9911796707
TMI Blog1991 (10) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... and children of the sons. 3. Six of the beneficiaries are trustees also, whose names are as under: 1. Md. Hussain 2. Md. Ahmed 3. Md. Younus 4. Md. Waheed 5. Md. Yaseen 6. Md. Anwar Md. Yaseen and Md. Anwer, each of the trustees were paid salary of Rs. 18.000. Three of the beneficiaries, viz., Md. Layeeq, Faheem and Muneer were also paid a salary of Rs. 12,000 each. 4. The assessee carries on business in automobile spare parts in different names and styles as under : 1. Royal Auto Traders 2. Royal Motor Stores 3. Royal Automobile 4. Royal Firms While the business in Royal Auto Traders and Royal Motor Stores is mostly in old parts, in Royal Automobile and Royal Firm is in new parts of automobile. In addition. to that assessee runs a poultry farm. Separate sets of accounts are maintained for the business carried on in each of the above names and the profits thereon have been transferred to the books of the trust. 5. For the asst. year 1985-86, in the consolidated profit and loss account of the trust (to which the profits have been transferred), a deficit of Rs. 1,81,707 was shown as against a profit of Rs. 2, 94,796 shown in the earlier year. The deficit is mainly on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust itself much less in the status of an 'AOP'. (3) CIT(A) ought to have held that the assessment of the trust as an 'AOP' is misconceived and unsustainable in law in view of the provisions of sec. 161 of the Act. (4) In any event, the assessment under appeal having been made and upheld by the CIT(A) without application of appropriate provisions of the Act, the said assessment is liable to be cancelled. 9. It transpires from the perusal of grounds taken before the first appellate authority, that the assessee only disputed the disallowance made on the count of interest, salary etc. The main ground taken before the CIT (A) is reproduced here as under : "The Commissioner (Appeals) erred in holding that the appellant is assessable at maximum marginal rate of tax as provided in section 16 1 (I A) of the Income-tax Act, 1961 notwithstanding the fact that the appellant is not assessable to tax inasmuch as the beneficiaries of the trust were earlier assessed, in which event, according to section 166 of the Income-tax Act, 1961 there can be no assessment on the AOP subsequent to the option exercised by the ITO to make assessments of the beneficiaries earlier." 10. The general consp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eficiaries or the trustees and the option can be exercised when income is computed in the manner prescribed under sec. 161 (1) unlike sec. 164(1). 14. If the intention of the Legislature was to assess a specific trust earning income from business in the manner prescribed under sec. 164, then there is no need for the Legislature to bring a new sub-section under sec. 161. A simple amendment to sec. 164 would have sufficed the purpose. Having not amended sec. 164, the intention of the Legislature is to assess a specific trust in the manner specified under section 161 (1) to levy a maximum marginal rate on that portion of income which is derived from business or profession. 15. Shri Swamy further submitted that generally, non obstante clause is used to take away what another confers because if both the sections are clear, the result will be head-on clash. But if the words of a statute are clear and are capable of a well reasoned interpretation, in that case the non obstante clause has to be read as clarifying the whole position and must be comprehended to have been incorporated by the Legislature by way of abundant caution and not by way of limiting the ambit and scope of the operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the implication of the section we propose to resort to the notes and clauses and memorandum explaining provisions in Finance Bill, 1984. Finance Bill, 1984, Notes and Clauses : "Clause 20 seeks to amend section 161 of the Income-tax Act relating to liability of representative assessee. Sub-section(1) of section 161 provides that every representative assessee, as regards the income in respect of which he is a representative assessee, shall be liable to assessment in his own name in respect of such income and tax shall be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. The proposed amendment seeks to insert a new sub-section (1A) in section 161 of the Act. The new sub-section provides that where any income in respect of which a person mentioned in clause (iv) of sub-section (1) of section 160 is liable as a representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the "maximum marginal rate". The proposed provision will, however, not apply in cases where s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ximum marginal rate of income-tax will not apply in a case where the profits and gains of business are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him. Para 46 - It is relevant to mention that under an existing provision in the Income-tax Act, income received by trustees of discretionary trusts is charged to tax at the maximum marginal rate of income-tax. (A trust is regarded as a "discretionary trust" if the income or any part thereof is not specifically receivable by the trustee on, behalf of or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or part is receivable are indeterminate