COMMISSIONER OF INCOME TAX Vs. MARSONS BENEFICIARY TRUST

JUDGEMENT

(1.) IN all these applications, there are certain basic facts which are common. The income tax applications pertain to the assessment to income tax of the trustees of a trust in which, under the deed of trust, the settlor has given to the trustees a power to carry on business. Under the deed of trust in each application, the income of the trust including its business income is required to be distributed amongst specified beneficiaries in shares which are determinate. The questions which have been posed in these applications relate to the manner of assessment to tax of the business income of the trust.

(2.) ALL these applications relate to the assessment years which are prior to the date when S. 161(lA) was inserted in the IT Act, 1961. This amendment has been inserted by the Finance Act, 1984, with effect from April 1, 1985. We are, therefore, concerned with the relevant provisions of the IT Act prior to that date. Chapter XV of the IT Act, 1961, deals with tax liability in certain special cases. This includes, inter alia, the liability of representative assessees. The relevant portions of the sections in Chapter XV are as under :

(3.) 164. Charge of tax where share of beneficiaries unknown. (1) Subject to the provisions of sub ss. (2) and (3), where any income in respect of which the persons mentioned in cls. (iii) and (iv) of sub s. (1) of S. 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as 'relevant income', 'part of relevant income' and 'beneficiaries', respectively), tax shall be charged (i) as if the relevant income or part of relevant income were the total income of an association of persons, or (ii) at the rate of sixty five per cent.,whichever course would be more beneficial to the Revenue ... l66. Direct assessment or recovery not barred. Nothing in the foregoing sections in this Chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable , or the recovery from such person of the tax payable in respect of such income."