2002 (10) TMI 25 - HC - Income Tax

Whether Tribunal was right in law in holding that the status of the private trust carrying on business in accordance with the trust deed cannot be taken as association of persons? - Sub-section (1A) was introduced in section 161 of the Income-tax Act 1961 with effect from April 1 1985 and was applicable during the assessment year 1985-86. - Having regard to the clear language of the provision the whole of the income derived from the trust from the business it carried on is liable to be taxed at the maximum marginal rate. The decision of the Bombay High Court relied on by the Tribunal in the case of CIT v. Marsons Beneficiary Trust was a decision which concerned the assessment year prior to the year in which sub-section (1A) was introduced to section 161 - The question is therefore answered in favour of the Revenue and against the assessee.

Summary

The High Court of Madras ruled that a private trust carrying on business as per the trust deed should be assessed as an association of persons for the assessment year 1985-86. The income derived from the trust's business is liable to be taxed at the maximum marginal rate. The decision favored the Revenue over the assessee.