or unknown). The Income-tax Act, however, provides that income received by discretionary trust, will not be charged to tax at the maximum marginal rate, but at the normal rates of tax applicable to individuals, association of persons, etc., in cases where any one of the following conditions is fulfilled, namely : --- (i) none of the beneficiaries has any other income charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all the Judges is always to make such construction as shall suppress the mischief and advance the remedy, and to suppress subtle inventions and evasions for the continuance of the mischief and pro privato commodo, and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono publico. There is now the further addition that regard must be had not only to the existing law but also to prior legislation and to the judicial interpretation thereof." 24. The things which are to be designed and considered as proposed in Heydon's case are contained and crystallised in the notes and clauses and in memorandum explaining provisions in Finance Bill, 1984 referred to above. The intention of the Legislature is obvious and the profile of law shaped by the Legislature to cure the defect is contained in sub-section (1A) of sec. 161 which was inserted by the Finance Act, 1984. 25. Coming now to the case relied upon by the counsel for the assessee, in the case of Karelal Kundantal Trust it was held that the combined reading of secs. 160 and 161 of the Income-tax Act, 1961 clearly establishes the position that a representative assessee is to be asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of business, it falls clearly within the mischief of sec. 161(1A). 30. Section 161(1A) of the Act begins with a non obstante clause. A non obstante clause is usually used in a provision to indicate that the provision should prevail despite anything to the contrary in the provision mentioned in such non obstante clause. In case there is any inconsistency or departure between the non obstante clause and another provision, one of the objects of such a clause is to indicate that it is the non obstante clause which would prevail over the other clause. This view was taken by the Hon'ble Andhra Pradesh High Court in the case of CIT v. Navbharat Enterprises (P.) Ltd. [1988] 170 ITR 332. Since the Legislature manifested its intention, and ambit of the law with reference to the language in which the section is couched has well been explained in the nos and clauses and in memorandum explaining the provisions, in our opinion, there is no inconsistency or a departure between the non obstante clause and another provision in regard to the taxability of the business profits of the trust. Sec. 161(1A) contemplates in very clear and unequivocal terms its applicability with reference to the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest, we find that the interest is being charged and debited in the books of the trust and credited in the names of the beneficiaries. Since beneficiaries cannot be construed to be defacto or dejure owners of the trust property such payments cannot be deducted in computing the total taxable income of the Trust. It is seen that beneficiaries have deployed their own funds also. We are of the opinion that to the extent beneficiaries have deployed their separate funds, interest may be allowed. In regard to this, we direct the assessing officer to find out the personal funds deployed by the beneficiaries in the business of the trust and allow the actual amount of interest charged thereon. In regard to the other disallowance in salary etc. we uphold the order of the learned CIT(A). Since no cogent material as to its admissibility was placed before us, we confirm the said disallowance. 33. In the result, appeals are partly allowed. Per Shri G. Santhanam, Accountant Member - I have gone through the order proposed by my learned brother in the case of Mohammed Omer Family Trust [WT Appeal Nos. 1569 and 1570 (Hyd.) of 1989], and I am in agreement with the facts stated in the proposed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of a non-resident specified in sub-section (1) of section 9, the agent of the non-resident, including a person who is treated as an agent under section 163 ; (ii) in respect of the income of a minor, lunatic or idiot, the guardian or manager who is entitled to receive or is in receipt of such income on behalf of such minor, lunatic or idiot ; (iii) in respect of income which the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager (including any person, whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a court, receives or is entitled to receive, on behalf of or for the benefit of any person, such Court of Wards, Administrator General, Official Trustee, receiver or manager ; (iv) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including any wakf deed which is valid under the Musalman Wakf Validating Act, 1913 (6 of 1913) receives or is entitled to receive on behalf of or for the benefit of any person, such trustee or trustees . . . . .' ." Thus a representative assessee is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is also subject to the provisions of the Act. Thus the total income is to be read in the context of the definition of "income" as given in section 2(24). Section 14 deals with the heads of income and it is as follows:--- "Heads of Income 14. Save as otherwise provided by this Act, all income