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TMI Blog1982 (7) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... t'), in regard to its income derived by way of dividend and interest. The ITO rejected the assessee's claim for deduction under section 80L on the ground that the assessee having regard to its status is not eligible for such deduction and his action has been upheld by the AAC. Aggrieved by his order, the assessee in each case is in further appeal before the Tribunal. 4. The dispute in this case turns entirely on the construction of the provisions of section 80L and the determination of the status of the assessee, as no other facts or figures are disputed. Before we refer to the submissions of the parties and consider them, we may as well refer to the provisions of section 80L which states that where the gross total income of an assessee, being (a) an individual, or (b) a Hindu undivided family, or (c) an association of persons or a body of individuals consisting only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu, includes any income by way of certain items stated in sub-clauses (i) to (ix), there shall, in accordance with and subject to the provisions of this section, be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and wife, etc.' only govern 'body of individuals' and not an association of persons. It is argued that the determination of status should be with reference to the beneficiaries and the beneficiaries in the present case cannot be regarded as an association of persons according to the test laid down by the Supreme Court and consequently the beneficiaries should be regarded as one unit and the assessment be made in the status of an individual, with the result that the relief contemplated by section 80L is available to the assessee. Reliance was also placed on behalf of the assessee on the order of the Tribunal, Bench 'D', Madras dated 30-6-1980 [IT Appeal Nos. 790 and 791 (Mad.) of 1979] in the case of Venu Suresh Sanjay Trust and other similar trusts. 6. The learned departmental representative supported the rejection of the assessee's claim for deduction under section 80L contending that the real status that should be held to be applicable and should have been adopted in this case is the status of 'body of individuals' although the ITO has stated the status in the assessment order as association of persons because it is pointed out that the rate of 65 per cent has been adopted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 555 was considering such a question. The case of course arose under the provisions of the Wealth-tax Act and the sections that came to be considered are sections 3, 21(1) and 21(4) of that Act. It was noticed in that decision that section 21(1) of the Wealth-tax Act is analogous to section 41(1) of the Indian Income-tax Act, 1922, and the only difference was whereas section 21(1) of the Wealth-tax Act deals with assets, section 41(1) of the Indian Income-tax Act, 1922, deals with income and, therefor, decisions under section 41(1) of the Indian Income-tax Act, 1922, are relevant for considering the provisions of section 21(1) of the Wealth-tax Act. The nature of assessment on a trust under the current Act contained in section 164 are substantially the same as that governed by section 41(1) of the Indian Income-tax Act, 1922, and, therefore, the observations of the Supreme Court in this case are quite relevant for determining the issue before us. The first principle stated in regard to an assessment on a trustee is that the assessment should be made in accordance with the provisions of section 21(1) of the Wealth-tax Act (section 161 or 164 of the Act in the present case). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are held were an individual in a case where the shares of the beneficiaries were not determinate or known. In the Act, however, the concept of fictional beneficiary introduced in section 164(1) is somewhat different. It provides that the tax governed by the provisions of that section 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 65 per cent, whichever course would be more beneficial to the revenue. It was the submission of the learned counsel for the assessee that the fictional status declared in clause (i) as an association of persons is only for the purpose of determining the amount of tax payable and not for the purpose of determining the status making the assessment, which must be governed otherwise than by reference to this provision. According to him, the only status that can be attributed in the present case where the shares of the beneficiaries are not determinate or known is that of 'individual'. This submission of the learned counsel for the assessee is not, however, directly supported by the decision of the Supreme Court in the case of Trustees of H. E. H. Nizam's, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered, therefore, is as to the status of the assessee when the assessment is sought to be made, as in the present case, determining the rate of tax at 65 per cent. Since in such a case there is no indication of a fictional beneficiary for adoption of the status with reference to such beneficiary, we have to go by the general law otherwise applicable for determining the status. In the present case, when there are more beneficiaries than one and when their shares are not determinate or known, the only two remaining status that has to be adopted are, namely, the status of individual or the status of body of individuals ? The status of association of persons is ruled out not only by the implication of section 164(1), clauses (i) and (ii), by adoption of the rate of tax at 65 per cent by the department, but also because the beneficiaries cannot be said to form an association of persons judged by the tests laid down in a number of decisions of the Supreme Court starting with CIT v. Indira Balkrishna [1960] 39 ITR 546 because it cannot be said that the beneficiaries have joined together in a common purpose or common action the object of which is to produce income, profits or gains. As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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