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TMI Blog1983 (12) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... ral trust. The beneficiaries under each trust are the family members of Shri J.M. Rathi. It is common ground that all the trusts are private discretionary trusts and the income is not specifically receivable on behalf or for the benefit of any one beneficiary, nor are the individual shares of the beneficiaries under the trusts determinate or known. The income is derived by way of dividends on shares settled on trust. The claim for deduction is made in terms of clause (iv) of section 80L(1). We have considered the facts of the cases and have heard the learned counsel for the assessees and the learned departmental representative. 2. The ground on which Shri V.G. Bhide, the learned counsel appearing on behalf of the assessee, presses the claim for deduction is that the assessees having been assessed in the status assigned to them as AOP in the assessments which have been upheld in appeal by the AAC or entitled to the deduction in terms of clause (c) of section 80L(1). It would be convenient to reproduce the relevant provisions of the section here to facilitate consideration of the claim. Those provisions read as under : " 80L(1) Where the gross total income of an assessee, being-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to property were governed, the husband and wife married under the law of realm, being the Portuguese Civil Code, constituted a communion of persons for the purpose of assessment with respect to the income earned from their communion property. There was dispute between the revenue and the assessee from Goa as regards the liability of income from the communion property. The dispute was whether the husband and the wife should be assessed equally on such income, in their individual status or should they be assessed in one assessment, as an AOP or a BOI, on the ground that the two had joined for the purpose of earning income from the communion property. By the time the Finance (No. 2) Act, 1971, was passed, this dispute was not resolved by an authority to pronouncement of the High Court or of the Supreme Court. Hence, in respect of the income of the communion property, assessments were being made either in the status of (i) an AOP ; or (ii) a BOI. In these circumstances, the framers of the legislation as a matter of abundant precaution thought it appropriate to give deduction under section 80L to both the types of communions of the husband and the wife, viz. (i) an AOP ; and (ii) a BOI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing in different contexts of the two statutory enactments. We, therefore, reject this ground raised by Shri Bhide. 4. The learned counsel for the assessee next seeks to canvass the claim on two additional grounds for the admission of which he has sought leave of the Tribunal. These grounds are as under : " (1) The words 'consisting of only husband and wife governed by the system of community of property in force in the Union Territories of Dadra and Nagar Haveli and Goa, Daman and Diu govern only the Body of Individuals appearing in section 80L(1)(c) and they do not govern the words 'Association of Persons' appearing in section 80L(1)(c) and, therefore, section 80L deduction be granted to the appellant-even if the assessee is assessed as Association of Persons. (2) The status of the assessee should be taken the same as that of the beneficiary, since the assessment is to be made on the trustee in the same manner and to the same extent---as it would be on the beneficiary. It is, therefore, prayed that the status of the assessee be taken, accordingly. " The first of those grounds cannot be considered to be an additional ground, since in the memo of appeal the assessees had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and powers of the Tribunal in dealing with an appeal as compared with the jurisdiction and powers of the AAC or the first appellate authority. The High Court held that while the jurisdiction of the first appellate authority extended over the subject-matter of assessment, so that the authority could consider and pronounce upon all the matters which were raised in the assessment, whether or not they were considered and decided by the ITO, the jurisdiction of the Tribunal was limited. The Tribunal's jurisdiction extended only to the subject-matter of appeal filed before it, although within that jurisdiction, the Tribunal was vested with almost the same powers as those of the AAC in deciding the appeal. 6. It was by applying these principles to the case before it that the High Court laid down that inasmuch as the assessee had not objected to the express disallowance of its claim for development rebate on electric motors by the ITO in the appeal which it filed before the AAC, it followed that the assessee had accepted the ITO's decision and could not be held to have been aggrieved by that decision since it was not challenged before the AAC. Such being the case, this point neither aros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the relief in terms of clause (c) of section 80L since that clause applied only to the special type of AOP or BOI governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu. On these facts, we do not see that the question of the correct status of the assessee apart from the determination of such status being basic to the assessment, lay entirely beyond the scope of consideration by the AAC. On the other hand, we are clearly of the view that in holding that the assessee was an AOP, but not of the special kind as contemplated in terms of