TMI Blog2002 (9) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... essment is reasonable, supported by valid materials and sustainable in law? - 4. Whether the Appellate Tribunal's view that it is not possible to make an assessment in the status of association of persons/body of individuals is reasonable, supported by valid materials and sustainable in law?" - The questions referred to us are, therefore, answered in favour of the assessee, and against the Revenue with the clarification with regard to question No. 3 that the accrual was to the trust though not to the beneficiary in that year. - - - - - Dated:- 12-9-2002 - Judge(s) : R. JAYASIMHA BABU., K. RAVIRAJA PANDIAN. JUDGMENT The judgment of the court was delivered by R. JAYASIMHA BABU J.-This reference is at the instance of the Revenue. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the net interest earned from investments made by the trustee. The trust deed also provided that the corpus of the trust shall not be divided or distributed among the beneficiaries until the duration of the trust which was to be for a period of fifteen years, or sooner, if all the beneficiaries unanimously agreed to terminate the trust even before the expiry of fifteen years. Out of the interest income of the trust, the beneficiaries were to receive only one-third and the balance was to be accumulated. The trustees were also empowered to carry on business and invest the funds of the trust and loss, if any, was to be deducted from the corpus. For the assessment year 1983-84, the trustees filed a return of income on November 22, 1985, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by a duly executed instrument in writing whether testamentary or otherwise including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913, receives or is entitled to receive on behalf, or for the benefit, of any person, such trustee or trustees will be the representative assessee. Section 161 of the Act sets out the extent of liability of the representative assessee. Section 161(1) of the Act provides that, "Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. The court quoted with approval the observations made by Chagla C.J., in the case of Vaidya [1958] 34 ITR 187 (Bom), that: "The basic idea underlying section 41, and which is in conformity with principle, is that the liability of the trustees should be co-extensive with that of the beneficiaries and in no sense a wider or a larger liability. Therefore, it is clear that every case of an assessment against a trustee must fall under section 41, and it is equally clear that, even though a trustee is being assessed, the assessment must proceed in the manner laid down in Chapter III." The apex court in the case of Nagappa [1969] 73 ITR 626 observed that: "The Legislature, while enacting the new Act, to avoid doubts has given effect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovered from him thereon only under and in the manner provided by sections 160 to 166 of the Act." Thus, though section 5 of the Act refers to the total income of the person whose income is being assessed and the charge of income-tax under section 4 of the Act is on the total income, what can be taxed in the hands of a representative assessee is only the income which the beneficiary can be said to have received, or be deemed to have received in India or in whose favour income has accrued or arisen or deemed to have accrued or arisen outside India during the relevant year. Though the trust may receive the income, the extent to which the same can be taxed is the extent to which tax would be leviable and recoverable from the beneficiary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th which we are concerned, having regard to the terms of the trust, the beneficiaries had no right to receive any part of the corpus of the trust to which the income received by the trustees by way of prize money on the lottery ticket was required to be credited. The right to the beneficiary was only to share in the division of that corpus at the end of the fifteen year period or sooner, if all the beneficiaries unanimously agreed to terminate the trust. The beneficiaries could not have been assessed to tax in respect of any part of this prize money in the year in which that money was received by the trust. The prize money received by the trustees on the lottery tickets not being an amount in which the beneficiaries, whose identities are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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