SURENDRANATH GANGOPADHYAYA TRUST Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assesses is a trust and the ITO while making the assessment for the year 1974-73 held that the shares of the beneficiaries were indeterminate. He took the status as association of persons but held that the basic exemption of Rs. 5,000 as available to the association of persons under the Finance Act was not applicable to the assessee's case. The ITO determined the income at Rs. 6,500. When the matter went up in appeal before the AAC he did not accept the assessee's contention regarding the allowance of basic exemption of Rs. 5,000. He allowed deduction of Rs. 3,000 under Section 80L of the I.T. Act, 1961. Thereupon, the matter went up before the Tribunal. It was submitted on behalf of the assessee that the provisions of Section 164 of the I.T. Act were not applicable to the total income of the trust and it was submitted further that on the basis of the trust deed the shares of the beneficiaries should be held to be determinate. It was also contended that even if the provisions of Section 164 applied to any part of the trust income, the rate of 65% as laid down in Section 164 could be applied only after allowing the basic exemption of Rs. 5,000. After considering the trust deed and the other facts of the case the Tribunal came to the conclusion that the trust deed had not been properly considered by the authorities below and it had not been found out as to which part of the income of the trust was hit by the provisions of Section 164. The Tribunal, therefore, sent back the matter to the ITO for determination of the question. Regarding the manner in which the tax was to be levied, the Tribunal observed as follows :

(2.) Upon an application being made by the assessee under Section 256(1) of the I.T. Act, 1961, the following question of law has been referred to this court :

(3.) In view of the language used in Section 164(3)(b), read in the background of Section 164 as also the provisions of the Finance Act, 1973, which was relevant for the year, and Sub-section (3) of Section 2 of the said Act, which is, inter alia, as follows, in our opinion, the Tribunal arrived at the correct conclusion :