COMMISSIONER OF INCOME TAX Vs. R S TRUST

JUDGEMENT

(1.) The assessment year is 1983-84. The question referred to us is as to whether the Appellate Tribunal was right in law in cancelling the Commissioner's order under Section 263, and proceeding to hold that the status of the trust should not be taken as that of Association of Persons.

(2.) The assessee is a trust created under a trust deed dated 07.09.1981. In terms of the trust deed, the trustees are empowered to carry on any business and/or to engage in any trade of commercial activities which the trustees deem profitable. All the beneficiaries of the Trust are minors. The business in which the Trust was engaged in the relevant previous year was the business of construction of buildings.

(3.) The assessing officer made the assessment, after allocating the income of the assessee among the beneficiaries of the Trust. The Commissioner took the view that that manner of assessing the income was prejudicial to the revenue, that assessment should have been made on the Trust as an Association of Persons. For taking that view, the Commissioner placed reliance on the decisions of the Supreme Court in the case of M/s. N.V.Shanmugam & Co. vs. Commissioner of Income-tax, 81 ITR 310, as also the case of Commissioner of Income-tax vs. Indira Balakrishna, 39 ITR 546. It must be noticed here that Section 161, Income-tax Act was amended and sub-section 1A was introduced therein by which in case of representative assessees having income which includes profits and gains of business, tax shall be charged on the whole of the income at the maximum marginal rate, only with effect from 01.04.1985 and that provision was not on the statute book in this assessment year.