# W.O. HOLDSWORTH AND OTHERS v. THE STATE OF UTTAR PRADESH

- **Citation:** [1958] 1 S.C.R. 296
- **Court:** Supreme Court of India
- **Decided:** 1955-04-19
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/w-o-holdsworth-and-others-v-the-state-of-uttar-pradesh-1455
- **Pages:** 12

## Headnote

1957
{.er,tember 4.
296
SUPREME COURT REPORTS
[1958]
W.O. HOLDSWORTH AND OTHERS
v.
THE STATE OF UTTAR PRADESH
BHAGWATI, S. K. DAS AND GAJENDRAGADKAR J.J.
Agriniltural lncome-tax-Wi/1-Triust-Annuities-Land held
hr trustee, \Vhether on behalf of annuitants-Nature of interest of·
annuitants. whether joint-Indian Trusts Act, 1882 (fl of 1882),
s. 3--U. P. Agricultural Income-tax Act, 1948, (U. P. Ill of 1949),
ss. 2( 11 ), 3, 11 (I).
Sec~ion 11(1) of the U. P. Agricultural Income-tax Act, 1948,
provided : "Where any p'crson holds land, from which agricuitural
incon1e is derived, as a con1mon manager appointed under any la\V
for the tin1c heing in force or under any agreement or as receiver9'
administrator or the like on behalf of persons jointly interested in
such land or in the agricultural income derived therefrom, the
aggregate of the sums payable as agricultural income-tax by each
pers0n on the agricultural income derived from such land and
received by hin1, shall be assessed on such common manager,.
receiver, administrator or the like, and he shall be deemed to be
the assessee in respect of the agricultural income-tax so payable
by each such person and shall be liable to pay the same."
The appellants were the trustees of an estate settled on trust
under a will which inter alia provided that the trustees were t<>
take possession of the trust properties and to manage the samewith all the powers of absolute owners and to pay the annuities
to certain persons. The assessing authority assessed the appellants to agricultural income-tax upon the total agricultural income
received by them. overruling their contention that the tax should
be computed in accordance with the method of computation laid
down ins. 11(1) of the Act and that they should be called upon to
pay the aggregate of the sums payable as agricultural income-tax
by each of the annuitants.
Held : (I) that the trustees who were the legal owners of the
trust property did not hold the land from which agricultural income was derived, on behalf of the annuitants and that each of
the annuitants was separately or individually interested in the
agricultural income derived from the land comprised in the trust
estate to the extent of the annuity payable to him.
(2) that s, 11(1) of the Act was not applicable to the case and
that the appellants were liable to pay agricultural income-tax
upon the total agricultural income received by them.

## Text

1957
{.er,tember 4.
296
SUPREME COURT REPORTS
[1958]
W.O. HOLDSWORTH AND OTHERS
v.
THE STATE OF UTTAR PRADESH
BHAGWATI, S. K. DAS AND GAJENDRAGADKAR J.J.
Agriniltural lncome-tax-Wi/1-Triust-Annuities-Land held
hr trustee, \Vhether on behalf of annuitants-Nature of interest of·
annuitants. whether joint-Indian Trusts Act, 1882 (fl of 1882),
s. 3--U. P. Agricultural Income-tax Act, 1948, (U. P. Ill of 1949),
ss. 2( 11 ), 3, 11 (I).
Sec~ion 11(1) of the U. P. Agricultural Income-tax Act, 1948,
provided : "Where any p'crson holds land, from which agricuitural
incon1e is derived, as a con1mon manager appointed under any la\V
for the tin1c heing in force or under any agreement or as receiver9'
administrator or the like on behalf of persons jointly interested in
such land or in the agricultural income derived therefrom, the
aggregate of the sums payable as agricultural income-tax by each
pers0n on the agricultural income derived from such land and
received by hin1, shall be assessed on such common manager,.
receiver, administrator or the like, and he shall be deemed to be
the assessee in respect of the agricultural income-tax so payable
by each such person and shall be liable to pay the same."
