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TMI Blog2016 (7) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... MEDABAD-B] if a specific trust is having its beneficiaries, few as individuals and few as discretionary trusts, but share of each of individual as well as discretionary trusts is specific, keeping in view that trustees of First Level Trust are to be considered as representative assessee and they represent share of beneficiary, Assessing Officer can assess income of First Level Trust at maximum marginal rate as per section 164 to extent of respective share of such beneficiary trust (discretionary trust) and at normal rate as per section 161 to extent of share of individual beneficiaries. It is further held by this court that however if Second Level Trust which is a beneficiary of First Level Trust is found to be specific, then assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section160(1) read with section 161 and 166, the Tribunal was justified in holding that the income did not accrue or arise to the specific beneficiary (the assessee) in the relevant year and was further justified in concluding that the assessee could not be regarded as beneficiary in the year under review liable to be taxed at maximum marginal rate of tax under section 164(1) of the Act? 1.1 For assessment years 1981-82 and 1982-83 the following questions in addition to the above two question are also referred : Whether the Tribunal was justified in not dealing with or holding that the CIT had no jurisdiction u/s 263 of the Act for direction for invoking the provisions of section 164(1) of the Act and also giving further findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u the same was to be accumulated for a period of 19 years from the date of the trust deed. 2.1 The Main Trust became partner in the firm M/s. Nirma Chemical Works through its trustee Smt. Shantaben Kacharabhai Patel with 15% share. The firm was dissolved on 7th Feb 1980 and the running business of the erstwhile firm was taken over by the Main Trust. The Main Trust submitted returns of income declaring NIL income during all the years under consideration on the ground that the said trust received income for and on behalf of beneficiaries and the same was allocated amongst the beneficiaries as per the above ratio provided in Schedule I II of the trust deed. The Assessing Officer originally assessed the income at NIL in the case of Main Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the common order passed on 29.05.1995 the Tribunal confirmed the findings of the CIT(A) and so far as the second and third years were concerned, the additional ground arising in relation to validity of Explanation 1 to Section 160(1) were also substantially rejected following the order of the Tribunal in the case of Neo Trust (41 ITD 412). 3. Mr. Soparkar, learned advocate for the assessee submitted that the questions referred for considering in the present reference are squarely covered by two decisions of this Court in the cases of K.V. Patel Family Trust vs. Commissioner of Income tax reported in [2014] 49 taxmann.com 499 (Gujarat) and in the case of Neo Trust vs. Income Tax Officer reported in [2015] 54 taxmann.com 1 (Gujarat) . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le-I and the beneficiaries mentioned in Schedule-II, it is to be held that the assessee Trust is a specific Trust and therefore, not subjected to the tax at the maximum marginal rate under section 164 of the Income Tax Act, 1961. 5.1 Similarly in the case of Neo Trust (supra), this Court has observed that if a specific trust is having its beneficiaries, few as individuals and few as discretionary trusts, but share of each of individual as well as discretionary trusts is specific, keeping in view that trustees of First Level Trust are to be considered as representative assessee and they represent share of beneficiary, Assessing Officer can assess income of First Level Trust at maximum marginal rate as per section 164 to extent of respec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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