shall, for the purposes of charge of income and computation of total income, be classified under the following heads of income:--- A. Salaries. B. Interest on securities. C. Income from house property. D. Profits and gains of business or profession. E. Capital gains. F. Income from other sources." It would be evident from the above that the charge of income-tax is not on any particular head of income but all the incomes comprising every head of income. The charge is one indivisible charge. In other words, there cannot be a separate tax for salary income, a separate tax for house property income, much less a separate tax for profits and gains of business. We have to keep in mind the scope of charge of income-tax and the definition of "income" when we deal with the expression "income" occurring in different sections of the Income-tax Act Sec. 161(1) deals with the income in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rogation of the definition of "income" as given in clause 2(24). If, on the other hand, it is held that the word "income" occurring in section 161(1) is not affected by the non obstante clause in section 161(1) and retained its original scope and content then the question arises whether it is permissible to have two different tax rates and two different modes of assessment in respect of an identical subject, viz., "income". The answer is obvious. The construction placed by my learned Brother on section 161(1A) leads to such anomalies. 4. The interpretation of sec. 161(1A) as given by my learned-Brother obliterates the distinction between a case of a trust where the beneficiaries are known and their shares are determinate and a case of a trust where the beneficiaries are not known and their shares indeterminate. In other words, no distinction is made between the provisions of sub-section 161(1A) and section 164. Further, under section 166, the Revenue has the option to make direct assessment on the known beneficiaries with determinate shares. Even in such a case, if entire income of the trust as a unit is chargeable to tax at the maximum marginal rate under section 161 (1A), as ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment as an association of persons. This will be evident from the fact that notwithstanding the "non obstante clause", the representative character of the trustee is retained throughout the section, as for instance by the user of the words "liable as a representative assessee"; the expression "such person" would again refer to the representative assessee. The adverb "so" qualifying the word "liable" would pin-point the representative character of the liability and it is to be read as "so liable as a representative assessee". The question then would be how and in what manner or mode the representative assessee would be liable? He is liable because "he receives or entitled to receive income on behalf of or for the benefit of any person" or persons. In order to ascertain the mode of assessment, beneficiaries are to be classified into two groups and the "income" into three groups and different rates of taxes would step in. This is represented in the following chart : BENEFICIARIES |----------------------------------------------------|---------------------------------------------------------------| Known and Known and Not known or shares determinate. determinate shares share. inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this eventuality, law prescribes that tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate." I am unable to understand how an interpretation of sec. 161 (1A) in the manner done by the learned Judicial Member can lead to the conclusion that the assessment should be made in the hands of the representative assessee in the status of "Association of persons". Shri Swamy's arguments are two-fold: (a) Up to the assessment year 1984-85, all the individual beneficiaries of the trust had been independently assessed though u/s. 143(1). Even in respect of the impugned assessment years, some of the beneficiaries had been assessed. Therefore no assessment can be made as "AOP". (b) If assessable as AOP, 161(1A) cannot be invoked. Some assessment orders of the beneficiaries were shown before us in which the assessments were made u/s. 143(1). As it is, it is not clear to me whether those assessment orders related to the assessment year 1986-87 also. It is settled law that once an assessment is made on the individual members of an A.O.P., it is not open to the I.T.O. to assess the same income in the status of 'A.O.P.'. This is be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduced by the Finance Bill, 1984. None of the beneficiaries had withdrawn their salaries credited to their accounts. No salary was paid to them ever since the inception of the trust There is no indication of rendering of any specific service. On these grounds, the disallowance was sustained by the CIT(A). 6. My learned Brother upheld the disallowance on the ground that no cogent material was placed before the Tribunal. In my considered opinion, this is a short way of disposing the ground of appeal. The ITO did not doubt or deny that the three persons had rendered any service. The CIT(A) While sustaining the disallowance has stated that there is no indication of rendering of any specific services. It is the case of the assessee that these three persons' services were utilised generally for all the businesses of the trust and in the context of the turnover of Rs. 50.91 lakhs in the assessment year 1985-86 and Rs. 59.47 lakhs in the assessment year 1986-87, the payment of salary was justified. When it is the plea of the assessee that these persons were looking after the business in general in all the four places and when it is the case of the ITO that the payment of salary is a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 161(1A). 