COMMISSIONER OF INCOME TAX Vs. DEVSHI TRUST

JUDGEMENT

(1.) THIS is the reference under s. 256(1) of the IT Act made by the Income -tax Appellate Tribunal ('the Tribunal' for short). The question referred by the Tribunal is arising out of its order passed in ITA No. 3053/Bom/1985 for the asst. yr. 1982 - 83. The same reads as under : "Whether, on the facts and in the circumstances of the case, the assessee -trust was a non -discretionary trust for the purposes of applicability of appropriate rate of tax - one Pushpa F. Shah created a trust by handing over Rs. 5,000 to two trustees, viz., Shri Bipin Amritlal Kothari and Smt. Bharati Bipin Kothari in the presence of one Shri Hasmukhlal Panachand Sheth. It may be mentioned that Pushpa F. Shah is a sister of Shri Bipin, while Smt. Bharati is the wife of Bipin A. Kothari. details as to the purpose of the trust, powers of the trustees, the name of the beneficiaries, etc. resolving to pay a sum of Rs. 20,000 to the beneficiaries in the ratio of 50:50. They have resolved that the income of the trust and the balance in Surplus Reserve Fund after paying the amount as mentioned hereinabove be held on behalf of the beneficiaries, viz., Ms. Sonal Bipin Kothari and Master Amit Bipin Kothari in the ratio of 50:50. On the aforesaid fact, the assessee filed its return of income for the year under reference computing the taxable income as nil in the manner mentioned in the return of income. income of the assessee at maximum marginal rate of tax holding that the share of the beneficiaries was not definite and ascertainable as on the date when the trust came into being, as such act of trustees cannot subsequently, change or alter it. In other words, the trust was assessed as discretionary trust and the income of the trust was brought to tax on maximum marginal rate of taxation as provided under s. 164 of the IT Act.

(2.) Being aggrieved by the aforesaid order of the ITO, assessee preferred an appeal before the Appellate Assistant Commissioner ('AAC' for short), who was pleased to allow the appeal filed by the assessee accepting the contention of the assessee. The Revenue being aggrieved by the aforesaid order of the AAC, carried the matter in appeal before the Tribunal. For the reasons recorded for the year under reference, the Tribunal upheld the order of the AAC.

(3.) Having dissatisfied with the decision of the Tribunal, the Revenue desired the Tribunal to refer the question of law for the opinion of this Court extracted from the opening part of this order.