Income Tax Appellate Tribunal - Mumbai
Income-Tax Officer vs Subhash Metal Indl. on 30 November, 1992
Equivalent citations: [1993]44ITD677(MUM)
ORDER
M.K. Chaturvedi, Judicial Member
1. These three appeals by the revenue are directed against the order of the Dy. CIT (A), Central Range, Bombay and pertain to the assessment years 1981-82, 1982-83 and 1983-84.
2. The solitary ground taken in all the three appeals projects the following grievance:
On the facts and in the circumstances of the case and in law, the Deputy CIT (A) erred in holding that provisions of Section 194A were not applicable in assessee's case. The Dy. CIT (A) has ignored the provisions of Section 204(iii) according to which 'the payer himself is the person responsible for deduction of tax at source under Section 194A. In this case the trust, through trustees, was responsible for payment of interest and deduction of tax at source.
3. The assessee is a trust. The name of the trust is M/s Duggal Family Trust. The said trust is running business in the name and style of M/s Subhash Metal Industries. This trust is comprised of 20 beneficiaries. The shares of the beneficiaries in the trust were claimed to be known and determinate.
4. The Assessing Officer in the course of the proceedings noticed from the records that the assessee has failed to deduct income-tax under Section 194A of the IT Act, 1961 (hereinafter called the Act) read with Rule 37(2A) of the Income-tax Rules, 1962 (hereinafter called the Rules). Accordingly, a show-cause notice under Section 201(1) read with Section 221 of the Act, was served on the assessee. In response to the show-cause notice the assessee vide letter dated 6-1-1988 submitted that :
(i) T.D.S. has been made and deposited.
(ii) Declaration have been received from person whose income is below the taxable limit.
(iii) No. T.D.S. has been made in the case of sister concerns as they were under the belief that such tax was not to be deducted.
(iv) Firms/Individuals who were to receive Interest have paid income-tax on their income and so, no loss to revenue is caused.
5. On enquiry, it was found that the T.D.S. was not deposited. The declaration received from person whose income found to be below the taxable limit was also not produced. The Assessing Officer, accordingly, levied interest under Section 201(1A) of the Act for failure of the assessee to deduct tax at source in terms of Section 194A of the Act. The amounts of interest levied in three years are as under:
A.Y. Amount 1981-82 Rs. 16,581 1982-83 Rs. 63,469 1983-84 Rs. 50,303
6. It was contended before the Dy. CIT (A) that the assessee was not duty bound to deduct the tax at source as the status of the trust ought to be taken as an "individual". "Individual" and "HUF" are exonerated from the requirement of tax deduction at source. The Dy. CIT (A) held that since the status of the assessee could have been only the "individual", the assessee was not liable to deduct tax at source, under Section 194A of the Act. In view of this, there was no violation of the provisions of Section 194A and consequently no interest under Section 201(1A) of the Act could be levied on the assessee.
7. Shri G.R. Sofi, 1d. D.R. appeared before us. It was contended by Sri Soft that the assessee was under an obligation to deduct the tax at source. This obligation was not discharged. Before the Assessing Officer, the correct factual position was not stated. Sri Sofi argued that the assessee cannot be construed to be an "individual". Interest was therefore, correctly charged. It was submitted that the assessee did not file requisite forms before the Assessing Authority to show that the income of the concerned parties were below the taxable limit and the assessee was not required to deduct tax at source. It was also stated that similar other trusts are deducting the tax at source. Sri Sofi relied on some precedents also.
8. Shri V.H. Patil, alongwith Shri V.B. Joshi appeared before us, on behalf of the assessee. It was contended by Shri Patil that the assessee was under no obligation to deduct the amount of tax at source. The assessee is a trust. In view of this, the assessee falls under the category of "individual". The provisions of Section 194A exonerate "individual" and "HUF" from the requirement of deduction of tax at source. In order to support the contention, Shri Patil followed deductive theory of reasoning. He took us through the various categories of the persons enumerated under Section 2(31) of the Act. It was contended that the trust cannot be assessed as an "A.O.P.". It cannot be assessed as an artificial juridical person. It falls only in the category of "individual". He relied on some precedents also.
