COMMISSIONER OF INCOME TAX Vs. SHABANDARI FAMILY TRUST

JUDGEMENT

(1.) THESE Income Tax references relate to the assessment years 1988-89 and 1989-90 arise out of ITA Nos. 666 and 667/Coch/1993. The questions of law referred for the opinion of this court are as follows :

(2.) SHABANDARI Family Trust, Calicut, is the assessee. During the assessment of the above assessee for the years 1988-89 and 1989-90, it was noticed from the details of interest payments furnished by the assessee that interest exceeding Rs. 2,500 was paid to 19 persons totalling to Rs. 1,60,599 during the year relevant to the assessment year 1988-89 without deduction of tax at source as stipulated in section 194A of the Income Tax Act, 1961. Similarly, for the assessment year 1989-90 interest exceeding Rs. 2,500 was paid to 21 persons aggregating to Rs. 1,62,180 without deduction of tax at source as stipulated in section 194A of the Income Tax Act, 1961. Hence letters were issued to the assessee. The assessee's representative in his reply, it is stated that the assessee is a specific trust having the shares of the beneficiaries determined and since all the beneficiaries are individuals, the status of the trust is that of an individual and hence, the provisions of section 194A were not attracted. But this contention was not accepted by the assessing officer. Since the assessee failed to deduct tax at source, interest under section 201(1A) was also leviable. For the assessment year 1988-89 a total amount of Rs. 27,460 and for the assessment year 1989-90 a total amount of Rs. 25,331 were demanded from the assessee. Against those orders, the assessee, preferred appeals before the Deputy Commissioner (Appeals). Both the appeals were heard together. The Deputy Commissioner (Appeals) held that the assessee is not governed by the provisions under section 194A of the Income Tax Act and therefore, levy of interest under section 201(1A) for both years was cancelled.

(3.) IT is not disputed that the assessee is a family trust. But neither the assessing authority nor the appellate authority nor the Tribunal considered the question whether the family trust is one declared by a duly executed instrument in writing or an oral trust, whether it is liable to be assessed as a representative assessee under section 161(1) or whether the income is liable to be assessed to the maximum marginal rate under section 161(1A) of the Act. They have also not considered the circumstances under which the assessee happened to pay interest to 19 persons for the year 1988-89 and to 21 persons for the year 1989-90. There is no material on record to show the activities of the trust and how the income is derived by the trust, who are the beneficiaries under the trust. In order to decide the question whether the trust can be treated as an Association of persons, it is absolutely necessary to decide the matter with reference to the trust deed, the accounts and other records maintained by the assessee. None of the authorities including the Tribunal had considered the matter with reference to the said documents. As such, we are not in a position to answer the questions referred to either way and we decline to answer the same.