TMI Blog1993 (11) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned and does not affect the status of the appellant. 1.3 The CIT (A) further failed to appreciate that the appellant cannot be treated as an association of persons In view of the fact that the essential element of an association of persons, viz., two or more persons joining in a common purpose or action with the object of producing income, is not present in the instant case. 2. 1 On the facts and circumstances of the case and in law, the CIT (A) erred in upholding the action of the Assessing Officer in not granting deduction u/s 80L. 2.2 The appellant prays that since the correct status of the appellant is individual as prayed for in Ground (I) above, the appellant would be consequentially eligible for deduction u/s 80L." 3. In the case of Maharashtra Scooters Employees' Welfare Fund Nos. 1 2, the order of the Dy. CIT (A) has been challenged and the deduction u/s 80L has been claimed. 4. These assessees before us are discretionary trusts settled by the companies for the welfare of its employees by way of financial assistance, providing residential housing facilities, educational assistance, to meet on hospital treatment, promote family planning etc. The employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the various Benches of the Tribunal in favour of the revenue. He also draws our attention to the decision of the Calcutta High Court in the case of Smt. Santimoyee Bose v. CIT [1969] 74 ITR 133. In particular, he draws our attention to the following observations of the Hon'ble High Court: "While there is good deal of force in Mr. Mitra's argument that joint decree holders like the plaintiffs in the present suit do not associate to produce the income, we are of the opinion that in view of the deeming provisions contemplated by the proviso to section 41, even though they do not associate to produce the income, if the person who is in actual receipt of the income fulfils the conditions mentioned in the main part of section 41(1) and if the share of the persons on whose behalf the income is received is indeterminate, then such income can be taxed as if it was an income of an association of persons even though, in fact, they are not an association of persons.............. under the proviso to section 41 of the Income-tax Act, 1922, even though the assessees did not associate or join in any endeavour or any purpose to produce the income, they would be deemed to be an association of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. It, therefore, appears that the said provision only prescribes the rate of tax and has no connection with the computation of income, which has to be done u/s 143(3) or section 144 of the Income-tax Act. Section 164, therefore, creates a fiction. It is settled law that the legal fictions are created only for some definite purpose and these must be limited to that purpose alone and should not be extended beyond that legitimate field. A legal fiction should no doubt ordinarily be carried to its logical end to carry out the purposes for which it is enacted, but it cannot be carried beyond that. For this proposition, we are well supported by the decision of the Supreme Court in the case of CIT v. Mother India Refrigeration Industries (P.) Ltd. [1985] 155 ITR 711 and State of Maharashtra v. Narayan Rao Sham Rao Deshmukh [1987] 163 ITR 31. 10. Applying the aforesaid principles to the fiction created in section 164(1), we are of the view that the said fiction has been created and, in fact, has to be restricted for determining the rate of tax to be levied on a trust. The said fiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a charitable or public religious trust, but not to a discretionary private trust dealt with by sub-section (1) of section 164. Section 164(1) only lays down the rate of tax applicable to a discretionary trust. It is not concerned with the manner of computation of total income. In fact, this section comes into play only after the income has been computed in accordance with the other provisions of the Income-tax Act, 1961. Since the determination of the status of an assessee is a part of the process of computation of income, it is necessary to look into the general principles for determining whether the status of the trustees of a discretionary trust can be taken to be as "an association of persons" or as "individual". It is now well-settled that the word "individual" does not necessarily and invariably always refer to a single natural person. A group of individuals may as well come in for treatment as an individual under the tax laws if the context so requires. The word "association" means "to join in any purpose" or "to join in action". Therefore, "association of persons" as used in section 2(31)(v) of the Income-tax Act, 1961, means an association in which two or more person ..... X X X X Extracts X X X X X X X X Extracts X X X X
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