1996 (7) TMI 76 - HC - Wealth-tax

Summary

Issues:
1. Assessment of a trust where beneficiaries' shares are determinate.
2. Whether the trust is a discretionary trust or a specific trust.
3. Authority of the Income-tax Officer to assess the right person.

Analysis:

Issue 1: Assessment of a trust where beneficiaries' shares are determinate
The case involved the assessment of a trust for the years 1981-82 and 1982-83. The Income-tax Officer initially assessed the trust directly as the beneficiaries' shares were deemed indeterminate. However, the Tribunal, upon appeal, found that the beneficiaries' shares were specific and certain. The Appellate Assistant Commissioner concluded that the trust was a specific trust, with determinate shares for the beneficiaries. The Tribunal upheld this decision, leading to the reference applications by the Revenue. The court concurred with the findings that the trust was indeed a specific trust, with specific, determinate shares for the beneficiaries, thus ruling in favor of the assessee.

Issue 2: Whether the trust is a discretionary trust or a specific trust
The main dispute revolved around determining whether the trust in question was a discretionary trust or a specific trust. A discretionary trust allows trustees to decide how to allocate income among beneficiaries, while a specific trust mandates fixed proportions for beneficiaries. The Appellate Assistant Commissioner and the Tribunal both found that the trust was a specific one, with determinate shares for the beneficiaries. The court, based on this concurrent finding, affirmed that the trust was a specific trust, rejecting the Revenue's argument that it was a discretionary trust.

Issue 3: Authority of the Income-tax Officer to assess the right person
The Revenue argued that the Income-tax Officer must assess the "right person" according to law, as per a Supreme Court decision. However, the court noted that in this case, the beneficiaries had already been assessed, and there was no need to reassess them. The argument was raised for the first time before the court and was deemed unsubstantial due to the previous assessments of the beneficiaries. The court held that there was no error in the Tribunal's decision, ruling in favor of the assessee and against the Revenue.

In conclusion, the court answered the questions referred in the affirmative, favoring the assessee. The judgment will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.