9911796707
TMI Blog1989 (10) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 1980-81. For the A.Y. 1980-81, the assessee had declared a total income of Rs. 53,250 which was revised to Rs. 53,100. After considering the trust deed dated 11-12-1974, the I.T.O. for that year observed that the trustees have been given discretionary powers to distribute the income of the trust amongst the beneficiaries and if the trustees did not exercise the discretionary powers, then the beneficiaries' share will be as stipulated in the Trust Deed. The I.T.O. further held that the trustees had the discretion to accumulate the income of the trust or distribute the same among the beneficiaries after meeting administrative and other expenses. Since no books of account were maintained to show that the beneficiaries had been pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation to pay the entire net income to the beneficiaries as per their shares. It is argued that the AAC failed to appreciate the fact that the assessee-trust is a discretionary trust assessable under section 164 of the I.T. Act. 5. The learned Departmental Representative relied on the order of the ITO for this and the earlier years whereas Ms. Aarti Vissanji, learned counsel for the assessee relied on the order of the AAC for this and the earlier years. Mrs. Vissanji also pointed out that this was a trust made under the Will of Anubhai Chamanlal Javeri and the direct assessment on the trustees made by the ITO was not warranted in view of the provisions of the proviso to sub-section (1A) of section 161 of the Act. Ms. Vissanji also arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of giving effect to the Will of the said A.C. Javeri, in respect of 80 per cent of the net estate of the said A.C. Javeri. Para 4 of the Trust Deed reads as under :-- "The Trustees shall receive the annual or other income of the Trust Fund and all other income arising under this Deed and in the first place reimburse or pay and discharge all the costs and expenses which may be incurred in or about the administration of the Trusts of these presents including any Income-tax or Wealth-tax or other Tax levied upon the Trustees and including also outgoings and Municipal or other rates assessments and duties and costs or ordinary repairs to any immovable property if any forming part of the Trust Fund and subject thereto shall pay each year t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, tax shall be charged on the whole of the income in respect of which such person is liable at the maximum marginal rate :" These provisions are relevant in the context of a business carried on by a private trust. This sub-section provides for taxation of business profits of private trusts at maximum marginal rate of income-tax, which is why the I.T.O. has made an assessment on the A.O.P. at the maximum marginal rate. Section 160 of the I.T. Act gives the connotation of the word 'representative assessee'. Clause (iv) of sub-section (1) of section 160 provides that in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise receives or is entitled to rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the proviso of sub-section (1A) of section 161 will come into operation in the present case and the provisions of sub-section (1A) which authorised the ITO to make an assessment at the maximum marginal rate will not be operated or applicable in the case of a trust of this type. Without prejudice to this argument, the alternative argument of Ms. Vissanji was that by operation of cl. (ii) to first proviso to sub-section (1) of section 164, the income of the trust which was a trust declared by Shri Zaveri under a Will and which was the only trust so declared would be taxable at appropriate rates as if it were the income of an A.O.P. and not at the maximum rates. Finally Ms. Vissanji argued that the assessments of the beneficiaries had alr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument of Ms. Vissanji that the proviso to sub-section (1A) of section 161 would be applicable in the present case, has to be rejected. 12. The alternative arguments of Ms. Vissanji, however are relevant in the present case and have to be accepted. It is not disputed that this is a trust which came into existence to give effect to the provisions of the Will of late Sri A.C. Javeri. It is also not disputed that this is the only trust of its kind. The impugned income is the type of income contemplated in cl. (ii) of sub-section (1) of section 164 of the I.T. Act being income receivable under the trust bequeathed by a person by a Will. Therefore, the assessment of such income cannot be made at the maximum marginal rate. This argument ..... X X X X Extracts X X X X X X X X Extracts X X X X
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