COMMISSIONER OF INCOME TAX Vs. KRISHNA BANDAR TRUST

JUDGEMENT

(1.) In this reference made at the instance of the Revenue, the following question of law has been referred to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1984-85 :

(2.) Shortly stated, the facts are that the assessee is a discretionary trust and was assessed in the status of an "association of persons". The assessee claimed relief under Section 80L of the Income-tax Act, 1961. The Income-tax Officer was of the view that, having regard to the provisions of Explanation 2 to Section 164 of the Income-tax Act, 1961, a discretionary trust has to be taxed as an association of persons and, therefore, deduction under Section 80L was not available to the assessee-trust. The Commissioner of Income-tax (Appeals) upheld the stand of the assessee-trust following the decision of the Hyderabad Bench of the Tribunal in the case of Education Trust Fund v. ITO.

(3.) The Revenue, being aggrieved, went to the Tribunal. The case of the assessee before the Tribunal was that the trustees in the instant case had not mutually associated themselves for the purpose of producing income and that they were jointly holding an office and were merely receiving income by way of dividend and interest. According to the assessee, its case fell under the main provision of Section 164(1) of the Income-tax Act, 1961, and the first proviso to that section was not attracted in this case.