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TMI Blog1987 (7) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... f each of the beneficiaries is specified and determined under the terms of the trust deed. 50% of the income of the trust was to be distributed amongst the beneficiaries mentioned in Schedule I and balance 50% of the income was to be accumulated for and on behalf of the beneficiaries mentioned in Schedule II for a period of 19 years. 3. on the aforesaid facts, the ITO framed the assessment on 24-11-80 determining the total income of the trust at Rs. 7,03,490. 50% of this amount, i.e. Rs. 3,51,745 was taxed in the hands of 25 beneficiaries as mentioned in Schedule I and the remaining 50% was assessed in the hands of the trustees of the assessee trust u/s 161 of the Act on the respective share of each of the beneficiaries mentioned in Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions in the cases of Addl. CIT v. M.K. Doshi [1980] 122 ITR 499 (Guj.) and CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 (SC). 5. The ITO, however, negatived the assessee's contentions in the following manner :--- " There is no question of any further inquiry to be made in respect of the income of the 23 beneficiaries. According to provisions of the Act, the total income of the beneficiary has to be taken into account for the purposes of ascertaining the rate of tax that should be applied to the share income of the beneficiary from the trust. Thus there is a clear mistake of non-application of the correct rate of tax to the share income of each of the 23 beneficiaries. At the most it can be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame as that payable by each beneficiary in respect of his beneficial interests, if he were assessed directly. For this purpose the assessee has relied upon the Supreme Court decision in the case of CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 wherein the phrase ' in the like manner and in the same extent ' occurring in section 21(1) of the WT Act, 1957 has been construed. It is true that Supreme Court has held that amount of tax payable by the trustee would be the same as payable by each beneficiary in respect of his beneficial interest, if he were assessed directly. It may however be pointed out that the point viz. at what rate of tax, the beneficial interest of the beneficiaries has to be taxed was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gories of the representative assessees who are assessable in respect of the income of the beneficiaries which belongs to other persons, specifically includes a trustee appointed under a trust declared by a duly executed instrument in writing. In section 161 the liability of the representative assessee is confined to the income in respect of which such person is representative assessee. The assessment on a representative assessee u/s 161 is separate and distinct from his personal assessment. Every representative assessee is liable to tax u/s. 161, " in like manner and the same extent " as the persons beneficially entitled to the income. The liability of the trustee u/s 161 is co-extensive with that of the beneficiary, the interposition of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act in the manner he did. Apart from relying on the aforesaid two decisions, the assessee had also relied on circular F. No. 45/78/66-ITJ(S) dated 24-2-1967 issued by the CBDT which according to the assessee supports its case. The CIT(A) accepted the assessee's contention in the following manner :--- " I have gone through the facts of the two cases cited by the appellant's counsel and have also seen the circular of the Board abstract of which have been reproduced above. On a consideration of the facts and circumstances of the case, I am of the view that the Income-tax Officer was not justified in making the proposed rectification in the case of the appellant Trust, as there were no mistake apparent from the record. The total tax leviable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 983] 142 ITR 677 (Gauhati). He, therefore, urged that the order of the CIT(A) be set aside and that of the ITO be restored. The learned counsel for the assessee, on the other hand, strongly supported the action of the CIT(A). He once again urged that since 50 per cent of the income of the trust was to be accumulated for a period of 19 years for and on behalf of the beneficiaries mentioned in Schedule II, even the assessment originally framed on 24-11-1980 was bad in law. Relying on the decision in the case of M.K. Venkatachalam, ITO v. Bombay Dyeing Mfg. Co. Ltd. [1958] 34 ITR 143 (SC), the learned counsel for the assessee urged that since there was no mistake of law in the instant case, the ITO could not have passed the order u/s 154 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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