U.T. Shah, Judicial Member - (1.) THE revenue has come up in appeal against the order of the AAC wherein he has held that the assessee-trust was not assessable at the maximum marginal rate.
(2.) The assessee is a trust and is assessed in the status of an AOP. The assessment year is 1981-82 and the relevant previous year ended on 31-3-1981. One Shri Pranlal Thakordas Shah had created two trusts, viz., Shri Pranlal Thakordas Trust and Rajnikant Gulabdas Family Trust as per will dated 10-3-1977. On 1-5-1979, Shri Pranlal Thakordas Trust was dissolved and its assets were distributed amongst the beneficiaries. During the relevant previous year, the assessee-trust was the only trust which was created under the will.
(3.) ON the aforesaid facts, the assessee claimed before the ITO that it should be taxed at the normal rate as per first proviso to Section 164(1) of the Income-tax Act, 1961 ('the Act'). The ITO, however, assessed the assessee-trust at maximum rate with the following observations : The assessee has claimed that the income of the trust is chargeable at the normal rate as per first proviso to Section 164(1) as none of the beneficiary is the beneficiary in other trust. The claim of the assessee under proviso to Section 164(1) fails as one of the beneficiaries, namely, Deviayaniben has got taxable income. Regarding the alternative claim of the assessee under second proviso to Section 164(1), the basic condition to be satisfied is that the relevant income is receivable under the trust declared by a 'will' and that trust is the only trust so declared. In this case the settlor had settled two trusts, viz., Pranlal Thakordas Trust and Rajnikant Gulabdas Trust. It is contended that the other trust, i.e., Pranlal Thakordas Trust was dissolved with effect from 1-5-1979 would not make any difference, so far as the creation of two trusts at the earlier stage. Further the trustees had no authority under the Indian Trusts Act, 1882 to dissolve the trust. Considering the above facts, claim of the assessee to tax the income at the normal rate is rejected and tax is charged at the maximum rate.;