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Issues Involved:
The issue involves the assessment status of a discretionary trust under section 80L of the Income-tax Act, 1961. Judgment Details: 1. Background: The assessee, a discretionary trust, was assessed as an "association of persons" and claimed relief under section 80L. The Income-tax Officer contended that a discretionary trust should be taxed as an association of persons, disallowing the deduction under section 80L. 2. Arguments Before Tribunal: The assessee argued that the trustees did not associate for income production, falling under the main provision of section 164(1). The Revenue contended that the trust was assessed as an association of persons in previous years and should be taxed at the maximum marginal rate. 3. Legal Interpretation: The court analyzed section 164(1) and Explanation 2, emphasizing that a discretionary trust should be taxed at the maximum marginal rate. The court clarified that the determination of an assessee's status is crucial in income computation. 4. Precedents: Citing legal precedents, the court highlighted that the term "individual" can encompass groups, depending on the context. It referenced cases where entities other than individuals were assessed as individuals under tax laws. 5. Amendment Impact: The court discussed the amendment by the Finance (No. 2) Act, 1980, which removed the deeming provision for trusts to be assessed as associations of persons. It differentiated between charitable trusts and discretionary private trusts for tax assessment purposes. 6. Judgment: Considering the facts, the court concluded that the trustees of the trust should be assessed as "individuals," ruling in favor of the assessee. The judgment was unanimous, with no costs awarded. This judgment clarifies the assessment status of discretionary trusts and the applicability of tax provisions under the Income-tax Act, 1961.
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