JUDGEMENT
M.A. Ajinkya, Accountant Member -
(1.)THIS is a departmental appeal against the order of the A. A.C. dated 3rd September, 1986 for the assessment year 1982-83.
(2.)The assessee, herein is a trust. For the assessment year 1982-83, it was assessed on a total Income of Rs. 78,270 as an Association of Persons the assessed is discretionary trust and he therefore taxed the entire income-in the hands of the assessee in the status of A.O.P. For doing so he followed the rationale of the decision of the I.T.O. the assessee had declared a total income of Rs. 53,250 which was revised to Rs. 53,100. After considering the trust. deed dated ll-2-1974, 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 is 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 benificiaries after meeting administrative and other expenses. Since no books of Account-were, maintained to show that the beneficiaries had, been paid in accordance with their definite share and since in the preceding years the income had been taxed in the trust in the status of AOP, the income for the assessment year 1980-81, according to the ITO, was also assessable in the status of A OP
The matter went before the AAC against such assessment for the assessment years 1979-80,1980-81 and 1981-82, The A.A.C. J-Range Bombay in his order dated 12-8-1985 noticed that the assessment of the beneficiaries had also taken place and such assessments had taken place for all the years under appeal in assessment years 1979-80 to 1981-82 prior to the date on ,which the assessment of the trust was completed. The AAC held that ;it would implicit in the terms of Section 161(1) that the ITO may either assess representative-assessee or the person represented by him, Once the option is exercised, by making the direct assessment on the person represented, it is not open to the department to make a further assessment in respect of the same income on the representative-assessee. He relied oh the decision of the Bombay High Court in the ease of Trustees of Chaiurbhuj Raghavji Trust v. CIT [1963] 50 ITR 693. This decision of the AAC has been followed by his successor-AAC for the assessment year 1982-83 which is the subject matter of the present appeal.
(3.)THE main contention in the departmental appeal is that the learned A AC erred in disregarding the provision of the trust deed according to which the trustee are not under any legal 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.
Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.