The appellants were the trustees of an estate settled on trust
under a will which inter alia provided that the trustees were t<>
take possession of the trust properties and to manage the samewith all the powers of absolute owners and to pay the annuities
to certain persons. The assessing authority assessed the appellants to agricultural income-tax upon the total agricultural income
received by them. overruling their contention that the tax should
be computed in accordance with the method of computation laid
down ins. 11(1) of the Act and that they should be called upon to
pay the aggregate of the sums payable as agricultural income-tax
by each of the annuitants.
Held : (I) that the trustees who were the legal owners of the
trust property did not hold the land from which agricultural income was derived, on behalf of the annuitants and that each of
the annuitants was separately or individually interested in the
agricultural income derived from the land comprised in the trust
estate to the extent of the annuity payable to him.
(2) that s, 11(1) of the Act was not applicable to the case and
that the appellants were liable to pay agricultural income-tax
upon the total agricultural income received by them.
CIVIL APPELLATE JURISDICTION: CIVIL Appeal No.
389 of 1956
S.C.R.
SUPREME COURT REPORTS
297
Appeal by special leave from the judgment and
order dated April 19, 1955, of the Allahabad High
Court in Agricultural Income-tax Miscellaneous Case
No. 202 of 1952.
G. S. Pathak and G. C. Mathur, for the appellants.
K. L. Misra, Advocate-General of Uttar Pradesh, and
C. P. Lal, for the respondent.
1957. September 4. The Judgment of the Court
was delivered by
BHAGWATI, J.-This appeal with special
leave
against the judgment of the High Court of Judicature
at Allahabad raises a question of the interpretation of
s. 11 (1) of the U.P. Agricultural Income-tax Act, 1948,
Act III of 1949 (hereinafter referred to as "the Act')
The appellants are the trustees of the estate settled
on trust under the
last will and testament
dated
May 17, 1917 of one.J. J. Holdsworth which, interalia,
comprised of a certain zamindari estate known as the
Lehra
Estate situate in the District of Gorakhpur,
Uttar Pradesh.
The clauses of the will so far as they are relevant for
the purpose of this appeal provided that the trustees
were to take possession of all real property in the
United Provinces of Agra and Oudh and elsewhere in
British India
(including the houses
at Lehra and
Gorakhpur and the grounds thereof) and 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 yeius
purchase of the net rent of seventy thousand rupees or
1957
Holdsworth
and Others
v.
The State of
Uttar Pradesh
Bhagwati J.
/
1957
Holdsworth
and Others
••
The State of
·uuar Pradesh
Bhagwatl. J.
298
SUPREME
COURT REPORTS
[1958]
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. If there was no survivor alive then it was tQ go
William Orlando Holdsworth, the son of the testator.
Seven of the said annuitants died and at the relevant
period the following
annuities were payable;
(i) Mrs. J. C. Holdsworth
£2,500
(ii) Mr. W. 0. Holdsworth
£1,000
(iii) Miss Lucy Marion Holdsworth £50
(iv) Lt. Col. L. R. J.C. Wilkinson
£500
(v) Mr. Horace Claud Holdsworth £400
The trnstees entered upon the trust and managed
the trust properties in accordance with the terms of
the said will. The Act came into force in 1949 and a
notice of assessment of agricultural income-tax was
issued to the trustees for the year 1357 Fasli ( 1949-50).
The AdditionafCollector, Gorakhpur, the assessing
authority for the area in question, by his order dated
December 14, 1950 assessed the trustees to agricultural income-tax upon the total agricultural income
received
by them, overruling their contention that
the tax should be computed in accordance with the
method of computation laid down in s. 11(1) of the
Act and that they should be called upon to pay the
aggregate of the sums payable as agricultural incometax by each of the five annuitants.
The trustees preferred an appeal before the Agricultural Income-tax Commissioner, Lucknow, who by an
order dated November 22, 1951, upheld the order of
the Additional
Collector.
He observed that the
beneficiaries were neither jointly interested in the land
held by the trustees nor in the agricultural income
derived therefrom, and that the agricultural income of
the Lehra Estate accrued to the trustees and not to the
beneficiaries directly as it left the hands of the various
tenants who paid rent or from self-cultivation that
was done by the trustees themselves.
S.C.R.
