Madras High Court
Commissioner Of Income-Tax vs Kumar Publications Trust on 9 October, 2002
Equivalent citations: [2003]262ITR173(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, K. Raviraja Pandian
JUDGMENT R. Jayasimha Babu, J.
1. The question referred to us at the instance of the Revenue is :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the status of the private trust carrying on business in accordance with the trust deed cannot be taken as association of persons ?"
2. The assessment year is 1985-86.
3. The assessee-trust derived income from a business which was carried on by it. It was assessed as association of persons at the maximum marginal rate, rejecting the claim that the assessment should only be in the hands of the beneficiaries as they were known and the shares were definite. That order was affirmed in appeal, but reversed on further appeal, by the Tribunal.
4. Sub-section (1A) was introduced in Section 161 of the Income-tax Act, 1961, with effect from April 1, 1985, and was applicable during the assessment year 1985-86. That sub-section reads thus :
"Notwithstanding anything contained in Sub-section (1), where any income in respect of which the person mentioned in Clause (iv) of Sub-section (1) of Section 160 is liable as representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate :
Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance and such trust is the only trust so declared by him."
5. Having regard to the clear language of the provision, the whole of the income derived from the trust from the business it carried on, is liable to be taxed at the maximum marginal rate. The decision of the Bombay High Court relied on by the Tribunal in the case of CIT v. Marsons Beneficiary Trust [1991] 188 ITR 224, was a decision which concerned the assessment year prior to the year in which Sub-section (1A) was introduced to Section 161 of the Income-tax Act.
6. The question is, therefore, answered in favour of the Revenue and against the assessee.