3. Whether, in the facts and circumstances of the case, the salaries paid to three of the beneficiaries for the work done for the business of the trust were rightly disallowed by the ITO ?" Per Shri Ch. G. Krishnamurthy, President --- In these matters on account of a difference of opinion between the Members of the Hyderabad Bench who heard this appeal in the first instance, the matter was referred to the President under section 255(4) of the Income-tax Act, for reference to a Third Member. 2. The President as a Third Member heard the matter for sometimes It was brought to his notice during the course of the hearing that the Bangalore Bench of the Tribunal expressed an opinion against the assessee in the case of P.S.V. Rasquinha The point made out during the course of hearing was that this decision had proceeded on an erroneous interpretation of the law and, therefore, required reconsideration. The President felt that the re-consideration of a view expressed by Division Bench must be done by a larger Bench of three Members. That is how this larger Bench of Three Members was constituted by the President to hear and dispose of this difference of opinion. 3. The releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest and salary was a device to circumvent the application of section 161(1A) of the Income-tax Act which came into effect from 1-4-1985 as this was the first year in which the interest and salary was paid. According to this provision, if a representative assessee receives income on behalf of any beneficiary and if that income includes income from profits and gains of business, the whole of the income of the representative assessee should be charged to tax at maximum marginal rate. The Income-tax Officer, as we mentioned above was of the opinion that since by the payments of interest and salary, the positive income of the businesses was converted into negative income, this was a device adopted to avoid the application of section 161 (1A) of the Income-tax Act. The Income-tax Officer was also of the opinion that as a consequence of this amendment, the assessment had to be made in the status of Association of persons in the hands of the trustee aggregating the income of all the beneficiaries. The Income-tax Officer also found that there was no agreement between the trust and the beneficiaries for the payment of the interest on their credit balances. In this view of the matter, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer ?" 9. Before us it was contended on behalf of the assessee that the assessments on the trustees can only be in a representative capacity and that too only in the like manner and to the same extent to which the beneficiaries are liable and consequently when the beneficiaries themselves could not form an Association of Persons, an assessment could not be made in that status. It was also contended that the amendment by which sub-section (1A) was introduced to section 161 had the effect of only applying the maximum marginal rate which is applicable to 'Association of Persons' and it did not authorise making assessment on the Trustees in the status of association of persons aggregating the income of all the beneficiaries. It was pointed out that the Act provided for a direct assessment of the beneficiaries and in the present case since such direct assessment had already been made, the Income-tax Officer did not have the option of bringing the same income again to tax in the status of Association of Persons in the hands of the trustees. 10. On the other hand, the revenue relying upon the opinion given by the Ministry of Law contended that the beneficiaries must be taken t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso. In any case, the absence of a specific provision lends support to the opinion expressed by some commentators that the Act leaves an option with the Department to assess the trustee, etc., either under section 3 or under section 40 or 41. Since assessment under section 3 might be more onerous than under section 40 or 41, it seems desirable to make it clear that it is obligatory on the Department to apply the provisions of sections 40 and 41 in cases where they are applicable, leaving the general liability under section 3 to be applied only in cases which are outside sections 40 and 41, The draft sub-clause under discussion is intended to achieve this object." Accordingly, when the Income-tax Act, 1961 was enacted, section 161 specifically provided for taxing the beneficiary alone through the representative assessee with the consequence that it is no longer permissible for any income received by a representative assessee as defined u/s 160 to be taxed under the general charging section 4. While explaining the corresponding provisions of the Wealth-tax Act, namely section 21, the Supreme Court held in the case of CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment must proceed in the manner laid down in Chapter III." [Emphasis supplied] The Department has also always understood