JITENDRA TRUST Vs. INCOME TAX OFFICER
LAWS(IT)-1989-1-1
INCOME TAX APPELLATE TRIBUNAL
Decided on January 31,1989

Appellant
VERSUS
Respondents

JUDGEMENT

Per Shri R.L.Sangani, Judicial Member - All these appeals were heard together with the consent of the parties as the point involved was identical. These appeals are directed against the order of the Commissioner of Income-tax in exercise of his powers under section 263(1) of the Income-tax Act, 1961. - (1.)
(2.)We shall narrate the facts in I. T. A. No. 525/PN/1987. The facts in that appeal are as follows.
The assessee is a private specific trust. There were three beneficiaries. All of them were minors. Each had 1/3rd share in the income of the trust. The settlor had authorised trustees to carry on the business. In accordance with the said directions of the trust deed, the trustees had carried on the business. The trustees filed the return in respect of income from the trust. The income was allocated to the beneficiaries whose share were determinate. The assessee had pleaded that the assessment was required to be made in accordance with the provisions of section 161(1) of the Income-tax Act, 1961. Since each of the beneficiaries was being separately assessed in respect of his share in the income of the trust, trustees had pleaded that they were not liable to be assessed in respect of the said income. The Income-tax Officer in his assessment order had accepted this position. He determined the business income at Rs. 75,777 and observed that the above income of the trust was assessed in the hands of the beneficiaries and as such the income to be assessed in the hands of the trust was nil. He allocated the above income amongst three beneficiaries the three beneficiaries were assessed in respect of his share in the said income.

(3.)SUBSEQUENTLY the Commissioner of Income-tax, Kolhapur, commenced proceedings under section 263 of the Income-tax Act, 1961. A notice was issued to the assessee-trust to show cause why the trustees of the assessee trust should not be assessed in the status of association of persons on the ground that they represented three beneficiaries who constituted an AOP. The assessee submitted that the beneficiaries of the trust did not constitute an AOP within the meaning of that expression which has been explained in the decision of the Supreme Court in CIT v. Indira Balkrishna [1960] 39 ITR 546. He also relied on the decisions in the case of CAIT v. Raja Ratan Gopal [1966] 59 ITR 728 (SC), Ladukishore Das v. State of Orissa [1973] 87 ITR 555 (Ori.) and G. Murugeson & Bros. v. CIT [1973] 88 ITR 432 (SC). It was submitted, on behalf of the assessee trust before the learned Commissioner of Income-tax that the assessment of the trustees of the trust where the share of the beneficiaries were known and determinate had to be made in accordance with the provisions of section 161(1) of the Act and that each beneficiary had a definite interest in the income of the trust and as such trustees were liable to be assessed in the like manner and to the same extent as each beneficiary. It was further submitted that since each beneficiary has been assessed in respect of his share of income from the trust, the trustees were not liable to be assessed directly in respect of the income of the trust. Reliance was placed on Circular No. 157 dated 26-12-1974 of the CBDT. It was further pleaded that the order of the Income-tax Officer was in accordance with the law and there was no error in the said order.


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