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Interpretation of section 164 of the Income-tax Act, 1961 regarding the assessment of trust income under different provisions. Analysis: The judgment pertains to the assessment of trust income for the year 1980-81. The main issue revolves around the interpretation of section 164 of the Income-tax Act, 1961, specifically concerning the tax liability of a trust. The trust in question was created for the purpose of hiring and exhibiting cinematographic films, with a portion of the profits earmarked for charitable activities and the rest for specified beneficiaries. The Assessing Officer, Appellate Assistant Commissioner, and Tribunal had differing views on the appropriate section for tax assessment. The court analyzed the relevant provisions of the Act, including sections 160, 161, and 164. Section 160 defines "representative assessee" and specifies the liability of such assessee. Section 164 delineates the tax treatment of income where the beneficiaries' shares are indeterminate or unknown. The court highlighted the scheme of section 164, noting that sub-sections (2) and (3) qualify sub-section (1) and apply to different scenarios of trust income. In the present case, the court determined that the income derived from the trust fell under sub-section (3) of section 164, as it pertained to property held under trust partially for charitable or religious purposes. However, to invoke sub-section (3), specific conditions needed to be met, including the indeterminacy of individual shares of beneficiaries or non-specific receivability of income. The court found that these conditions were not satisfied in the case at hand, leading to the application of sub-section (1) for tax assessment. Consequently, the court ruled that tax should be levied on the 15 percent of income allocated to the charity account under section 164(1) of the Act due to the indeterminacy of shares and beneficiaries. The judgment favored the Revenue's contention and directed the tax assessment accordingly. The court answered the referred question in the negative, in favor of the Revenue and against the assessee. The judgment will be transmitted to the Appellate Tribunal without any costs awarded. In conclusion, the judgment provides a detailed analysis of the application of section 164 of the Income-tax Act, 1961 to determine the tax liability of trust income, emphasizing the importance of meeting specific conditions for different sub-sections based on the nature of trust income and beneficiary shares.
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