that this was only a residuary power to prevent any escapement of income but not to enable the revenue to tax the income derived from a trust as part of the total income of the beneficiary. Thus the Central Board of Direct Taxes has issued instructions in letter No. F. 45/78/66-ITJ(5), dated 24-2-1967 to the effect that : "Once the choice is made by the Department to tax either the trustee or the beneficiary, it is no more open to the department to go behind it and assess the other at the same time. The inclusion of the share income from the trust in the total income of the beneficiary for rate purposes would virtually amount to an assessment of the income which has already been assessed and subjected to tax. According to the scheme of the Act, if certain income is to be included for rate purposes in the total income, a specific provision in that behalf is made in the Act In the absence of any such express provision, the general principle to charge all income only once would be applicable in such a case." 12. However, the Central Board of Direct Taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision but while considering the question who carried on a business, the course of conduct of the concerned parties is relevant.' In other words, in a case where a Trustee is authorised by the settlor to carry on business on behalf of the beneficiaries, the status of the beneficiaries is that of the Association of Persons. Except in the case of minors, it cannot be said that there was no consent is implied and, therefore, it is possible to take a view that the beneficiaries constitute an Association of Persons. However, we are not expressing any final view in case of trust exclusively for minors. The Supreme Court categorically held that where the beneficiaries receive profits that means they have acquiesced in the continuance of the business. The course of conduct of the beneficiaries is relevant in determining who carried on the business. In the case of Shanmugham and Co., it is no doubt true that the business was carried on by the orders of the Court. However, in cases where a Trust is created in writing and the Trustee is authorised to carry on business by the settlor for the benefit of the beneficiaries, the profits earned on behalf of the persons who had a common interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest or intention to carry on business and so they do not form an 'Association of Persons' by themselves so as to assess the trustees in that status, This has been clearly explained by the recent decisions of the Bombay High Court in the case of CIT v. Marsons Beneficiary Trust [1991] 188 ITR 224 and the Karnataka High Court in the case of CIT v. K. Shyama Raju (Trustees) [1991] 189 ITR 392. The Karnataka High Court has further explained that the receipt of the share of the income by the beneficiary cannot amount to an implied consent for carrying on the business so as to form an Association of Persons. 14. It was then contended on behalf of the revenue that, on the facts of the present case, the formation of association of persons by the beneficiaries should be inferred because there was an identity of the persons who are carrying on the business and those who are trustees and beneficiaries. It was pointed out that the same persons who were carrying on business originally as partners continued to carry on the business as trustees and since the beneficiaries who have become majors also participated in the business, it must be accepted that there was a common intention to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that, because a higher amount of tax could be collected if the income of all the beneficiaries are aggregated and taxed together, the formation of specific private trust itself could be treated as a device to avoid tax on the aggregate which will be larger than the tax on the individual shares of the beneficiaries. This was the attempt in the case of K.T. Doctor v. CIT [1980] 124 ITR 501. In that case a trust had been created for the benefit of the assessee, his wife and two minor sons by his mother and the trustee had been authorised to start any business. The assessee who was a chemical engineer resigned his job and devoted himself to that business carried on by the trust. The Income-tax Officer rejected that claim that only his 40% share of income derived as beneficiary was taxable and sought to tax the aggregate income from the business as such in the hands of the trust. The Gujarat High Court pointed out that,--- "So long as there is nothing illegal or immoral in the creation of the trust or in the objects of the trust and the business is a normal legal business, and so long as it cannot be said that the trust is illusory or fraudulent, the trust deed must be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 164 of the Income-tax Act.The proposed amendment will take effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years." The Memorandum explaining the provisions of the Bill also stated as follows : "Taxation of business profits of private trusts at maximum marginal rate of income-tax : 44. Trustees of a private trust are ordinarily not expected to carry on any business because, implicit in the nature of business is the possibility of incurring loss and no prudent trustee would risk the trust's property in business venture. However, it has come to notice that tax-payers are increasingly conducting business through the medium of private trusts. Such arrangements are entered into for purposes of tax avoidance, the main object being to avoid payment of the registered firm's tax which would become payable if the business is carried on in partnership. 