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TMI Blog2009 (4) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ENT K.RAVIRAJA PANDIAN, J. - All these 15 appeals are filed at the instance of the revenue against the common order of the Income Tax Appellate Tribunal 'A' Bench, Chennai, dated 24.02.2004 made in I.T.As. Nos.2023 to 2033 of 2003 and 2045 to 2048 of 2003. Tax Case Appeals Nos.866 to 870 of 2004 and 454 to 459 of 2005 arise out of I.T.As. Nos.2023 to 2033 of 2003 relate to the assessment years 1989-90 to 1999-2000 in respect M/s. Sekar Trust and Tax Case Appeals Nos.929 to 932 of 2004 arise out of ITA Nos.2045 to 2048 of 2003 relate to the assessment years 1994-95 to 1997-98 pertaining to M/s.Peegee Trust. 2. The appeals in T.C. (As.) Nos.866 to 870 of 2004 and 454 to 459 of 2005 were admitted by this Court on 10.02.2005 on the following substantial question of law: "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that in the case of the assessee Trust, the beneficiaries and their shares are determinate and, therefore, the trustees could not be assessed for tax and the provisions of section 164 of the Income Tax Act are not attracted?" The appeals in T.C. (As) Nos.929 to 932 of 2004 were admitted by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Family consisting of himself and his wife from the date of marriage. 5. The material terms of the trust deed culled out from the order of the Tribunal, are as follows : (a) As and when Sri P.Badri and Sri P.Prabhakar are married, their spouses would automatically become beneficiaries along with the other continuing beneficiaries in the said accounting year and subsequent accounting years and equally divide the beneficial interest in income of the aforesaid beneficiaries. (b) As and when any child/children is/are born to Sri P.Sekar, Sri P.Badri and Sri P.Prabhakar such child/children should automatically become beneficiaries along with the other continuing beneficiaries in the said accounting year and subsequent accounting years and equally divide the beneficial interest in income along with the aforesaid beneficiaries including spouse. (c) In the case of death of any beneficiaries, the male legal heir or heirs of the deceased beneficiary shall automatically become beneficiary in his or her place. In the absence of a male legal heir, the other legal heirs shall be treated as beneficiaries in respect of the said accounting year and subsequent accounting years along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular accounting year are specific and determinable in the ratio, as provided, it could not be said that the beneficiaries are not identifiable on the date of the Trust deed and the share of the beneficiaries were unknown and not determinate in respect of the said accounting year as the beneficiaries and the shares are expressly stated. 7. The beneficiaries filed returns admitting 10% income distributed to them in their individual returns. In respect of the accumulated income in the corpus fund, the assessing officer was on the view that 90% of the income received by the trustees have not been subjected to tax either under section 161 or 164 of the Income Tax Act, rejecting the objection of the assessee to the notice under section 148 of the Income Tax Act (hereinafter referred to as 'the Act") that whatever the beneficial interest, the beneficiaries had in the income of the Trust have been directly assessed under section 166 of the Act in the hands of the beneficiaries and so no liability arises in the hands of the Trustees under section 161, or under section 164 of the Act framed the assessment under section 164 of the Act treating the trustees as the representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 ITR 474, CIT v. Nirmala Bala Sarkar, 74 ITR 268, Allahabad Bank v. CIT, (1953) 24 ITR 519 and CIT v. Muthukrishnan, (2003) 260 ITR 526. 9. Mr.C.Sarangan, learned senior counsel appearing for the respondents/assessees contended that the first question of law in these appeals is identical to the one in the case of CIT v. Muthukrishnan, (2003) 260 ITR 526, which has been decided in favour of the assessees by the Division Bench of this Court. Hence, any contention raised on the part of the revenue to differentiate the facts, has to be rejected, particularly in view of the statement made by the tribunal in its order to the effect that the decision relied upon by the assessee (260 ITR 526) is squarely applicable to the facts of the present case. By his argument, he differentiated the judgments relied on by the learned counsel for the revenue and sought for sustaining the order of the Tribunal. 10. Heard the learned counsel on either side and perused the materials available on record. 11. Section 5 of the Act deals with the scope of the total income of any previous year of residents and non residents. Section 4 of the Act deals with the charge of income tax in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 64(V), section 161 (1) and (2) as also section 166 of the Act. The Court quoted with approval, the observations of Chagla C.J., in Balwantrai Jethalal Vaidya, referred to supra, as follows : "The basic idea underlying section 41, and which is in conformity with principle, is that the liability of the trustees should be co-extensive with that of the beneficiaries and in no sense a wider or a larger liability. Therefore, it is clear that every case of an assessment against a trustee must fall under section 41, and it is equally clear that, even though a trustee is being assessed, the assessment must proceed in the manner laid down in Chapter III." The Court further observed that the legislature, while enacting the new Act, to avoid doubts has given effect to the observations made by Chagla C. J. in Balwantrai Jethalal Vaidya's case and has enacted that where the income is assessable under Chapter XV in the hands of a person in the capacity of a representative assessee it is not liable to be assessed under any other provision of the Act, that is, the tax is not liable to be levied under any other provision of the Act. 14. In yet another case in CIT v. Nandlal Agarwal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al heading of that section itself, viz., Charge of tax where the share of the beneficiaries unknown. That section comes into play only where any income or any part thereof is not specifically receivable 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 such part thereof is receivable are indeterminate or unknown, and in such case, the relevant income, or part of the relevant income shall be charged at the maximum marginal rate. 18. From this, it is clear that in order to attract section 164(1) of the Act, the beneficiaries on whose benefit, such income or such part thereof is receivable are indeterminate and unknown. 