9911796707
TMI Blog1987 (3) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... of an association of Persons (AOP). The ITO, however, did not accept the claim and adopted the status as Body of Individuals (BOI). In this regard, reliance was placed by the ITO on the decision of the Supreme Court in N.V. Shanmugham and Co. vs. CIT (1971) 81 ITR 310 (SC). 3. Aggrieved by the said order, the assessee took up the matter in appeal the AAC and contended that the ITO cannot change the status of the assessee from AOP to BOI. It was claimed that the trustees of the trust were to be assessed in the representative capacity and in view of s. 161 of the IT Act, the tax to be collected from the trustees cannot exceed the amount of tax that might have been collected from the beneficiaries on their respective shares. In this regard, reliance was placed on the decision of the Supreme Court in the case of CWT vs. Trustees of H.E.H. Nizam's Family Trust 1977 CTR (SC) 306 : (1977) 1085 ITR 108 ITR 555 (SC). Reliance was also placed on the decision of the Tribunal in the case of trustees of Anandani Family Trust, Nagpur, vs. ITO (1985) 21 TTJ (Nag) 329 : (1984) 9 ITD 174 (Nag). The ld. AAC accepted the contentions of the assessee and held that the ITO could not change the status ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficiaries with determinate and known shares, though for the sake of the convenience, there may be only one assessment order specifying separately the tax due in respect of the wealth of each beneficiary. Secondly, the assessment of the trustees would have to be made in the same status as that of the beneficiary whose interest is sought to be taxed in the hands of the trustees. And lastly, the amount of tax payable by the trustees would be the same as that payable by each beneficiary in respect of his beneficial interest, if he were assessed directly". Similarly the Hon'ble Madras High Court in CIT vs. Balkrishnarao (1983) 37 CTR (Mad) 337 : (1983) 143 ITR 651 (Mad) has held that where the Trust share of individual beneficiaries are known and determinate, the income cannot be assessed in the hands of the trustees as AOP but in the hands of the individual beneficiaries whose shares are specified in the Trust Deed. The Hon'ble Gauhati High Court in CIT vs. Gangadhar Sikaria Family Trust (1982) 30 CTR (Bom) 117 : (1983) 142 ITR 677 (Bom) has held that where the shares of the beneficiaries are equal, individual shares are determinate and known and as such sec. 164 has no applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uidance from the decision of the Supreme Court in the case of McDowell Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 158 (SC). Since in the instance case the ld. CIT(A) has successfully went behind the smoke screen and discovered true state of affairs, his finding is liable to be sustained and the order of the ld. AAC for the asst. yr. 1981-82 is to be set aside. In this regard, the decision of the Supreme Court in the case of Workmen of Associated Rubber Industry Ltd. vs. Associated Rubber Industry Ltd. Anr., (1984) 48 CTR (SC) 355: (1986) 157 ITR 77 (SC) has been cited. 6. On the other hand, ld. counsel for the assessee Shri. V.H. Patil vehemently supported the order of the AAC. According to him, the finding recorded and the conclusion arrived at by the ld. AAC for the asst. yr. 1981-82 is valid and calls for no interference. According to him, the subsequent order of the CIT(A) for the asst. yr. 1982-83 does not bring out the correct facts of the case and, therefore, the conclusion arrived at cannot be sustained. According to him, the trust was created by Shri Rantanlal M. Gupta on 17th Aug., 1979. There are three trustees and the beneficiaries and their shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial painting of industrial items supplied by manufacturers as M/s. Advani Orelicon Ltd. etc. It is having separate bank account. In this case, the Manager is Shri Shreenarayan Gupta, trustee, who is having a separate personal business in manufacturing electric motors and electric washing machines etc. The trustee is having separate bank account with Bank of India whereas Maharashtra Painting Works in having its own bank account with Adhyadaya Co-op. Bank Ltd. Parel Branch, Bombay. Coming to Hyderabad Painting Works, ld. counsel submitted that it is having business of industrial paintings