Gujarat High Court
M.L. Family Trust And Ors. vs State Of Gujarat And Anr. on 14 December, 1993
Equivalent citations: [1995]213ITR152(GUJ)
JUDGMENT B.C. Patel, J.
1. Six complaints, vide Criminal Cases Nos. 919 of 1988 to 924 of 1988, were filed by the Income-tax Officer (hereinafter referred to as "the complainant") against the present petitioners for the alleged breach committed by the accused which is made punishable under section 276B read with section 278B of the Income-tax Act, 1961 (hereinafter referred to as "the said Act"). Criminal Complaints Nos. 919, 920 and 921 of 1988 are filed as the accused failed to deduct the tax within time from the interest amount which has been credited to the account of different payees referred to in the complaints and it is alleged that an offence punishable under section 276B, read with section 278B of the said Act, has been committed. Criminal Complaints Nos. 922, 923 and 924 of 1988 are filed, inter alia, alleging that the accused have failed to pay the tax within time after deducting it on June 30, 1985, from the interest amount mentioned in the complaints, credited on June 30, 1985, to the account of the payees referred to in the complaints who are the same persons referred to in the Complaints Nos. 919, 920 and 921 of 1988. These six complaints have been grouped in two different groups wherein for the same transaction different complaints have been filed, i.e., one for failure to deduct the tax and other for failure to pay the tax.
2. On the complaints being filed before the Additional Chief Metropolitan Magistrate, Ahmedabad, process as issued. The petitioners-original accused have preferred these applications under section 482 of the Criminal Procedure Code and have contended that section 194A of the said Act is not applicable. The relevant sub-section (1) of section 194A of the said Act reads as under :
"194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of "interest on securities" shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode whichever is earlier, deduct income-tax thereon at the rates in force :"
3. Mr. Thakore, learned counsel, submitted that it is the liability of the representative assessee and, therefore, the trustees being the representative assessee who have the liability to deduct the tax and to pay the same to the Revenue. Sub-section (1) of section 161 of the said Act reads as under :
"161. Liability of representative assessee. - (1) Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him."
4. It is further submitted by the complainants that as petitioner No. 1 is a trust and petitioners Nos. 2 to 4 are the trustees, the trust is an "association of persons" and would mean a "person" as per section 2(31) of the Act. It is also submitted that, therefore, the trustees are responsible to deduct the tax from the amount of interest within time from the interest amount which has been credited to the account of the payees. It is also the obligation of trustees to pay the tax within time after the same is deducted. As the accused failed to deduct and pay the tax, offences under section 276B read with section 278B of the Act have been committed by the accused. Mr. Thakore submitted that considering the provisions contained in section 2(31) and 161(1), the trust as well as the trustees are required to be held liable. Mr. Soparkar, learned counsel for the petitioners, submitted that the trustee is assessable in the like manner as the beneficiary. The status of the trustee would be in the same status as that of an individual as, in the instant case, the beneficiaries are individuals. He has relied on the decision of the apex court rendered in the case of CWT v. Trustees of H. E. H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555. The Supreme Court had held as under (at page 595) :
"It is also necessary to notice the consequences that seem to flow from the proposition laid down in section 21, sub-section (1), that the trustee is assessable 'in the like manner and to the same extent' as the beneficiary. The consequences are three-fold. In the first place, it follows inevitably from this proposition that there would have to be as may assessments on the trustee as there are beneficiaries with determinate and known shares, though, for the sake of 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 trustee 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 trustee. This was recognised and laid down by this court in N. V. Shanmugham and Co. v. CIT [1971] 81 ITR 310 (SC). And, lastly, the amount of tax payable by the trustee would be the same as that payable by each beneficiary in respect of his beneficial interest, if he were assessed directly. Vide Padmavati Jaykrishna Trust v. CWT [1966] 61 ITR 66 at 73, 74 (Guj); Trustees of Putlibai R. F. Mulla Trust v. CWT [1967] 66 ITR 653 at 657, 658 (Bom) and Chintamani Ghosh Trust v. CWT [1971] 80 ITR 331 at page 341 (All)."
5. In view of the legal position, the submissions of Mr. Thakore, for the complainant cannot be accepted. In view of this position, it is clear that section 194A of the Income-tax Act, 1961, will not be applicable to the present cases and obviously there is no question of deduction of tax from the interest amount credited to the account of payees or of paying the tax after deduction. Hence, there is no question of any offence alleged to have been committed by the petitioners as referred in the complaint. Hence, the process issued against the accused requires to be quashed and is hereby quashed. Applications dismissed. Rule made absolute accordingly.