COMMISSIONER OF INCOME-TAX VS MAHARAJA DALJITSINHJI TRUST
1995 P T D 220
[204 I T R 135]
[Gujarat High Court (India)]
Before S. Nainar Sundaram, C.J. and R.K. Abichandani, J
COMMISSIONER OF INCOME-TAX
Versus
MAHARAJA DALJITSINHJI TRUST
Income Tax Reference No.22 of 1979, decided on 20/11/1992.
Income-tax---
----Assessment---Representative assessees---Rate of tax---Private trust---No beneficiary having taxable income---Assessment must be made at the rate appropriate to an association of persons---Indian Income Tax Act, S.164(1), prov. (i).
The assessee was a private discretionary trust. The Income-tax Officer, in the course of assessment proceedings for the assessment year 1972-73, finding that one of the beneficiaries. by name RS was assessed to tax, held that the assessee's income should be taxed at the rate of 65 per cent. in view of the provisions of section 164(1) of the Income Tax Act, 1961, as the said provisions stood then. The contention of the assessee was that, save RS, no other beneficiary was assessed to tax and even in the case of RS she had relinquished her right and interest as a beneficiary by a release deed dated January 18, 1972, and she derived no taxable income as a beneficiary. It was urged that the case would be covered by proviso (i) to subsection (1) of section 164 as the said provision stood then and hence the income of the assessee should be charged to tax at the rate applicable to an association of persons. This contention was rejected by the Income-tax Officer but accepted by the Tribunal. On a reference.
Held, that with regard to RS, the Tribunal had adverted to the deed of relinquishment and a categoric finding had been rendered on appreciation and assessment of the recitals therein that she had released her beneficial interest and she was in fact not entitled to any income as a beneficiary in view of the relinquishment during the relevant previous year. This was a pure finding of fact. As RS was not entitled to any income in view of this relinquishment and since other beneficiaries did not have any taxable income, the assessee was liable to tax at the appropriate rate of tax applicable to an association of persons.
B.J. Shelat for Messrs R.P. Bhatt and Co. for the Commissioner.
N.R. Divetia for the Assessee.
JUDGMENT
S. NAINAR SUNDARAM, C.J.---The following questions stand referred to us for our consideration:
"(1) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the income of the trust was assessable to tax at the appropriate rate applicable to the association of persons and not at the flat rate of 65 per cent.?
(2) Whether the finding of the Tribunal that, in view of the fact that Rani Surendrakumari had given up all her claims, title and interest as a beneficiary under the deed of relinquishment dated January 19, 1972, and as she was not entitled to any income in view of this relinquishment and since other beneficiaries did not have any taxable income, the trust was liable to tax at the appropriate rate of tax and not at the higher rate of 65 per cent. is correct in law and sustainable from the material on record?"
The above questions have come to be referred to us in the following background:
The assessee is a private discretionary trust. We are concerned with the assessment year 1972-73. The Income-tax officer, in the course of the assessment proceedings, finding that one of the beneficiaries by name Rani Surendrakumari was assessed to tax, held that the assessee's income should be taxed at the rate of 65 per cent. in view of the provisions of section 164(1) of the Income Tax Act, 1961, as the said provisions stood then. The contention of the assessee was and is that, save for Rani Surendrakumari, no other beneficiary was assessed to tax and, even in the case of Rani Surendrakumari, she has relinquished her right and interest as a beneficiary by way of a release deed dated January 18, 1972, and she derived no taxable income as a beneficiary. It was urged that the case could be covered by proviso (i) to subsection (1) of section 164 of the Act as the said provision stood then and hence the income of the assessee should be charged to tax at the rate applicable to an association of persons. The Income-tax Officer did not accept the contention of the assessee. The assessee went by way of an appeal and the Appellate Assistant Commissioner held that the case could be covered by the proviso (i) to subsection (1) of section 164 of the Act and the Income-tax Officer was directed to tax the income of the assessee at the rate applicable to an association of persons. The Revenue challenged the decision of the Appellate Assistant Commissioner by way of an appeal to the Income-tax Appellate Tribunal and the Tribunal upheld the view of the Appellate Assistant Commissioner holding that the assessee was liable to tax at the appropriate rate of tax and not at the higher rate of 65 per cent. The Tribunal scrutinised the contention of the assessee with reference to the relinquishment of the right of Rani Surendrakumari as the beneficiary and her declaration that she derived no income as a beneficiary and held that this position is acceptable. Since the other beneficiaries did not have any taxable income, the assessee was held by the Tribunal as not chargeable to tax at the rate of 65 per cent.
Of the two questions, we feel, we should find an answer to question No.2 first. If the answer to question No.2 should be in favour of the assessee, necessarily we have to answer question No. l also in favour of the assessee. The reasons are obvious. Only when Rani Surendrakumari could have the role of a beneficiary and thereby she could be stated to have derived income in that role and chargeable under that Act, could the assessee go out of the benefit of the proviso. For the purpose of completion of the picture for appreciating and assessing the questions mooted to us for consideration, we deem it fit to extract the relevant portion of section 164(1) of the Act as it stood then:
"Subject to the provisions of subsections (2) and (3), where any income in respect of which the persons mentioned in clauses (iii) and (iv) of subsection (1) of section 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:
Provided that in a case where---
(i) none of the beneficiaries has any other income chargeable under this Act, or
(ii) to (iv) (not necessary for our purpose) tax shall be charged as if the relevant income or part of relevant income were the total income of an? association of persons."
On the question as to whether Rani Surendrakumari relinquished her right as a beneficiary, the Tribunal has adverted to the deed of relinquishment and a categoric finding has been rendered on appreciation and assessment of the recitals therein that she had released her beneficial interest and she was in fact not entitled to any income as a beneficiary in view of the relinquishment during the relevant previous year. We find that this finding rendered by the Tribunal is purely in the factual sphere and we have not been shown any feature to differ from the view taken by the Tribunal in the factual sphere. We could not characterise the finding rendered by the Tribunal as perverse or as totally unsustainable. Once we accept the finding of fact rendered by the Tribunal, the assessee squarely gets the benefit of proviso (i) to subsection (1) of section 164 of the Act as the section stood then. In view of the above discussion, our answer to question No.2 is that the finding of the Tribunal that Rani Surendrakumari had given up all her claims, right, title and interest as a beneficiary under the deed of relinquishment dated January 19, 1972 and as she was not entitled to any income in view of this relinquishment and since the other beneficiaries did not have any taxable income, the assessee was able to tax at the appropriate rate of tax and not at the higher rate of 65 per cent., is correct. In view of our above answer to question No.2 as a necessary corollary, question No. l has also got to be answered in favour of the assessee. The reference stands disposed of as above. We make no order as to costs.
M.B.A./258/T.F.????????????????????????????????????????????????????????? Question answered in affirmative.