SUPREME COURT REPORTS
299
The trustees then moved an application
under
s. 24(2) of the Act before the. Agricultural Income-tax
Board, U.P., for reference of certain questions oflaw to
the High Court for its decision.
The said Board
however decided to act under the third proviso to
s. 24(2) of the Act and to consider the questions .of law
itself instead of referring them to the High Court for
its decision. In the exercise of this power the Board
held inter alia that the entire property vested in the
trustees and that the latter could not claim the benefit
of s. 11 of the Act and refused to make a reference.
The trustees moved an application under s. 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 -0f 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 beard 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
not be said to be jointly interested in the land or in
the agricultural income derived therefrom within the
meaning of s. ll(I)ofthe Act and accordingly answered
the first part of the question in the affirmative and the
latter half in the negative.
1957
Holdsworth
and Others
v.
The State of
Uttar Pradesh
BhagwatiJ.
1957
Holdsworth
and Others
••
The Stale of
-' ·'1tar Pradesh
Hhagwati J.
300
SUPREME COURT REPORTS
[1958]
Thereupon the trustees tiled an application before
the High Court under Art. 133(1) of the Constitution
for leave to appeal to this Court which was rejected
with the result
that the trustees applied
for and
obtained on Api"il 16, 1956 special leave to appeal
against the judgment of the High Court.
Section 11 ( l) of the Act which falls to be considered
by us runs as under:
"Where any person holds land, from which agricultural income is derived,
as a common manager
appointed under any law for the time being in fore~ or
under any agreement or as receiver, administrator or
the like on behalf of person jointly interested in such
land or in the agricultural income derived therefrom
the aggregate of the sums payable
as agricultural
Income-tax by each person on the agricultural income
derived from such land and, received by him, shall be
assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the
assessee in respect of the agricultural income-tax so
payable by each such person and shall be liable to pay
the same."
This section concerns itself with the mode of computation of agricultural income-tax in certain cases.
The charging section is however s. 3 of the Act which
talks of agricultural income-tax and super-tax at the
rate or rates specified in the schedule to be charged for
each year in accordance with, and subject to the provisions of the Act. ..... and rules framed under els. (a),
(b) and (c) of sub-s. (2) of s. 44, on the total agricultural income of the previous year of every person.
"Person" is defined in s. 2( I I) to mean an individual
or association of individuals, owning or holding property for himself or f.or any· other. or partly for his
own benefit and partly for that of another, either as
owner, trustee, receiver, manager, administrator, or
executor or in any capacity recognized by law, and
includes an undivided Hindu family, firm or company
but not to include a local authority. According to the
above
definition the trustees before us would be
included in the definition of "person" and would as
such be liable to agricultural income-tax under the
S.C. R.
SUPREME COURT REPORTS
301
charging section. That liability to pay income-tax
would however be on the trustees as a "person"
without anything more. Where however s. 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
·effects of reducing the incidence of the tax by reason
of the person being liable to pay only the aggregate bf
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 s. 11(1) can
come into operation: (1) that the person holds land
from which
agricultural income is derived,
as a
c:ommon 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 bejointly 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 s. 11(1) of the Act and the
aggregate of the sums payable as agricultural incometax by each of these persons jointly interested on his
share of the agricultural income derived from such
land and actually received by him is to be assessed on
such common manager, receiver, administrator or the
like, and the latter is to be deemed the assessee in
respect of the agricultural income-tax so payable by
each such person and is liable to pay the same.
It is to be noted that the primary liability for .the
payment of agricultural income-tax is on the person
who is interestd in the land or in the agricultural
income derived therefrom. The incidence of the tax is
on that person and the amount of tax is determined
with reference to the aggregate income derived by
him. Inasmuch as however land such is held· by some
other person who is a common manager, receiver,
administrator or the like on behalf of such person and
others jointly interested in such land or in the agricultural income derived
therefrom,
the agricultural
income-true is assessed on such common manager,
1957
Holdsworth
and Others
"·
The State of
Uttar Pradesh
BhagwatiJ.
1957
Holdsworth
and Others
••
The State of
Uttar Pradesh
Bhagwati J.