clause (c) of section 80L, the AAC must be held to have considered and pronounced upon the question of the status of the assessee at least by implication. The case, therefore, to our minds, falls within the ratio of the ruling of the Gujarat High Court in the case of CIT v. Karamchand Premchand (P.) Ltd. [1969] 74 ITR 254 which was followed by the Bombay High Court in the case of Ugar Sugar Works Ltd.'s case, already referred to. The Gujarat High Court in the said case has laid down as to what is to be understood to be the subject-matter of an appeal before the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of private oral trusts under section 164A of the Act, the assessment year in the latter case being the assessment year 1981-82 (section 164A came into effect for assessment in the case of private oral trusts with effect from 1-4-1981, i.e., for the assessment year 1981-82). His proposition is that if we look at the language of section 164A, on the strength of which he develops his argument in the first instance, it would be seen that the charge of tax on the income which the trustee receives or is entitled to receive under an oral trust is laid upon that income and the rate of that tax is also prescribed at the maximum marginal rate which is defined in Explanation 2 to section 164. This provision employs a non obstante clause and, therefore, must be applied notwithstanding anything contained in any other provision of the Act. On these premises, Shri Sathe contends that when a case falls under section 164A, the income in question is subjected to the charge of tax not under the charging provisions sections 4 and 5 of the Act, but under the provisions of section 164A itself. In other words, he argues that the charge with reference to the income referred to under section 164A is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act itself, such as, for instance, under section 44 of the Act for the computation of profits and gains of life insurance business. No such separate provision is made with regard to the income referred to in section 164A or section 164(1). In other words, therefore, the concept of income chargeable to tax otherwise than as a constituent, duly processed, of the total income is foreign to the very scheme and structure of the Act. If that income is not to be computed in the manner laid down in the Act, and that is the very pith and substance of Shri Sathe's contention, the income itself would escape the charge of tax. To sustain this conclusion, we have the clear authority of the Supreme Court in the case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294. Dealing with section 45 of the Act, which is a charging section, the Supreme Court was pleased to observe : "....For the purpose of imposing the charge, Parliament has enacted detailed provisions in order to compute the profits or gains under that head. No existing principle or provision at variance with them can be applied for determining the chargeable profits and gains. All transactions encompassed by section 45 must fall under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined from amongst the categories enumerated in the definition of 'person' under section 2(31) of the Act and that status should in law have been determined as that of individual and not as an AOP as taken by the authorities below. He develops his contention on the premise that the assessments have been framed on the trustees as representative assessees. Now an assessment on a representative assessee is deemed in terms of section 161(1) to be made upon him in his representative capacity only and the tax is levied upon and recovered from him in like manner and to the same extent as would have been leviable upon and recoverable from the beneficiaries whom he represents. The correct interpretation of the phrase, 'in like manner and to the same extent' and its consequences with reference to the assessment framed on the trustees have been set down by the Supreme Court in the case of CWT v. Trustees of H.E.H. Nizam's Family Trust [1977] 108 ITR 555. One of these consequences is that the assessment of the trustees would have to be made in the same status as that of the beneficiaries whose interest is sought to be taxed in the hands of the trustees. The question, therefore, arises as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tential capacity to hold properties or disposable income would be the minimum requirement of a BOI. The purpose or aim in the context of the Income-tax Act should be to produce income or hold income-producing assets :" These essential characteristics, according to Shri Bhide, are not to be found in the case of the beneficiaries and could not, therefore, be ascribed to the assessees. 14. Shri Sathe, on behalf of the department, counters these contentions on the ground that the beneficiaries constitute a group of individuals, a group which has been brought together in that character under the trusts, who are entitled to the income arising from the settled property held on their behalf by the trustees. The proper status, according to him, therefore, of such a group of persons or individuals would, properly speaking, constitute if not an AOP certainly a BOI. We have carefully considered the submissions on this question made by the rival parties. In our view, in the light of the ruling of the Supreme Court in the case of Indira Balkrishna cited above, it is futile to contend that the status of the beneficiaries can be taken as that of an AOP. Failing that, can they be called a BOI. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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