is not bound 1·0 do 'SO. 
He may 
assess either the percentage assessee or the person represented by him. 
The contention that since the trustees were assess:!.ble in re·spect of the 
income of the beneficiaries under s. 161(1), tfiat income could not by 
virtue of sub-s. (2) of s. 161 be assessed in the hands of the beneficiary 
is contrary to the plain terms of s. 166 .. Sub-section (2) of s. 161, which 
was presumably intended to remove a conflict of judicial opinion, does 
not purport to deny th·e Income-tax Officer the option to as:sess the income 
in the hands of the person represented by l"he representative assessce : it 
merely enacts that wh-en a representative assessee is assessed to tax in 
exercise of the option of the revenue, he shall be assessed under Ch. X\' 
and sha11 not in rcsoect of that income be assessed under any other provi-
sion of the Act. [982 E-F; 983 A-B; 984 F-G] 
By the express injunction in s. 64(v) income which accrues from 
the assets settled by the appellant upon the trustees· for the be.nefit of his 
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• 980 
SUPRD1E COURT REPORTS 
(1969) J S.CR 
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minor children \\'as liable to be included 1n h:..; total incorl1e. 
Section 
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161 ( 1 ) predic<1tes 1-hc .zxistcncc of incon1~ liable to tax : where inrome 
fron1 a trust i<> made exigiblc to tax in the hand .. o~ the se-ttlor. it cannot 
he bi'ou.cht 10 tax in the hands of the bencficiarv or the trusrec, for the 
income is alr...:ady charged to tax in the 
hand~, o! the sctllor. 
If the 
income cannot be brought to tax under suh-5. 
~I) of "· 16 l, there is no 
scope for the opplicalion of suh·s. (2). [984 D-FJ 
Although in the present ca~c. the rninors \\'Cre as,.csscd to t1x. for 
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ass·~sn1c111 vear 1962-63 thar <.1S'\cssn1cnt 
\Vtl~ no! :iffcct !he validitv 
of !he inclu'Sion ·of the tru'\t incon1c in the aS"C:i:-.na:n! 1nadc on the appel-
lant under s. 64(v). 
c.1sc l;n\' referred to. 
CIVIL APPELLATE JUR!SDIC no:< 
1967. 
Civil Appeal No. 1374 of 
Appeals by special leave frnm the judgment an<l order dated 
December 15, 1966 of the Mysore High Court in J.T.R.C. "lo. 7 
of 1966. 
K. Sri11irasa11 and R. 

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