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Issues:
1. Taxability of sum received from discretionary trusts under section 166 of the Income-tax Act. 2. Exemption of sum paid out of dividends received by trusts under section 80K of the Income-tax Act. Analysis: The High Court addressed two key issues arising from the Tribunal's order in I. T. A. No. 1623 (Ahd) of 1973-74. The first issue was whether the sum received from discretionary trusts, totaling Rs. 53,122, could be taxed under section 166 of the Income-tax Act. Initially, the High Court answered this question in favor of the assessee based on a previous decision. However, the Supreme Court reversed this decision in a related case, leading to the need for a reassessment of the matter. In a similar case involving Dr. Vikram A. Sarabhai, the Supreme Court had ruled that the Revenue could assess and recover income from either the trustees or beneficiaries of a discretionary trust. The High Court was directed to consider the second question, which focused on whether the sum of Rs. 53,122, paid out of dividends received by the trusts, was exempt from tax under section 80K of the Income-tax Act. The Division Bench, in line with the decision in Dr. Vikram A. Sarabhai's case, held that the amount of dividend income passed on to the beneficiary from the trustees remained eligible for deduction under section 80K. As the funds were distributed from dividend income eligible for deduction, the Tribunal's decision to allow deductions under section 80K for the sums received from discretionary trusts was upheld. Consequently, the High Court answered the second question in the affirmative, ruling in favor of the assessee and against the Revenue. The judgment aligned with the reasoning provided in previous cases, leading to the disposal of the reference without costs.
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