2002 (2) TMI 46 - HC - Income Tax

Summary

Issues:
1. Taxability of income of Sharad Family Trust in the hands of the assessee.
2. Application of section 60 of the Income-tax Act, 1961 to the income of the assessee-trust.

Analysis:
1. In References Nos. 73, 73A, 73B, 73C, and 73D of 1987, the issue revolved around the taxability of the income of Sharad Family Trust in the hands of the assessee, who was the managing trustee. The Income-tax Officer initially assessed the entire income of the trust as belonging to the assessee. However, the Commissioner of Income-tax (Appeals) later deleted this addition based on a decision in the case of Sharad Family Trust. The Tribunal upheld the Commissioner's decision, ruling that the income of the trust should be assessed in the hands of the trust itself, not the managing trustee. This decision was made in light of the fact that the other trustees had no involvement in the trust's affairs, and the management was solely handled by the assessee. The High Court answered the question in the negative, stating that the income of the trust was not taxable in the hands of the managing trustee.

2. In the order leading to Income-tax References Nos. 100 and 100A of 1987, the Tribunal confirmed the Appellate Assistant Commissioner's decision to make the protective assessment in the hands of the trust substantive, as it was found that the business genuinely belonged to the trust. The question referred to the High Court was whether the income of the assessee-trust, under section 60 of the Income-tax Act, should be included in the individual income of the managing trustee. Referring to a previous case law, the High Court answered in the affirmative, stating that the income of the trust was not liable to be included in the individual income of the managing trustee. This decision was based on the fact that the trust was not created by the managing trustee but by another individual related to the beneficiaries. The High Court upheld the Tribunal's decision in this regard.

In conclusion, the High Court ruled in favor of the assessee in both sets of references, holding that the income of Sharad Family Trust was not taxable in the hands of the managing trustee and that the income of the trust was not to be included in the individual income of the managing trustee under section 60 of the Income-tax Act, 1961.