19. Coming to the facts of the case, as stated earlier, the beneficiaries are five in number for the period from 01.04.1986 to 31.03.1989 and the respective share of each beneficiary is in different percentage as stated in the deed itself. From 01.04.1989 onwards the beneficiaries are seven in number and their shares in the income is equal. The shares in respect of 6th and 7th beneficiaries are equal in the status of individual till the date of their marriage and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust which was to be for a period of fifteen years, or sooner, if all the beneficiaries unanimously agreed to terminate the trust even before the expiry of fifteen years. Out of the interest income of the trust, the beneficiaries were to receive only one-third and the balance was to be accumulated. The trustees were also empowered to carry on business and invest the funds of the trust and loss, if any, was to be deducted from the corpus. For the assessment year 1983-84, the trustees filed a return of income and claimed a refund of tax deducted at source amounting to Rs. 3,75,000 out of a sum of Rs. 15,00,000 which had been received by them as a lottery prize under the U. P. State Lottery Scheme in January, 1983. The Income-tax Officer rejected the claim for refund and held that the entire amount received should be treated as income in the hands of the trustees who were to be taxed in the status of association of persons. On appeal, the Commissioner affirmed that view of the Income-tax Officer. On further appeal, the Tribunal set aside the assessment that had been made and directed the assessing officer to frame fresh assessment in accordance with law on the ground that the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the beneficiaries and the description of the person who is to be benefitted, the beneficiaries cannot be said to be uncertain, merely because wife/children cannot be known until the marriage and begetting of children by the stated beneficiaries. The deed also provided that in the event of death of a beneficiary what should be done. The above view of us is fortified by the decision of this Court in the case reported in 147 ITR 500 referred to supra. 23. The judgment of a Division Bench of this Court in the case of CIT v. Bhandari (P.), (1984) 147 ITR 500, in which the facts are comparable to the facts of the present case, can be taken in aid. In that case, the assessee created a trust for the prospective wife of his minor son and on the same day, the assessee's wife created another trust for the benefit of the prospective wife of another minor son of the assessee. The Income Tax Officer, with the view that income accruing to the trust created by the assessee should be included in his assessment, reopened the assessments and subjected to tax the proportionate share income of the trust as his income on the ground that both the trusts were invalid. The Appellate Assistant Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld well be applied in respect of the child or children also. 24. In CIT v. M.K.Kannan Marriage Benefit Trust, (1999) 240 ITR 785 the Division Bench of this Court, while construing the trust deed, which was for the benefit of son-in-law to be and daughter-in-law to be of the settler has held that the beneficiaries were known persons and it could not be said that they were non existent on the date of the execution of the relevant trust deeds. When the beneficiaries are known, the provisions of section 164 of the Act were not attracted. 25. A Division Bench of this Court in which one of us was a party (Raviraja Pandian, J.), in an unreported judgment in the case of CIT v. Manilal Bapalal Family Benefit Trust in Tax case Nos.320 to 322 of 1997 decided on 18.09.2002 held to the following effect : "The beneficiaries of the Trust included the prospective spouses of some of the beneficiaries. The Trust deed also provided that in the event of a beneficiary dying before marriage or not marrying before the Trust came to an end, that part of the benefit which was to be given to the spouse would be given to the heir of the beneficiary or to the beneficiary himself or herself." .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the survival is fulfilled, with regard to clause 18 of the trust deed and having found that the shares of the beneficiaries on whose benefit the assets were held were not indeterminate and unknown, approved the decision of the High Court to that extent. Moreover, in the body of the order, the Supreme Court reproduced the ratio laid down in the case of CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 to the effect that once it was established that a trustee of a trust could be assessed only in accordance with the provisions of section 21 and under these provisions, it is only the beneficial interests which are taxed in the hands of the trustee, it must follow as a necessary corollary that no part of the value of the corpus in excess of the aggregate value of the beneficial interest can be brought to tax in the assessment of the trustee. This decision tilts the case in favour of the assessee. 30. In CIT v. Saroja Raman, (1999) 238 ITR 34, the Division Bench of this Court has held : "There can be no manner of doubt in this case, having regard to the terms of the trust deed, that the trustees have no discretion whatsoever with regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions in the cases of CIT v. Muthukrishnan, (2003) 260 ITR 526. CIT v. Bhandari (P.), (1984) 147 ITR 500, CIT v. Manilal Bapalal Family Benefit Trust in Tax case Nos.320 to 322 of 1997 decided on 18.09.2002 and CIT v. M.K.Kannan Marriage Benefit Trust, (1999) 240 ITR 785, the first question of law has necessarily to be answered in favour of the assessee and against the revenue. The same is answered as such. 33. As regards the second question of law raised, as per the statutory provision, section 245S, the ruling of the advanced ruling authority is not binding on others. In this case, though the Tribunal has observed in its order that, "we refer to the decision of the Advance Ruling Authority brought on record, which examined one of the points as to whether beneficiaries of the trust are ascertainable and shares determinable on the basis of the trust deed." But the Tribunal has not rested its decision on the advance ruling authority, rather the decision of this Court has been taken in aid and relied on. We are of the view that there is no bar for the Tribunal to take a view, have the reason or form opinion which is in consonance with the reasoning of the adv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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