COMMISSIONER OF INCOME TAX Vs. POONAM TRUST

JUDGEMENT

(1.) THE Income -tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as 'the Tribunal'), has referred under s. 256(1) of the IT Act, 1961 (for short 'the Act'), the following question of law for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of proviso (ii) to sub -s. (1) of s. 164 are not applicable in this case -

(2.) BRIEFLY stated, the material facts are as follows : The assessee -trust was created by virtue of a will executed by one Vidya Wati for the benefit of her granddaughter, namely, Poonam, daughter of Mangat Rai. Mangat Rai, the adopted son of Smt. Vidya Wati, was appointed as a trustee. A sum of Rs. 20,000 was earmarked as the corpus of the trust. The said amount was invested in a firm on which an amount of Rs. 4,113 was earned by way of interest during the previous year, relevant to the asst. yr. 1983 -84. While computing assessment for the said assessment year, the AO was of the opinion that since the said amount had been received under a trust wherein the share of a beneficiary had not been defined, in view of s. 164(1)(ii) of the Act, the interest income was assessable in the hands of the trust. Accordingly, the said amount was included in the total income of the trust and subjected to tax at the maximum marginal rate, taking the status of the assessee -trust as AOP. Aggrieved, the assessee -trust carried the matter in appeal to the Appellate Assistant Commissioner of Income -tax ('AAC' for short). The AAC was of the view that since the trust had been created for the sole beneficiary, namely, Poonam, there was no one else to receive any benefit from the trust at the discretion of the trustee, assessee's case did not fall within the ambit of s. 164 of the Act. He, accordingly, deleted the addition made in the hands of the trust. Revenue's appeal to the Tribunal against the said order was unsuccessful. On Revenue's moving an application under s. 256(1) of the Act, the aforenoted question has been referred for our opinion.

(3.) WE have heard learned counsel for the parties.