9. We have heard the rival submissions in the light of material placed before us and precedents relied upon. The short question neatly identified by Shri Patil is whether a trust could be treated as an "individual" and as such is exonerated from the requirement of Section 194A of the Income-tax Act, 1961?
Under Section 2(31) of the Income-tax Act, 1961, assessees are divided into the seven different categories namely, individual, HUF, company, R.F., A.O.P., local authority and every other artificial juridical person not falling in any of the preceding categories.
An "individual" is one entity, one distinct, being a single one. Etymologically the word owe its origin from latin INDIVIDUUS [IN - NOT, DIVIDUUS -Divisible]. According to Chambers Twentieth Century Dictionary, it means "not divisible without loss of identity: subsisting as one: pertaining to one only or to each one separately of a group single, separate....
Section 3 of the Indian Trust Act, 1882 defines trust as an obligation annexed to the ownership of property, and arising out of confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another or of another and the owner.
Trust now connotes a legal concept of relationship just as other relationship subsists under the law. The relationship of the partners is governed by the Indian Partnership Act, 1932, similarly the relationship which exist pursuant to the creation of trust is governed by the Indian Trust Act, 1882.
10. In explaining the concept of 'individual' it is, sine qua non, to indicate the essence of the object reflected in the concept which reveal the content of the concept and thus describe the term "individual" vis-a-vis the concept of trust. It transpires from the perusal of precedents available on the point that the courts have adopted the contextual meaning. While dealing with the term under the Indian Income-tax Act, 1922 Jogendra Nath Naskar v. CAT [1969] 74 ITR 33 (SC) apex court held that the term 'individual is wide enough to include a group of persons forming a unit or a corporation created by statute. Under the Income-tax Act, 1961 Deccan Wine & General Stores v. CIT [1977] 106 ITR 111 (AP). A.P. High Court held that the word is restricted to only a natural person. Dealing with the provisions of Wealth-tax Act, 1957 Trustees of Gordhandas Govindram Family Charity Trust v. CIT[ 1973] 88 ITR 47 (SC) the apex court has held that trustees of a trust can also be included within the expression of individual. The meaning was thus assigned with reference to the given context.
A definition of the term can be taken into consideration provided it is precise and clear. Definitions of concepts should be free from ambiguity. While dealing with the concept it is not admissible to substitute metaphors, comparison, etc., for them. We cannot define lion just by saying that the lion is the king of the animal world. Contextual definition makes it possible to clarify the meaning of a word in a given context.
11. Section 194A provides that ANY PERSON, not being an INDIVIDUAL or a HUF, who is RESPONSIBLE for paying to a resident any income by way of interest, 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. The conditions when a person is not required to make such deduction are listed in the proviso appended to the section.
12. Section 204 defines the meaning of the expression "person responsible for paying". As per Section 204(iii), in the case of credit, or, as the case may be, payment of any other sum chargeable under the provisions of this Act, person responsible for paying means, THE PAYER HIMSELF....
13. The definition of the word 'person' as given under Section 2(31) of the Act, "begins with the word 'person' includes...." This shows that the definition is not exhaustive. It is only enumerative. We for the present are concerned with the meaning of the word "person responsible for paying". This word is defined in the Act itself and according to the definition given, the payer himself is person responsible for paying. Without dragging the matter into the labyrinth of precedents we simply enquire who is the person responsible for paying ? Indisputably 'Trust" is the person responsible and not the, "ces tui que trust". If that be so we are concerned about the status of the trust and not that of beneficiaries. Trust connotes a legal relationship, akin to other legal relationships as exists under the law.
The author of the trust creates the trust. The property of the trust is looked after by Trustees for the benefit of the ces tui que trust. Trust is, therefore, compendium of persons having varied interest in the trust property. It is an institution with specific objects and purposes.
Therefore, it would be misnomer to call it "Individual".
14. Thus, having regard to the facts and circumstances of the case and after carefully considering the law on the point, we hold that the case of the assessee is coming within the ken of Section 194A, as such interest under Section 201(1A) was rightly charged.
15. In the result, appeals of the revenue stand allowed.