2002 (9) TMI 47 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the income of the trust carrying on business should be assessed only in the hands of the beneficiaries and not in the status of an association of persons as per the provisions of section 161(1A) of the Income-tax Act, 1961? - That the trustee is to be assessed is evident from the language employed in that provision. The person referred to therein is the person mentioned in section 160(1)(iv). The Tribunal was, therefore, in error in holding that the assessment should be on the beneficiary only and not on the trustee. The reference made in the question to a decision rendered by the Bench in the case of another trust was a decision which required the assessment to be made on the assessee even in respect of the business income, even after the introduction of section 161(1A). - The question referred to us is answered in favour of the Revenue and against the assessee.

Summary

The High Court of Madras ruled that the income of a trust carrying on business should be assessed in the hands of the trustee, not just the beneficiaries, as per section 161(1A) of the Income-tax Act, 1961. The Tribunal's decision to assess only the beneficiaries was deemed incorrect. The judgment favored the Revenue over the assessee.