9911796707
TMI Blog2004 (9) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ,690. The case was selected for scrutiny and a notice was issued under section 143(2) of the Act to the assessee. The assessee claimed the status of "resident individual". However, the assessee was assessed in the status of "AOP (Trust)" and the maximum marginal rate of tax was applied. Deduction claimed under section 80L was disallowed. Application under section 154 filed by the assessee, inter alia, requesting for being assessed in the status of an "individual" was disallowed vide order dated March 21, 1997. During the course of hearing before the Assessing Officer various judgments were cited. It was also pointed out that the assessee was assessed in the status as an "individual" in the past. The Assessing Officer did not accept the contention and made the assessment order on July 29, 1997, against which the appeal was preferred by the assessee being Appeal No. 161 of 1997-98 before the Commissioner of Income-tax (Appeals) who allowed the appeal against which the Revenue preferred an appeal before the Income-tax Appellate Tribunal being ITA No. 5426/Delhi of 1998 for the assessment year 1995-96 which was dismissed by the Tribunal by an order dated July 3, 2003. In all the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be noted that the Supreme Court in CIT v. Indira Balkrishna [1960] 39 ITR 546 while considering what constitutes an "association of persons" held that the words "association" means "to join in common purpose" or "to join in an action". Therefore, "association of persons" as used in section 2(31)(v) of the Act means an association in which two or more persons join in a common purpose or common action. The association must be one, the object of which is to produce income, profits or gains. In Suhashini Karuri v. WTO [1962] 46 ITR 953, the Calcutta High Court had an occasion to examine a somewhat similar aspect and has held that joint trustees must be taken to be a single unit in law and not an "association of persons" and "there is nothing wrong in treating such a unit as an individual". In CIT v. Sodra Devi [1957] 32 ITR 615, the Supreme Court held that the word "individual" does not mean only a human being, but is wide enough to include a group of persons forming a unit. In Mammad Keyi v. WTO [1966] 60 ITR 737 the Full Bench of the Kerala High Court held (Velu Pillai J. dissenting) that the term "individual" in section 3 of the Wealth-tax Act includes a Moplah Muslim family which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the trust is created while carrying on business exclusively for the benefit of persons employed in the business. Therefore, clause (iv) of the proviso to sub-section (1) of section 164 of the Act would be attracted and if that is so, the question arises as to how total income after computation of such trust is to be charged. It is in this background the submission made by learned counsel that in all cases the representative assessee must be assessed at the maximum marginal rate is required to be considered and reliance is placed on the decision of the apex court in Gosar Family Trust v. CIT [1995] 215 ITR 55. In that case the apex court pointed as under: "The sub-section contemplates charging of tax at the maximum marginal rate in two situations, viz., (a) where any income, in respect of which the trustees (omitting unnecessary categories of persons) are liable to be assessed as representative assessees, is not specifically receivable on behalf or for the benefit of any one person, and (b) where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown. The first proviso, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect which the court considered at page 62 is as under: "The trustees are expressly entitled to deposit the monies of the trust fund in any firm or joint stock company in which any one or more of them is/are partners/directors/shareholders, which means that the trustees could as well have decided not to distribute a single pie but invest all the income and corpus fund for the full period of eighteen years in their own firms and concerns. No less surprising is the provision that the trust started with a mere rupees five hundred and the trustees have been given absolute discretion not only in the matter of distribution of income but also in the matter of the very continuance of the trust. At any time after the expiry of two years they can put an end to it if they so choose." At page 61 the court pointed out that "If, in case, the trustees do not choose to put an end to the trust, even then the maximum life of the trust is eighteen years only". Thus, it is in view of these peculiar facts and circumstances the court held that the trust income is to be charged at the maximum marginal rate and the assessee is not entitled to the concessional rate of taxes. While in the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether profits should be assessed in the hands of the receivers in the status of an "association of persons". The Supreme Court held that they were only representative assessee and the fact that there were three receivers did not make them an association of receivers. The three receivers jointly represented the real owners. The Supreme Court, after referring to its earlier decision in CIT v. Indira Balkrishna [1960] 39 ITR 546 observed that association of persons means an association in which two or more persons joined in a common purpose or in an action and as the words occur in a section which imposes a tax on income the association must be one, the object of which is to produce income, profits or gains. In the case of trustees of a discretionary trust it cannot be said that they have joined in a common purpose or common end and the purpose of association is to earn profits or gains. They became trustees of the trust not because they have mutually agreed to be trustees but because they have been appointed as such under the trust deed. By no stretch of imagination it can be said that they have joined together in common for the purpose of carrying on an activity which would produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court referred to its earlier decision in CIT v. Sodra Devi [1957] 32 ITR 615 wherein it is held: "the word 'individual' has not been defined in the Act (Indian Income-tax Act, 1922) and there is authority for the proposition that the word 'individual' does not mean only a human being but is wide enough to include a group of persons forming a (natural) unit". This decision, though not directly on point, does lay down that the term "individual" as used in the Income-tax Act does not mean a single living human being but would include in its ambit a body of individuals constituting a unit for the purposes of the Act. The Madras High Court in CIT v. Venu Suresh Sanjay Trust [1996] 221 ITR 649 examined the question "whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to deduction under section 80L". Even while agreeing with the view taken by the Department that the income computed in the assessee's case will be liable to tax under section 164(1) treating such income as total income by an association of persons, the court held that the benefit under section 80L of the Act would be available. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier part of the judgment. In the case of CIT v. Venu Suresh Sanjay Trust [1996] 221 ITR 649 the Division Bench pointed out that determination of total income depends on the various provisions of the Income-tax Act which takes into consideration the deductions to be provided under section 80L as well. The charge of tax comes into play after the income has been determined. The court pointed out that "in the present case, the trustee is an individual. His status, therefore, has to be adopted as that of an individual and from his individual income the assessee is entitled to deduction under section 80L of the Act. On the income so computed the tax has to be charged in view of the provisions contained in section 164(1) treating such income as if it was the income of an association of persons." In the case of Niti Trust v. CIT [1996] 221 ITR 435 (Guj), the Division Bench was called upon to decide the question of the assessee, a private discretionary trust and its liability under the provisions of section 112 of the Income-tax Act, 1961. In that case the assessee was assessed in so far as capital gain is concerned at 20 per cent, in accordance with the provisions of section 112(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, like where the decision is sub silentio, per incuriam, obiter dicta or based on a concession or takes a view which it is impossible to arrive at or there is another view in the field or there is a subsequent amendment of the statute or reversal or implied overruling of the decision by a higher court or some such or similar infirmity is manifestly perceivable in the decision. It must be remembered that it is a general policy in income-tax matters that whatever the view of the Bench at the time of hearing may be the Bench should follow the view taken by another High Court on the interpretation of the section. In the case of CIT v. Sarabhai Sons ltd. [1983] 143 ITR 473, 486, the Gujarat High Court observed that "Even though we may be persuaded to take a different view, we are not inclined to do so in view of the settled practice referred to in the decision of the Madras High Court and the decisions of the Bombay High Court and the Madhya Pradesh High Court adverted to above." However, on behalf of the Revenue, it was submitted that the decisions of the Gujarat, Calcutta and Madras High Courts are impliedly overruled. It may be noted that it is not the case of even the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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