Madras High Court
Commissioner Of Income-Tax vs Saurin S. Zaveri on 5 November, 2001
Equivalent citations: [2002]257ITR160(MAD)
Author: A.K. Rajan
Bench: R. Jayasimha Babu, A.K. Rajan
JUDGMENT A.K. Rajan, J.
1. The question that is referred to us in respect of the assessment years 1987-88 and 1988-89 is, "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in directing the Assessing Officer to allow deduction under Section 80C as claimed by the assessee ?"
2. The managing trustee of the trust, by name, Manilal Bapalal Family Benefit Trust, filed returns on behalf of the minor, Master Saurin Zaveri, as one of the beneficiaries for the assessment years 1987-88 and 1988-89 disclosing the beneficiary's share from the trust. The managing trustee claimed deduction under Section 80C of the Act. This claim was allowed by the Assessing Officer. Subsequently, finding that the trust was carrying on business, the Assessing Officer concluded that the whole of the income must be assessed to tax at the maximum marginal rate and the application of Section 80C did not arise and negatived the assessee's claim for deduction under Section 80C does not arise.
On appeal, the Commissioner of Income-tax (Appeals) allowed the appeal. Thereupon, the Department filed the appeal before the Income-tax Appellate Tribunal; the Income-tax Appellate Tribunal also decided based upon its own decision regarding another beneficiary from the same trust. In the circumstances, the above question has been referred.
3. A similar question has been decided by this court in the case of CIT v. Venn Suresh Sanjay Trust [1996] 221 ITR 649 , in favour of the assessee and against the Revenue, where this court held that (page 658) :
"A discretionary trust is obviously not a Hindu undivided family nor an association of persons contemplated by that Section. Therefore, such a trust would become entitled to the deductions provided it can be regarded as an individual. The term, 'individual' as used in the Income-tax Act does not mean a single living human being but would include in its ambit, a body of individuals constituting a unit for the purposes of the Act. Even though the assessment of income is in the hands of the trust, it had to be made in the same manner and to the same extent as it would have been made in the hands of the beneficiaries. The representative assessee in the case of a discretionary trust must be regarded as an individual and thus would be entitled to the benefit of deductions under Section 80L of the Act."
4. Since Sections 80C and 80L are similar, this question is answered against the Revenue and in favour of the assessee.