302
SUPREME COURT REPORTS
[1958]
receiver, administrator or the. like instead of the
assessment being made on each of such persons who
is jointly interested in such land or in the agricultural
income derived therefrom. Section 11(1) prescribes a
mode of assessing such common manager, receiver,
administrator or the like and he is deemed to be the
assessee in respect of agricultural income-tax so payaable by each such person and is liable to pay the same.
Such common manager, receiver, administrator or
the like would certainly be covered by the definition
of person contained in s. 2(11) of the Act because he
would be
holding proper(¥ for others as receiver,
manager, administrator or the like and would be liable
to pay
the agricultural income-tax on the agricultural income derived by him from the land which he
thus held. If there was nothing more, the incidence of
the tax would be on the total income which has come
to his hands. But, in so far as he holds the land from
which agricultural income is derived as such common
manager, receiver, administrator or the like on behalf
of the persons jointly interested in such land or in the
agricultural income derived therefrom, the agricultural
income-tax is levied not on the computation of the
whole agricultural income which has come to his
hands but is limited to the aggregate of the sums
payable
as agricultural income-tax by each of the
persons jointly interested in such land or in the agrir
cultural 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-t~x 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
S.C.R.
SUPREME COURT REPORTS
303
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 agricul·
tural 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 comes to his hands, the atnount thus debited to
each of such persons would be larger than the amount
which the latter would have to pay by way of agri·
cultural income·tax,
if agricultural income·tax was
levied on the actual amount of agricultural income
derived fiom such land and received by him as falling
to his share. This provision therefore is designed to
lower
the incidence of the agricultural income·tax
upon e.ll,.ch such person and such common manager,
receiver, administrator or the like by virtue of these
provisions is deemed to be the assessee in respect
of agricultural income-tax so payable by each such
person and is made liable to pay the same.
This position however is not available unless and
until such common manager, receiver, administrator
or the like holds the land from which agricultural
income is derived on behalf of persons jointly interested
in such land or in the agricultural income derived
therefrom. Such common manager, receiver, administrator or the like should hold the land on behalf of
these persons and not on his own behftlf. The very
words "on behalf of" predicate that the land is held
by such common manager, receiver, administrator or
the like not as the owner but as the agent or represen·
tative of these persons and he manages or administers
the same either in accordance with law or the terms of
the agreement arrived at between the parties. There
is no vestige of ownership in him and all that he is
entitled to do is to manage or administer the land on
behalf of persons who are jointly interested in the
agricultural income derived therefrom. This could
be predicated of receivers, managers, administrators
or the like but cannot be predicated of owners or
MlSC/'1-10
1957
Holdsw~rth
and Others
v.
The Stat• of
Uttar Pradesh
Bhagwati •·
1957
Ho/d.'lwor1h
and Others
v.
The State of
Uttar Pradesh
Bhagwati I.
304
SUPREME COURT REPORTS
[1958]
trustees who are equally with the manager, receiver,
administrator or the like included within the definition of "person" contained in s. 2(11) of the Act.
The case of the owner does not require any elaboration. He holds the land on his own behalf and also
for his own benefit. He certainly cannot come within the
scope of s.11(1) of the Act. The position of a trustee is
also similar to that of the owner. A trust is thus defined
in English Law:
"A trust in the modern and confined sense of the
word, is a confidence reposed in a person with respect
to property of which he has possession or over which
he can exercise a power to the intent that he may
hold the property or exercise the power for the benefit
of some other person or object". (Vide Halsbury's
Laws of England, Hailsham
Ed., Vol. 33, p. 87,
para. 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 p. 89 para. 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 Romily, M. R., in Lister v. Pickford('):
"A trustee, who is in possession of land is so on
behalf of his cestuis que trust, and his making a mistake
as to the persons who are really his cestuis 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 p. 583:
"Suppose that they had imagined bona fide that
they themselves were personally entitled to the property, and that they were not trustees of it for anyone,
it would, nevertheless have been certain that they would
(1) (1865) 34 Beav. 576, 582; 55 E.R. 757.
S.C.R.