of industrial items supplied by manufacturers as M/s. Khaithan Fibrewala electricals (P) Ltd. etc. The address of the business in B-15, Co-operative Industrial Estate, Balanagar, Hyderabad. It is maintaining its bank account with Bank of India and is managed by Shri Mohanlal Gupta, trustee. The individual business of Shri Mohanlal Gupta is in the name of Golconda Electro Plating Co. doing business of metal polishing and electro plating as nickel, copper, zinc, chromium etc. Since the business of metal polishing and electro plating is fundamentally different from industrial painting of indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the ITO cannot change the status of the assessee without calling for fresh return and for this proposition reliance was placed on the same decision cited before the ld. AAC as follows: (a) CWT vs. J.K. Srivastava Sons (1983) 34 CTR (All) 319 : (1983) 142 ITR 183 (All) (b) CIT vs. Assciated Cement Steel Agencies (1984) 147 ITR 776 (Bom) (c) CIT vs. Rameshwar Lal Sanwari Mal (1972) CTR (SC) 300 : (1971) 82 ITR 628 (SC). 11. On careful consideration of the rival submissions in the light of the material placed on our record, we are of the view that the assessee is to succeed in this regard. As pointed out by the ld. AAC for the asst. yr. 1981-82, the assessee is a private family trust created by Shri Ratanlal M. Gupta vide trust deed dt. 17th Aug., 1979. There are three trustees namely Mohanlal M. Gupta, Shri Prem Narayan Gupta and Shri Srinarayan Gupta. There are ten beneficiaries with specified shares as defined in cl. 1 of the deed itself. There is no confusion or dispute in regard to the shares of the beneficiaries. The main objection of the ITO for asst. yr. 1981-82 and of the CIT(A) for asst. yr. 1982-83 is in respect of the genuineness of the trust and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the trust fund pr corpus in the same proportion as the income. The trust was irrevocable and excluded the settler from all benefits. The ITO held that all the conditions for assessment under s. 164(1) of the IT Act as a specific trust were fulfilled and, therefore, did not raise demand against the trust but assessed the income in the hands of the beneficiaries direct. The Commr., exercising his powers under s. 263 held that the person represented by the trustees was an AOP/BOI for whose benefit the business was being carried on and the assessment had to be made in the status of an AOP. The Tribunal after considering all the relevant case law including the decision of the Supreme Court in the case of N.V. Shanmugham Co. (1971) 81 ITR 310 (SC), CWT vs. Trustees of H.E.H Nizam Family Trust and that of the Tribunal in Trustees of Anandani Family Trust vs. ITO : (1985) 21 TTJ (Nag) 329 (1984) 9 ITD 174 (Nag) held that the case of the trustees carrying on business in terms of the mandate given to him in the trust deed is different from the care of receiver who carries on business clearly on behalf of certain persons. The common interest of the beneficiaries did not exist in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd curtailed the application w.e.f. 1st April, 1985. In that view of the matter, it is not necessary for us to apply the provisions as they are relevant only for asst. yr. 1985-86 onwards. We, therefore, hold that the arrangement by the assessee is within law and the decision of the Supreme Court in the case of the M/s. McDowell Co. Ltd. cannot be applied to the facts of the case. 15. With regard to the reliance by the ld. counsel Shri V.H. Patil on the decision of the Bombay High Court in so far the double taxation is concerned and in regard to the claim that the ITO cannot do the assessment by changing the status without calling for fresh return, we are of the view that this contention need not be considered in view of the finding given by us. 16. Since the assessee in this case is found to be specific private trust with specific shares given to the beneficiaries, the ld. AAC was justified in directing the ITO to apportion the income of trust and assess directly in the hands of the individual beneficiaries under s. 161 of the IT Act. We, therefore, uphold the order of the ld. AAC for the asst. yr. 1981-82 and allow the appeal of the assessee for the asst. yr. 1982-83. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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