9911796707
TMI Blog1993 (10) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... Aswinkumar had 1/3rd interest each in the income of the said trust and each one of them had shown their respective share of income from the said trust in their respective returns of income and were duly assessed to tax u/s 143(1) on 23rd September, 1987. The assessment made against the trust thereafter on 29th February, 1988 by invoking the provisions of sec. 161(1A), levying maximum marginal rate of tax on the total income of the trust is invalid and ought to have been cancelled. He submitted that assessments in the cases of all the three beneficiaries of the trust were made directly in their respective hands as per sec. 166 and as per the circular which was in force at the relevant time. Once the ITO exercised the option to assess the beneficiaries directly in respect of their share income from the trust, he cannot thereafter assess the same income in the hands of the trust. The learned counsel further submitted that section 166 has not been abrogated by introduction of the provisions of sec. 161(1A). This has resulted in double taxation of the same income in the hands of the beneficiaries as well as in the hands of the trust. This is clearly contrary to the provisions of law an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer had exercised the option of assessing the share income from the trust in the hands of the beneficiaries but the returns of income in the cases of the beneficiaries had been accepted under the summary assessment scheme contained in section 143(1). Such assessments were completed under section 143(1) in oversight of the availability of all the relevant facts for attracting the provisions of sec. 161(1A). The provisions of section 161(1A) were inserted by the Finance Act, 1984 w.e.f. 1-4-1985. The trust is carrying on business and, therefore, the said provisions of sec. 161(1A), providing for levy of tax at the maximum marginal rate in the case of the trust which includes profits and gains of business, are clearly applicable in the present case. The departmental authorities were, therefore, fully justified in assessing the entire income in the hands of the trust and levying tax at maximum marginal rate in view of the new provisions of section 161(1A) inserted w.e.f. the year under consideration. The acceptance of the returns in the cases of the beneficiaries under section 143(1), in consonance with the summary assessment scheme, cannot tantamount to exercising t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the trust in view of sec. 161(1A) and tax at maximum marginal rate is leviable thereon. The assessee placed heavy reliance on Board's circular dated 24th February, 1967 in which it has, inter alia, been clarified that section 41 of the 1922 Act gave an option to the department to tax either the representative-assessee or the beneficial owner of the income. 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 Hon'ble Supreme Court in the case of Roza Buland Sugar Co. Ltd. has also held that if an association or a firm is taxed in respect of its income, the same income cannot be charged again in the hands of the members individually and vice versa. The provisions of sec. 166 also provides that "nothing in the foregoing sections in this chapter (Chapter XV) shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income". Hon'ble Supreme Court in the case of Jyotendrasinhji v. S.I.Tripathi [1993] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), prior to insertion of a newly substituted section by the Taxation Laws (Amendment) Act, 1970, inter alia, provided that where a return has been made u/s 139 and the ITO is satisfied without requiring the presence of the assessee or the production by him of any evidence that the return is correct and complete, he shall assess the total income or loss of the assessee on the basis of such return. After the aforesaid amendment, the words "and the ITO is satisfied" have undergone a change and the requirement of satisfaction of the ITO has been omitted in the amended provision. The amended provision does not require the ITO to be satisfied as regards the correctness and completeness of the return but he may without requiring the presence of the assessee make an assessment of the total income after making certain prima facie adjustments to the total income on the basis of return of income submitted by the assessee. The Legislature introduced this provision for reposing trust by providing for acceptance of the income declared in the return in large number of cases in accordance with the provisions contained in section 143(1). The assessments of the beneficiaries in the present case were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at maximum marginal rate in the case of trusts carrying on business. If the interpretation suggested by learned counsel for the assessee is accepted, it would lead to the conclusion that once the assessment of the beneficiaries has been made under summary assessment scheme u/s 143(1), thereafter the provisions of sec. 161(1A) cannot be applied in the case of a trust carrying on business and the tax cannot be levied at maximum marginal rate and such a conclusion would amount to nullifying the very purpose and object of inserting the provisions of sec. 161(1A). We, therefore, hold that the learned CIT(A) has rightly confirmed the view taken by the Assessing Officer that tax in the hands of the assessee-trust is leviable at maximum marginal rate in accordance with the provisions contained in section 161(1A). 7. However, the contention of the learned counsel that same income cannot be taxed twice - once in the hands of the assessee-trust and also in the hands of the respective beneficiaries, amounting to double taxation of the same income, is a valid contention and deserves acceptance. We, therefore, direct the ITO to delete the share income from the trust in the respective assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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