9911796707
TMI Blog2002 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... e-trust under section 161 of the said Act on the respective share of each of the beneficiaries mentioned in clause 3(B)(i)(b) of the trust deed and Schedule II thereto. In the trust deed, it was specifically stipulated that the trust was a specific trust and in clause 3(B)(i)(b), it was provided as under: "It is hereby agreed and declared between the parties to this deed of the trust that the trustees shall stand and possessed the balance 1/2 part of the income which shall be receivable on behalf of and for the benefit of the persons mentioned in Schedule II herein attached to this trust deed, and shall be divided as per share specified against each of them, i.e., the beneficiaries mentioned in Schedule II herein attached, but it is specifically made known that the said income is to be accumulated and not to be paid to the said beneficiary up to the period of 19 years from the date of this presents, and should be kept as separate specific corpus in the name of each of the said beneficiary." Schedule II which is referred to in the above clause shows the names of the beneficiaries of the assessee-trust of the 23 beneficiaries, serial Nos. 1, 2, 3, 22 and 23 are Jayantibhai Chhab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arent from the record. It was also submitted that the Income-tax Officer intended to make further inquiry in respect of each of the 23 beneficiaries and, therefore, the alleged mistake was not apparent from the record. The Income-tax Officer held that there was no force in this contention, because, there was no question of holding any further inquiry in respect of the income of 23 beneficiaries. According to the provisions of the Act, the total income of the beneficiaries had to be taken into account for the purpose of ascertaining the rate of tax that should be applied to the share income of the beneficiaries from the trust. Thus, there was a clear mistake of non-application of the correct rate of tax to the share income of each of the 23 beneficiaries which can be rectified under section 154 of the said Act. One more contention was raised before the Income-tax Officer which was to the effect that 50 per cent. of the income of the trust amounting to Rs. 3,51,745 was to be accumulated for a period of nineteen years from the date of the trust deed and, therefore, the 23 beneficiaries had no vested interest in the said income and since it was not paid to them, it lost its characteris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of the trust, as there was no mistake apparent from the record, allowed the appeal. The Revenue appealed against the order of the Commissioner of Income tax (Appeals) before the Tribunal and the Tribunal accepted the stand of the Revenue that since the assessee-trust had accepted the order originally passed by the Income-tax Officer taxing 50 per cent. of the income of the trust in respect of the 23 beneficiaries mentioned in Schedule II, it was too late in the day for the assessee to urge that even the assessment as originally framed was bad in law. It was held that the only issue which was required to be decided was whether the Income-tax Officer was justified in raising the levy of tax in the manner he did. The Tribunal held that the provisions of section 161 of the Act were clear and unambiguous, and that by miscalculating the rate applicable as per that provision, a mistake was committed which could be rectified under section 154 of the Act. It was, therefore, held that the Commissioner of Income-tax (Appeals) was not justified in deciding the appeal in favour of the assessee. The rectification order was, therefore, restored. Learned counsel for the assessee-trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it could not be taxed. That was a decision in the context of the provisions of section 64(v) of the Act (prior to amendment in 1971) prescribing that the income from a transferred asset can be included in the income of the transferor, provided under the transfer, the benefit of the income from such asset is immediately available or is deferred for the spouse or minor children of the settlor. It was held that if the child, for whom the benefit is provided attains majority, it is clear that the provision contained in clause (v) would not be attracted on the plain reading of clause (v) itself. Otherwise, the Legislature would not have expressed itself in the manner in which it did by providing that income from such assets is for the immediate or deferred benefit of his or her spouse or minor child. The court held that where the benefit under the transfer is to be deferred beyond the minority of the child, section 64(v) will not be attracted. (c) Reliance was placed on the decision of the Supreme Court in CIT v. M. R. Doshi [1995] 211 ITR 1, by which the appeal against the last mentioned decision was dismissed by the Supreme Court. The Supreme Court noted that the cumulative effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corrected by way of rectification. The expression "record" has to be construed and understood in the context in which it appears and in the context of the expression "apparent from the record" in section 154, "record" would mean the record of the case comprising the entire proceedings including documents and materials produced by the parties and taken on record by the authorities which were available at the time of passing of the order which is the subject matter of proceedings for rectification. The authorities cannot go beyond the record and look into fresh evidence or materials which were not on record at the time the order sought to be rectified was passed. (f) The decision of the Supreme Court in T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50, was cited for the proposition that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. (g) The decision of the Supreme Court in M.K. Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive assessee in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. It was contended that when the income going to the share of these beneficiaries was assessed in the hands of the trust, the rate that should have been applied was the rate applicable to the total income of each of the beneficiaries including the income that went to their shares, It was submitted that there was no question of making any further inquiry or assessment, because, the assessment orders of the beneficiaries were just to be seen with a view to total up their respective income for the purpose of ascertaining the rate that should have been applied while assessing their income in the hands of the trust. It was further contended that the circular of the Central Board of Direct Taxes which was sought to be relied upon was not applicable to the instant case since it related to exercise of option and not to the question of rectification. It was submitted that, in any event, the circular of the Central Board of Direct Taxes cannot govern the quasi-judicial exercise of powers by the authorities, nor can it be enforced against the interpretation given b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich declared the law on the question arising for consideration. (d) The decision of this court in Induprasad Chunibhai Patel v. Central Board of Direct Taxes [1993] 200 ITR 688 was cited for the proposition that the Central Board of Direct Taxes is not competent to give directions regarding the exercise of judicial powers by the subordinates. (e) The decision of the Madras High Court in Estate of Khan Sahib Mohd. Oomer Sahib v. CIT [1958] 33 ITR 767 was cited to point out that, in the context of section 41(1) of the Indian Income-tax Act, 1922, it was held that the liability imposed by section 41(1) on a receiver appointed by court is that the tax shall be levied upon and recoverable from such a receiver in the like manner and to the same amount as it would be leviable upon and recoverable from the person or persons on whose behalf such income, profits or gains are receivable. (f) The decision of the Assam High Court in Safiullah Wakf Estate v. CIT, AIR 1959 Assam 191 was cited for its proposition that the measure of the liability of the trustee or other representative under section 41(1) of the Act of 1922, was the liability of each beneficiary and the assessment should be at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct relating to the computation of his total income and the manner in which the income amount was to be computed. When the Income-tax Officer chooses to assess the person represented in respect of the income of the trust property in the name of the trust, the computation of the total income of the person represented is to be done on the basis of the provisions which would apply to the computation of his total income while making such assessment. The assessment of the trustee would have to be made in the same status as that of the beneficiary whose interest is sought to be taxed in the hands of the trustees. The income of all these beneficiaries was assessed in the hands of the trust under section 161(1) and there was no direct assessment made in the hands of the beneficiaries. Therefore, the total income of the beneficiary, i.e., the share of income of the trust receivable by such beneficiary under the deed as well as the other income of the beneficiary which would make up his total income was required to be taken into account for the purpose of ascertaining the rate at which the total income of such beneficiary was to be taxed. Admittedly, when the first assessment order was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the beneficiary's income for the purpose of working out the total income even for the rate purposes amounted to an assessment of the income which was already assessed. It was submitted that, in view of that circular, there was no mistake apparent from the record committed by the Income-tax Officer. It was finally submitted that these were highly arguable questions and therefore, no rectification should be allowed. We first take up the question whether the Central Board of Direct Taxes circular which according to the Tribunal was not applicable to the assessee's case has any bearing on the question of rectification. That circular has been reproduced in the order of the Commissioner of Income-tax (Appeals) and also appears at page 5600 of Volume III of Chaturvedi and Pithisaria's Income Tax Law, fifth edition. The circular gives the background in which it was issued. The Board came across a case where the assessee was one of the beneficiaries in the trust in which 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 at the appropriate rate and to the amount which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed frivolity there may be in discussing a point, it would not raise an obvious issue to the level of a debatable issue. In our opinion, this circular is wholly irrelevant and has no bearing on the question of rectification and has been only referred to with a view to cloud the issue for the purpose of urging that no rectification ought to be done on such a contrived debate. The other aspect which is sought to be raised, namely, that the income of the beneficiaries which was receivable by them under the trust deed was to be paid to them only after nineteen years, and, therefore, since it was to be accumulated, it was not income, was never raised at the time of the assessment and as held by the authorities below, it could never have been raised, as there was no application for rectification made on this count by the assessee-trust. The show-cause notice for rectification issued by the Income-tax Officer was limited only to the question of applying the correct rate of tax which undisputedly would be the rate on the basis of the total income of the beneficiaries which aspect emanating from the provision of section 161(1) was overlooked at the time of the assessment. Reliance on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