45. In order to counteract such attempts at tax avoidance, it is proposed to make a provision in the Income-tax Act, that where any income in respect of which, any person mentioned in clause (iv) of sub-section (1),of Section 160 of the Income-tax Act (i.e., a tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the settlor or where the settlor is a Hindu undivided family, exclusively for the benefit of the members of such family, in circumstances where such relatives or members were mainly dependent on the settlor for their support and maintenance ; (iv) the trust has been created bona fide by a person carrying on business or profession exclusively for the benefit of his employees. The Bill seeks to provide that the aforesaid provisions will not apply in a case where the income of a discretionary trust consists of, or includes, profits and gains of business. In such cases, the entire income of the trust would be charged at the maximum marginal rate of tax, except in cases where the profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him. In such cases, the income of the discretionary trust would be charged to tax at normal rates applicable to individuals and not at the maximum marginal rate of Income-tax. 47. The proposed provisions will take effect from 1st April, 1985, and will, accordingly, apply in relation to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smen. 8. Now this right given in sub-section (1) is taken away by section (1A) because it is non obstante. We, therefore, have to see only what is the income including the profits and gains of business in the hands of the trustees. That is to be taxed at the maximum marginal rate. There is no need for apportioning this income among the beneficiaries." We find that this view proceeded on two apparently incorrect premises. The first is the assumption that but for section 161 the trustee would be liable to tax like any other individual or association of persons. This goes against the statement of law given by Justice Chagla (extracted above) and approved by the Supreme Court namely the liability of the trustees can in no case be larger or wider than the liability of the beneficiaries. The second is that there is nothing in the Income-tax law to limit the liability to that of the beneficiary. This again is contra to the well-settled proposition that the law seeks to tax only the interest of the beneficiary though in the hands of the legal owner, viz. the trustee as representative assessee but only to the extent of the liability of the real owner (i.e.) the beneficiary. 19. Apart fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rginal rate. In other words what sub-section (1A) provided for or seeks to achieve is to impose a higher rate of tax on the income of a representative assessee if the income received by that representative assessee includes income from profits and gains of a business. This is made clear from the wording of section (1A) when it provided that "tax shall be charged on the whole of the income in respect of which such, person is so liable at the maximum marginal rate". The expression "the whole of the income" means the income of the representative assessee in respect of which he is so liable as a trustee. That, it was the income in respect of which he is liable as a trustee is also made clear by the use of the expression "in respect of which such person is so liable". Here, the expression "in respect of which" means that income and the expression "such person" means the person referred to in clause (iv) of sub-section (1) of Section 160. So a plain reading of this section would indicate in most unambiguous terms and unequivocally that if the person referred to in clause (iv) of sub-section (1) of Section 160 (i.e.) a trustee, is liable as a representative of the assessee in respect of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med without specifying the shares of members, the provisions were amended by the Finance Act, 1985 w.e.f. 1-4-1985 with a view to countering tax avoidance through such methods. It was provided that where the shares are indeterminate or unknown, tax would be charged on the whole of the income of the association at the maximum marginal rate." 23. The contention of the revenue that the status of the trustee should be taken as an association of persons because of the provisions of sub-section (1A) is devoid of any merit. This is because sub-section (1A) does not state anywhere that the status should be taken as 'association of persons'. It only states, when read with Explanation, that the tax imposable shall be the maximum marginal rate applicable to association of persons. Thus the object of sub-section (1A) is only to impose higher rate of tax in the circumstances mentioned therein and not to create an association of persons by imposing tax at the maximum marginal rate which happened to be the rate applicable to an association of persons. The non obstante clause did not wipe out the settled legal position that it is only the share of the beneficiary that is liable to be taxed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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