COMMISSIONER OF INCOME-TAX VS DR. ANAND SARABHAI TRUST
1998 P T D 3540
[231 I T R 524]
[Supreme Court of India]
Present: B. P. Jeevan Reddy and S. B. Majmudar, JJ
COMMISSIONER OF INCOME-TAX
versus
Dr. ANAND SARABHAI TRUST and another
Civil Appeals Nos.2154 and 2157 of 1978, decided on 07/02/1996.
(Appeals from the judgment and order dated March 1, 1978, of the Gujarat High Court in ITRs. Nos.216 and 268 of 1977).
(a) Income-tax---
----Representative assessee---Trust---Discretionary trust---Option to assess trust or beneficiary directly---Indian Income Tax Act, 1961, Ss. 164 & 166.
(b) Income-tax---
----Special deduction---New industrial undertaking---Trust---Discretionary trust- --Dividend received by trust from new industrial undertaking---Whether beneficiary entitled to deduction---Matter remanded to High Court---Indian Income Tax Act, 1961, Ss.80-K & 166.
Distributions received by a beneficiary from a discretionary trust can be assessed in the hands of the beneficiary or in the hands of the trust.
CIT v. Kamalini Khatau (1994) 209 ITR 101 (SC) fol.
[Since the High Court had held in favour of the assessee on the first question and, had, therefore, not answered the second question, the Supreme Court remanded the matter to the High Court to decide the second question, i.e., whether, in respect of distributions received by the beneficiary from dividends received by the trust which were exempt under section 80-K of the Income Tax Act, 1961, the beneficiary was entitled to exemption.]
J. Ramamurthi and R.R. Mishra, Senior Advocates (S.N. Terdol. Ranbir Chandra and R. Satish, Advocates with them) for Appellants.
Mrs. A.K. Verma, Advocate for Respondents.
ORDER
Both these appeals are preferred by the Revenue against the judgment and order of the Gujarat High Court. The questions referred in both these appeals are identical. They read as follows:
"(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 distributions received by the assessee from various discretionary trusts were assessable only in the hands of the trustees of the respective trusts under section 164 of the Income Tax Act, 1961, and not in the hands of the assessee?
(2)Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the amount received by the assessee from various discretionary trusts is exempt from tax inasmuch as the amount was paid out of dividends, received by the trusts which were exempt under section 80-K of the Income Tax Act, 1961?"
The first question was answered by the High Court in the affirmative, i.e., in favour of the assessee and against the Revenue. It is, however, agreed now before us by counsel for both the parties that the judgment of the High Court has to be reversed following the decision of this Court in CIT v. Kamalini Khatau (1994) 209 ITR 101. Accordingly, the first question is answered in the negative, i.e., in favour of the Revenue and against the assessee.
So far as the second question is concerned, the High Court has declined to answer that question in view of its answer to question No.1. Inasmuch as we have reversed the High Court's answer to question No.1 question No.2 now requires to be gone into and answered. Accordingly, the matters are remitted to the High Court to consider and answer question No.2 alone in accordance with law.
Appeals are allowed in part and the matters are remitted to the High Court. No costs.
M.B.A./1851/FCAppeal allowed.