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Showing contexts for: Two trustee in Trustees Of Anandani Family Trust vs Income-Tax Officer on 24 March, 1984Matching Fragments
(i) The order passed by the Commissioner is illegal, invalid and without jurisdiction,
(ii) The order passed by the Commissioner is unjustified and unwarranted.
(iii) The Commissioner erred in directing that the tax should be charged in the hands of the assessee at the normal rate prescribed for the AOP.
2. The brief facts of the case are as under: The assessee is a private family trust settled by Smt. Pewandbai, wife of Mulchand Anandani, resident of Jharipatka, Nagpur, by a duly executed instrument in writing whereby she appointed two trustees, viz., Shri Chandumal, son of Hundrajmal, resident of Jharipatka, Nagpur, and Shri Mahesh, son of Jodharam, resident of Jharipatka, Nagpur, for the benefit of six beneficiaries as under:
4. The Commissioner by a notice dated 18-11-1983 directed the assessee to show cause as to why the orders passed by the ITO could not be held as erroneous and prejudicial to the interests of the revenue as though the ITO correctly determined the status as an 'AOP', his action in distributing the income amongst the various beneficiaries is not warranted by law. According to him, the trust deed clearly shows that the two trustees were appointed to carry on the business for and on account of the trust and since the business is carried on for the benefit of all the six minors jointly, there is no warrant for making an assessment on the shares of the beneficiaries under Section 161 of the Act as the representative assessee, since the said six beneficiaries jointly constitute an AOPs/BOIs. The Commissioner in the said notice further opined that the ITO has misapplied the provisions of Section 164 of the Act and the opposite does not follow where the shares are determinate. On the other hand, according to him, Section 161 lays down that the representative assessee is assessable to the same extent and in the like manner as the person represented. In the instant case, the person represented is the BOI consisting of all the beneficiaries and as such assessment is to be made in the hands of the AOPs. The assessee was directed to appear before him on 22-11-1983 or to make written submissions. In response to the aforesaid notice the assessee filed written reply objecting to the proposed action mainly on the following grounds:
9. In reply Shri Dewani submitted that there is no conflict between the two decisions of the Supreme Court in the case of N.V. Shanmugham & Co. (supra) and in the case of Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust (supra). He read out a passage from Kanga and Palkhivala's Law and Practice of Income-tax, Seventh edition, Volume I, page 953 which, according to him, clarified the two decisions. The case of N.V. Shanmugham & Co. (supra) decides the issue of status of representative assessee. A representative assessee derives the status from the beneficiary and if a beneficiary is an AOP, the person represented, that is the trustee, shall be an AOP. He gave an example of a trust consisting of three individuals and one AOP as the beneficiaries. According to him, the assessment in respect of the three beneficiaries will be completed as individual and in respect of an AOP the trustees shall be assessed as an AOP. According to him, there is no conflict between the two decisions and if any conflict is assumed, the latter decision of the Supreme Court in Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust's case (supra) shall prevail. He next referred to the provisions of Section 164 as the same stood before the amendment in 1971. According to Shri Dewani, if the contention of the revenue is accepted, there will be no difference between the provisions of Section 161 and Section 164 as they stood before the amendment of 1971. There was no amendment to Section 161 at any point of time. He, therefore, contended that it cannot be said that the Legislature enacted the section for the same effect and consequence. An identical situation cannot be said to be covered by two sections rendering the other as superfluous. Thus, according to him, this is sufficient indication of the intention of the Legislature about the effect of the provisions of Section 161. He reiterated and laid stress on the issue that the trustees and the receivers are not the same persons. A trustee, according to him, is governed by the provisions of the Indian Trusts Act, 1882, and the receiver is governed by the Code of Civil Procedure, 1908. Referring to the two decisions of the Supreme Court in the case of W.O. Holdsworth (supra) and in the case of Kripashankar Dayashanker Worah (supra), he stressed that the receivers hold the property and carry on the business on behalf of the persons for whose property they are appointed as receivers, whereas the trustees hold the property and the income in their own right though for the benefit of the beneficiaries. He, therefore, emphasised that the beneficiaries of the trust cannot be said to constitute an AOP. He again referred to the decision of the Bombay High Court in the case of Balwantrai Jethalal Vaidya (supra) and pointed out that the said decision has received the approval from the Supreme Court in the two decisions in the case of C.R. Nagappa (supra) and in the case of Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust (supra). He pointed out that since the matter is concluded by the Supreme Court decision, it is not open for the revenue to reopen the issue or context on the ground that the particular aspect or the ground was not addressed or argued before the Supreme Court and, therefore, the Supreme Court had not decided the matter from that angle. For the aforesaid proposition he relied on the decision of the Karnataka High Court in the case of CJT v. Jagadish Jakati & Co. [1979] 119 ITR 19. He concluded his arguments by saying that the case of the assessee is fully covered by the various authorities and also the decision of the Tribunal and there are no compelling circumstances or reasons for deviating from the view taken earlier. He further referred to the two page statement of admitted facts and the reasoning placed on record to show that the beneficiaries do not constitute an AOP and, therefore, the order passed by the Commissioner under Section 263 is illegal. The only way to make the assessment, according to him, is the one which the ITO has made. He again stressed that the circular of the Board applied to the facts of this case. He, therefore, contended that the order passed by the Commissioner deserves to be quashed.
13. The next question that arises for consideration is whether the beneficiaries of the trust in question can be said to be joint for whom business was carried on by the trustees. The two authorities cited on behalf of the assessee, namely, the decision of the Supreme Court in the case of W.O. Holdsworth (supra) and the decision of the Madras High Court in the case of Pattammal (supra) clearly show that the beneficiaries cannot be said to be persons 'jointly interested' in the property or income of the trust. The relevant portion of the judgment of the Supreme Court in the case of W.O. Holdsworth (supra) reads as under: