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2015 (2) TMI 121 - GUJARAT HIGH COURTTax Liability of Trust - whether Assessee Trust is a discretionary Trust and, therefore, charged tax at the maximum marginal rate under Section 164 and not under Section 161 of the Act? - Held that:- Attempt to contend that if the beneficiary of Second Level Trust is a discretionary Trust or the shares are uncertain of the beneficiaries of Second Level Trust, the beneficiary of the First Level Trust can also be taxed at the maximum marginal rate under Section 164 of the Act, in our view cannot be accepted because the relationship between the Trustees in representative capacity and the answerability of the Trustees to the beneficiary is limited to the beneficiary of a particular Trust as per the Trust Act and it cannot be stretched or reached to the beneficiaries of the beneficiary and then again beneficiaries’ beneficiary. It is true that for the purpose of tax, the provisions of the Act are to be considered and the Act provides for assessment in representative capacity, but the representative capacity of the Trustees of the First Level Trust is to represent the beneficial interest of the beneficiary of its Trust, it cannot reach to the Third Level Trust or the beneficiaries of the Third Level Trust as sought to be canvassed. Had the option been not available under Section 164 of the Act to the Assessing Officer, possibly the beneficiaries of Second Level Trust could also not be considered, but as such option is expressly made available under Section 164 of the Act, we are inclined to read and interpret that for the purpose of tax under the Act, the Assessing Officer may be in a position to find out the status of the beneficiaries of the First Level Trust and while finding out the status of the beneficiaries of the First Level Trust, he may look upon the taxable liability of the beneficiaries of Second Level Trust, who are the beneficiaries of First Level Trust and if the tax payable is higher, while making assessment of the First Level Trust, option may be resorted to under Section 164 of the Act to that extent only, but such cannot be permitted again to reach to the Third Level Trust and to find out the taxable liability of the beneficiaries of the Third Level Trust. Hence, the said contention to that extent of the Revenue cannot be accepted. The question arise for reaching to the beneficiaries of the second level with third level trust for the assessment of first level trust, the impugned orders of the Tribunal cannot sustain for charging tax at the maximum marginal rate under section 164 of the Act. - Decided in favour of assessee. Income recognition - whether once the amount credited in the books of account was on contingencies of the remuneration available, it could not be considered as real income? - Held that:- Tribunal after considering the terms of the agreement has recorded the finding of fact that as per the agreement, the income which had already accrued in favour of the assessee trust during the completion of accounting year cannot be treated as no income merely because the respective societies sent notices after many years demanding the refund of the aforesaid amount. Nothing is brought to our notice that the agreement expressly provided for the refund of the amount already paid by way of remuneration nor there is any adjudication by any authority that the assessee was under obligation to refund the amount. Under these circumstances, when the Tribunal has recorded ultimate finding of fact. Whether a particular income was real income as per the terms and conditions of the agreement of the assessee or not in our view is essentially a question of fact which would be beyond the scope of judicial scrutiny in the present appeals before this Court. Same will be the position for examining references which would be limited to only substantial questions of law. Hence, we find that the second substantial question of law as sought to be canvassed by the respective appellants or the assessee would not arise for our consideration further as sought to be canvassed - Decided against assessee.
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