SUPREME COURT REPORTS
305
have been trustees for the cestuis que trust, and no time
would run while they were in such possession. The
legal estate was vested in them, no other person could
have maintained an ejectment against them; they are
bound to know the law, they ought to have taken
possession ·as soon as they saw who were the real
beneficiary devisees, and being in possession, they ought
to have applied the proper proportion of the rents for
the benefit of such residuary devisees."
The passage quoted above makes it abundantly clear
that the legal estate is vested in the trustees and they
hold it for the benefit of the beneficiaries.
Whatever be the position in English Law, the Indian
Trusts Act, 1882 (II of 1882) is clear and categoric on
this point. Section 3 of that Act defines a Trust as
an obligation annexed to the ownership of property,
and arising out of a confidence reposed in and accepted
by the owner, or declared and accepted by him, for the
benefit of another, or of another and the owner: the
person ·who accepts the confidence is called the
"trustee"; the person for whose benefit the confidence
is accepted is called the "beneficiary": "the beneficial
interest" or "interest" of the beneficiary is his right
against the trustee as owner of the trust property; the
subject matter of the trust is called "turst property" or
"trust money".
These definitions emphasize that the trustee is the
owner of the trust property and the beneficiary only
has a right against the trustee as owner of the trust
property. The trustee is thus the legal owner of the
trust property and the property vests in him as such.
He no doubt holds the trust property for the benefit
of the beneficiaries but he does not hold it on their
behalf. The expressions "for the benefit of" and
"on behalf of" are not synonymous with each other.
They convey different meanings. The former connotes
a benefit which is enjoyed by another thus bringing
·in a relationship as between a trustee and a benetlciary
~r cestui que trust, the latter connotes an agency which
brings about a relationship as between principal and
agent between the parties, one of whom is acting on
behalf of another. Section 11(1) therefore can only
39
M2SC61-tt
19~7
Holdsworth
and Otlrel'1
v.
The State of
Uttar Pradesh
BJiarwati J.
1957
Holdsworth
anJ Others
v.
The State of
Uttar Prlllk1h
Bhogwati J.
306
SUPREME COURT REPORTS
[1958]
come into operation where the land fiom which agricultural income is derived is held by such common
manager, receiver, administrator or the like on behalf
of, 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 s. 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 arc jointly interested in such land or in the agricultural income derived therefrom. The term "jointly
interested" is well-known in law and predicates and
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 provisions of the deed of trust the
interest which is created in the beneficiaries is a separate or individual interest of each of the beneficiaries
in the land or in the agricultural income derived
therefrom,
merely
because
they have a common
interest therein, that cannot make that interest a joint
interest in the land or in the agricultural income
derived therefrom. The words "jointly interested"
have got to be understood in their legal sense
and
having been used in a statute are not capable of being
understood in a popular sense as meaning a common
interest or an interest enjoyed by one person in common
with another or others.
If regard be had to the above
construction put
upon the terms ofs.11(1) oftheAct, it follows that the
appellants who were trustees of the deed of trust in the
present case did not hold the land fr<'m which agricultural income is derived as common manager, receiver,
administrator or the like on behalf of the annuitants
S.C.R.
SUPREME COURT REPORTS
307
and the annuitants were not jointly interested in the
land or in the agricultural income derived therefrom
with the result that s. 11(1) of the Act did not come
into operation at all. The appellants were the legal
owners of the trust estate and did not hold the land
from which agricultural income was derived "on behalf
of" the annuitants. Each of the annuitants, moreover
was separately or individually interested in the agricultwral income derived from the land comprised in the
trust estate to the extent of the annuity payable to ·
him under the deed of trust and the interest of one
annuitant was not affected by whatever happened to
the interest of the other. There was thus no fulfilment
of either of the two conditions pre-requisite before
s. 11(1) of the Act could come into operation at all.
The learned judges of the High Court were therefore
in error in answering the first part of the question
referred to them in the affirmative, though their
answer to the latter part in the negative was correct.
We are of opinion that both the parts of the question
should have been answered by them in the negative.
The ultimate result however is the same and this
appeal of the appellants is therefore bound to fail. The
appeal will accordingly stand dismissed with costs.
Appeal dismissed.
1957
Holdsworth
and others
v.
The State •I
Uttar Pradesh
BhagwatiJ.