TMI Blog2000 (9) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... 1993. The same were not disinvested or disposed of by March 31, 1993. The assessee claims that it was entitled to hold the said shares up to March 31, 1993 ; that, they were required to disinvest on and after April 1, 1993. In this appeal, we are concerned with the accounting year 1992-93 relevant to the assessment year 1993-94. The previous year, ended on March 31, 1993. The Department contended that the assessee was required to dispose of the above shares by March 31, 1993, and since they failed to do so, the exemption granted to the trust stood withdrawn for breach of section 11(5) of the Act. In this group of appeals, we are not concerned with the question as to whether the maximum marginal rate of tax is leviable on the entire income of the trust. This part of the question calls for consideration in the next group of appeals with which we are not concerned at this stage. Arguments on question No. 2 : Mr. Desai, learned senior counsel for the Department, contended that the assessee was a public charitable trust ; that section 11(5) of the Act deals with various modes of investing or depositing the money referred to in section 11(2)(b). He submitted that under section 13(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o March 31, 1993, whereas, according to the Department, the shares were required to be disposed of by March 31, 1993, and before April 1, 1993. He contended that clause (iia) fell within the proviso to section 13(1)(d). He contended that under the said proviso, the Legislature has clearly laid down the period up to which a trust is allowed to hold on to impermissible investments. He contended that the said proviso does not contemplate disposal or disinvestment of such investments. He contended that a reading of the said proviso shows that the trust was required to dispose of the asset only after March 31, 1993, and, therefore, the Department erred in coming to the conclusion that the assessee-trust had violated section 11(5) by not disposing of the shares by March 31, 1993. He urged that under the proviso, the assessee was required to dispose of the asset in the accounting year commencing from April 1, 1993. They were not required to dispose of the assets by March 31, 1993. Hence, he contended that the said proviso permitted the assessee to hold on to the impermissible investments up to March 31, 1993, in this case. He further contended that if a trust received shares or acquired s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t day of March, 1983, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983 ; or (iii) any shares in a company (not being a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act) are held by the trust or institution after the 30th day of November, 1983 : Provided that--- . . . (iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not Held by the trust or institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1993, whichever is later ;" Reading section 13(1)(d) of the Act, it is clear that the said section refers to various circumstances under which exemption provided to charitable trust or institution is forfeited, viz., if the funds of the trust are invested after February 28, 1983, otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from impermissible investments to permissible investments by the cut-off date then the trust would not lose the exemption. Keeping in mind the above purpose of the proviso to section 13(1)(d) we do not find any merit in the contention advanced on behalf of the assessee that it was entitled to hold on to such impermissible investments up to March 31, 1993. If this underlying object is kept in mind, it is clear that the assessee-trust ought to have disinvested the shares by March 31, 1993. In fact the amendment to section 13(1)(d)(iia) by the Finance Act, 1992, is expressly made applicable from April 1, 1992. The reason is obvious, viz., to give opportunity to public trusts to disinvest on or before March 31, 1993. If the contention of the assessee is accepted, it would defeat the legislative purpose behind the amendment to the said proviso by the Finance Act of 1992. In fact, the very object of enacting the Finance Act, 1992, was to extend the time-limit from March 31, 1992, up to March 31, 1993, so that the assessees could disinvest by that date. Reading of the proviso makes it very clear that it deals with disposals/disinvestment of the assets. We do not find any merit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents otherwise than in one or more of the forms or modes specified in section 11(5) of the Act, which had been made before March 1, 1983, were allowed to change their pattern of investment to that specified in section 11(5) before November 30, 1983. The assessee-trust and so also many other trusts changed their investment pattern between April 1, 1983, and November 30, 1983. They were denied the benefit of exemption for the assessment year 1983-84 in view of section 13(1)(d). The court considered the issue and decided that the provisions of section 13(1)(d) would be applicable from the assessment year 1984-85 and not from the assessment year 1983-84. This was also in consonance with the circular issued by the Board. Hence, the judgment of the Calcutta High Court in the case of CIT v. Deoria Public Charitable Trust [1992] 196 ITR 110 has no application to the facts of the present case. Moreover, in the said judgment, the question of interpretation of proviso (iia) did not arise for consideration. Hence, the said judgment has no application to the present case. Accordingly, question No. 2, is answered in the affirmative, i.e., in favour of the Department and against the assessees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Act. He contended that the assessee-trust had admitted in the form of its return that it is an association of persons. In the circumstances, the Tribunal erred in coming to the conclusion that the assessee was assessable as an individual. He contended that the judgment of the Division Bench of this court in CIT v. Marssons Beneficiary Trust [1991] 188 ITR 224, has no application to the facts of this case. He contended that the said judgment was under section 161 and section 164 of the Income-tax Act. He contended that the said two sections cannot apply to a public trust. He contended that section 80L applied to individuals. That the said section did not apply to association of persons. Hence, the assessee was not entitled to claim deduction under section 80L. He contended that under identical circumstances, in the case of CIT v. G. B. J. Seth and C. O. J. Seth [1987] 166 ITR 604, the Madhya Pradesh High Court has held that since the assessee, in that matter, had never disputed their status as an association of persons, the Tribunal was right in assessing the assessees as an association of persons. He contended that, in this matter also, the assessees filed their, return as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares in the trust were not definite. He denied the benefit of section 80L. He relied upon section 164. On appeal, the first appellate authority accepted the plea of the assessee. On appeal, the Tribunal found that section 164 was not an independent section. That, section 164 did not determine the status of an assessee. That it merely imposed a liability at the same rate of tax as an association of persons. Therefore, the Tribunal found that the assessee was the representative assessee and that such representative assessee has to be an individual or an artificial juridical person equated with an individual. The trustee acts for each individual beneficiary. He is responsible for the tax liability of such an individual. Therefore, the assessment is to be made on the trustee as an individual in his representative capacity. The fact that the beneficiaries are a group of individuals does not mean that the liability of the assessee is of an association of persons. This judgment of the Tribunal was upheld by the Madras High Court in the above judgment. The Madras High Court held that the determination of the total income depended on the various provisions of the Income-tax Act which too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trust. They do not derive their authority from the beneficiaries. They derive their authority from the settlor under the deed of trust. The beneficiaries are merely recipients of the income earned by the trust. They have not come together for a common purpose to earn income. Therefore, they cannot be considered as an association of persons or a body of individuals. In the said judgment, the Division Bench of this court rejected the contention of the Department that the beneficiaries constituted an association of persons. The trustees did not carry on business on behalf of the beneficiaries just as the receivers. The beneficiaries are merely recipients of the income earned by the trust. Accordingly, it was held that the trustees were not assessable as an association of persons. In view of the above judgments, the Tribunal was right in coming to the conclusion that the assessee-trust ought to have been assessed in the status of an individual. The judgment of the Madhya Pradesh High Court in the case of CIT v. G. B. J. Seth and, C. O. J. Seth [1987] 166 ITR 604 has no application to the facts of this case. In that matter, the assessees were executors of the will. They were assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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