COMMISSIONER OF INCOME TAX Vs. MECCA TRUST

JUDGEMENT

(1.) The Tribunal has stated a case under S. 256(1) of the IT Act, 1961 and referred the following common question of law for the asst. yrs. 1987-88 and 1988-89 :

(2.) THE issue that arises in the tax case reference is one regarding the status of the assessee to be adopted for the purpose of the assessment of the trustees. The Asstt. CIT, the AO assessed the Trust treating it as an AOP but the CIT(A), on appeal, held that the Trust is not liable to be assessed in the status of an AOP, which was confirmed by the Tribunal. It is against this order, the present reference has been made.

(3.) WE hold that the beneficiaries of the trust in these circumstances cannot be regarded as an AOP, as they have not joined together to earn income. They are entitled to receive the income in fixed proportion by virtue of the deed of trust. In other words, they have not associated themselves to earn income from the trust property to regard them as an AOP. The Bombay High Court in CIT vs. Marsons Beneficiary Trust (1990) 87 CTR (Bom) 71 : (1990) 188 ITR 224 (Bom) in similar circumstances has held that where the assessee is a private trust and the shares of the beneficiaries are known and certain, the beneficiaries are not an AOP. We are in respectful agreement with the view expressed in the said decision and accordingly we do not find any infirmity in the order of the Tribunal. We answer the question of law referred to us in the affirmative, in favour of the assessee and against the Revenue. However, there will be no order as to costs.