TMI Blog2002 (2) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the assessee-trust derived income from business, and that it has to be charged on the whole of its income at the maximum marginal rate. 3. The assessee-trust came into existence by an Indenture dated 3-10-1950, and the settlor was Shri T.L. Kapadia. The corpus of the Trust was an amount of Rs. 1,25,000. We need not bother about the life interest created under the Trust and the only relevant point for the purposes of these appeals is that during the years of account, relevant for the assessment years under appeal, the Trust had two beneficiaries, Shri Dhirajlal Kapadia and Shri Kirtikumar T. Kapadia, the sons of the Settlor, with, as mentioned hereinbefore, each one of them having 50 per cent beneficial interest in the income of the Trust. 4. The main contention of the assessee before us has been that assessments have already been made in respect of these two beneficiaries, including the share income from the Trust, and as such, the Department is barred from reopening the assessments of the assessee-trust, for the purposes of making a direct assessment on the Trust in terms of section 161(1A) of the Act. The details of the intimations sent under section 143(1)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Personal income + Personal income + the return share from the share from the income of the trust income of the trust consisting of pro- consisting of Pro- perty income and perty income and interest receipts interest receipts. (3) Manner in which Assessment under section Intimation dated Assessing Officer 143(3) including assessee's 13-1-1994 accept- dealt with the return share from the trust income ing the income. made on 8-3-1995. (Appeal filed against certain mistakes in assessment order. Assessment set aside for de novo assessment vide dated 18-12-1995. No further order by the Assessing Officer) Assessment year 1993-94 (1) Date of filing of 31-5-1994 31-5-1994 return (2) Income declared in Personal income Personal income + the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery by itself. It only makes it clear that sections 160 to 165 do not bar the direct assessment of the person on whose behalf or for whose benefit the income is receivable or the recovery from such person of the tax payable thereon, provided that is permissible under any other provisions of the Act. Even so, since the word used in section 166 is "receivable", it cannot apply to a discretionary trust, for it cannot be said that the income thereon is "receivable" for one or more beneficiaries it being left to the discretion of the trustees whether or not the income should be distributed to one or more of the beneficiaries or not at all. But that is not to say that the beneficiary of a discretionary trust, because he does not fall within the ambit of section 166, may not be assessed upon income received by him and tax recovered from him thereon if that is permissible under any other provisions of the Act for section 166 is merely clarificatory.... Section 5 of the Act defines the total income of any person to include income received by him or received on his behalf or which accrues or arises to him. A person may be directly assessed in respect of such income. The income of a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case inasmuch as the Assessing Officer has the option of framing the assessment either on the beneficiaries direct or on the trustees, the ratio of the decision of the Apex Court in the case of Ch. Atchaiah does not apply. He also clarified that even section 161(1A) does not stipulate that an assessment has to be made on the Trust adopting its status as AOP as done for all the three years, by the Assessing Officer in this case. It only stipulates that the income in respect of which a representative assessee is liable, shall be charged at the maximum marginal rate. According to him, section 161(1A) does not stipulate that the entire income of the Trust can be brought to tax in the hands of the trustees in their capacity as the representative assessee at maximum marginal rate. Separate assessments on the representative assessees have to be made in respect of the incomes of each of the beneficiaries, applying maximum marginal rate. So, it is conceded that at the most, the Assessing Officer could have reopened the assessments framed on the beneficiaries and charged the shares income from the trust at the maximum marginal rate. 9. We are of the view that the assessee de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Hon'ble Kerala High Court in Dr. David Joseph's case and also the decision of the Tribunal (TM) in Mirje Family Trust's case, to which one of us was a party. In this decision of the Tribunal at page 46 of the Reports (73 ITD), it was held that the decision of the Apex Court in the case of Ch. Atchaiah is applicable only in a situation where there is no option for the Department to proceed against either of two or more entities and the assessment had been made initially on the wrong person. As per the relevant portion of the head-note of this decision, the Tribunal held in a similar situation, as under- "Section 166 read with sections 161 and 164, gives a clear option to the Assessing Officer to proceed against either the beneficiaries or the trust. When the amounts are credited to the accounts of the beneficiaries, they become liable to be assessed. It was not the case of the department that the incomes from the trust on which the beneficiaries had been assessed in the respective years had not been received by them or that they had not been even credited to their accounts in the books of the trust. So it must be held that the assessments on the beneficiaries had be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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