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2016 (7) TMI 211 - HC - Income TaxRevision u/s 263 on ‘Protective basis’ - Maximum marginal rate u/s 164 - whether the income did not ‘accrue’ or ‘arise’ to the specific beneficiary (the assessee) ? - whether CIT had no jurisdiction u/s 263 of the Act for direction for invoking the provisions of section 164(1) of the Act and also giving further finding that the statement in writing submitted under Explanation 1 to section 160(1) signed by one of the Trustees was not valid and hence the provisions of section 164A could not be applicable resu8lting in levy of tax at maximum marginal rate of tax? Held that:- As decided in Neo Trust [1992 (1) TMI 138 - ITAT AHMEDABAD-B] if a specific trust is having its beneficiaries, few as individuals and few as discretionary trusts, but share of each of individual as well as discretionary trusts is specific, keeping in view that trustees of First Level Trust are to be considered as representative assessee and they represent share of beneficiary, Assessing Officer can assess income of First Level Trust at maximum marginal rate as per section 164 to extent of respective share of such beneficiary trust (discretionary trust) and at normal rate as per section 161 to extent of share of individual beneficiaries. It is further held by this court that however if Second Level Trust which is a beneficiary of First Level Trust is found to be specific, then assessment of First Level Trust should rest there and assessment of First Level Trust would be made as per section 161; it would be wrong to contend that if beneficiary of Second Level Trust is a discretionary trust, then beneficiary of First Level Trust can also be taxed at maximum marginal rate under section 164 inasmuch as relationship between trustees in representative capacity and answerability of trustees to beneficiary is limited to beneficiary of a particular trust as per Trust Act and it cannot be stretched or reached to beneficiaries of beneficiary and then against beneficiaries’ beneficiary. Also see KV. Patel Family Trust Versus CIT [2014 (8) TMI 601 - GUJARAT HIGH COURT] In view of the aforesaid legal position, we answer the reference in favour of assessee
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