CHINTAMANI GHOSH TRUST Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is an income-tax reference under Section 256 of the Income-tax Act, 1961, in which the following question has been referred for our opinion :

(2.) THE assessee is a trust and the relevant assessment years are 1971-72, 1972-73 and 1973-74. Part of its income was held to be specifically receivable on behalf of or for the benefit of the beneficiaries whose share was determinate and known. THE remaining income was assessed in the hands of the assessee in the status of an association of persons. THE assessments were made by the Income-tax Officer and the tax was levied treating the income of an association of persons for the respective, years. Subsequently, the Commissioner of Income-tax felt that the orders passed by the Income-tax Officer were erroneous and prejudicial to the interests of the Revenue inasmuch as on the assessee tax should have been levied for all the three years at the rate of 65 per cent. Hence, the Commissioner of Income-tax issued notice under Section 263 of the Act to the assessee. THE assessee claimed that there was no mistake in the assessment order and the Income-tax Officer had rightly charged the tax at the rate applicable to its total income. In support of its contention, the assessee claimed that trust had been created by a will and its case was, therefore, covered by Clause (ii) of the proviso to Section 164(1). In the alternative, the assessee claimed that its case was covered by Clause (iii) of the said proviso inasmuch as the trust had been created bona fide exclusively for the benefit of the relatives of the settlor before March 1, 1970. THE Commissioner of Income-tax rejected both these contentions of the assessee and held that its case was not covered by either Clause (ii) or Clause (iii) of the proviso to Section 164( 1) of the Act, and hence he accordingly held that the Income-tax Officer erred in not applying the rate of 65 per cent.

(3.) AS regards the alternative contention of the assessee that the case was covered by Clause (iii) of the proviso to Section 164(1), the Tribunal held that the trust had been created not only for the benefit of the relatives of the settlor but also for various other purposes, e.g., worship of the family deity and wages of the servants employed for the deity and for the maintenance of a homoeopathic dispensary and a fund for the maintenance of widows, orphans and students. Thus the trust had not been created exclusively for the relatives of the settlor.