COMMISSIONER OF INCOME TAX Vs. BHARTIDEVI SARABHAI

JUDGEMENT

(1.) THE following two questions had arisen out of the order of the Tribunal made in ITA No. 1623/Ahd/1973 -74 decided on 24th July, 1975.

(2.) EARLIER , when this reference had come up for hearing before the Division Bench (B. J. Divan, C.J. and P. D. Desai, J.), the Court, by its order dt. 1st March, 1978, following the decision of the Full Bench in CIT vs. Smt. Kamalini Khatau 1976 CTR (Guj) 327 (FB) : (1978) 112 ITR 652 (Guj) (FB) : TC 44R.591 which was decided on 23rd Dec., 1977, answered the question No. 1 in the affirmative in favour of the assessee and against the Revenue and held that in view of the answer given to question No. 1, it was not necessary to answer question No. 2.

(3.) THESE two questions were identical to the questions which were referred to the High Court in a cognate matter in the case of Dr. Vikram A. Sarabhai, arising out of ITA No. 1621/Ahd/1973 -74. In that cognate matter also, the High Court had earlier taken a similar view as was done in the present case and the matter was carried to the Supreme Court in Civil Appeals Nos. 2154/1978 and 2157/1978 and the Supreme Court, by its order dt. 7th Feb., 1996 [reported as CIT vs. Dr. Anand Sarabhai Trust (1998) 149 CTR (SC) 349], reversing the judgment of the High Court on its opinion on question No. 1, held that Revenue had the option to assess and recover from either the trustees or from the beneficiaries of a discretionary trust in respect of such income thereafter as has been distributed to and received by the beneficiaries in the course of accounting year and answering question No. 1, in negative in favour of the Revenue and against the assessee, directed the question No. 2 in the said two references to be gone into and answered by the High Court. Those two references i.e., IT Ref. No. 216/1977 and IT Ref. No. 268/1977 came up for hearing on the question No. 2, which was identical to the present question No. 2, before a Division Bench and the Division Bench, by its decision dt. 26th Feb., 1997 [reported as CIT vs. Dr. Anand Sarabhai (1998) 147 CTR (Guj) 391], answered the question No. 2 in the affirmative against the Revenue and in favour of the assessee, in both the references. It was held that the amount of the dividend income received by the trustee which was allowable for deduction under S. 80K, when passed on to the beneficiary, would nonetheless be eligible to the same deduction. When admittedly the amounts were paid by the trust out of the dividend income which was in the hands of the trusts, eligible to deduction under S. 80K as has been found on facts, it was held that the Tribunal was right in holding that such deductible amounts received by the assessee from the discretionary trusts were eligible for deduction under S. 80K of the said Act. The facts and the said question of law in the present case are identical to those in the case of Dr. Vikram A. Sarabhai (supra) and the opinion of this Court on question No. 2 in the cognate references i.e. IT Ref. No. 216/1977 and IT Ref. No. 268/1977, will hold good even for the present question No. 2. Following the reasoning given in the judgment of the Division Bench rendered on 26th Feb., 1997 in IT Ref. 216/1977 and IT Ref. 268/1977, we answer question No. 2 referred to us in the affirmative against the Revenue and in favour of the assessee. The reference stands disposed of accordingly with no order as to costs.