Assessment of discretionary trusts under section 164/166 - Correct procedure therefor

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..... ction No. 45/78/66/ITJ(5), dated 24-2-1967 [printed here as Clarification 2] on the subject of assessment made under section 41(2) of the 1922 Act/section 166 of the 1961 Act. In spite of the clear instructions to the effect that neither section 41 which give an option to the department to tax either the representative assessee or the beneficial owner of the income nor the parallel provisions of t .....

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..... eneficiary or the trustee). Circular : No. 157 [F.No. 228/8/73-IT (A-II)], dated 26-12-1974. CLARIFICATION 2 1. Recently an interesting case came to the notice of the Board. The assessee was one of the beneficiaries in the trust. The shares of the beneficiaries were known and determinate. The Income-tax Officer raised an assessment on the trustees taxing the income of the trust in their hands a .....

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..... e approach of the Income-tax Officer is not correct. Section 41 of the 1922 Act (corresponding to section 166 of the 1961 Act), gave an option to the department to tax either the representative assessee or the beneficial owner of the income. Once the choice is made by the department to tax either the trustee or the beneficiary, it is no more open to the department to go behind it and assess the ot .....

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