TMI Blog2001 (10) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... thought it was in contravention of section 50 of the Indian Trust Act being payment without any express provision in the Trust deed ? 2. We have heard Mr Akil Kureshi, learned counsel for the revenue. Though served, none appears for the respondent-assessee. 3. Assessee-Sona Family Trust filed its return through one of its trustees in his capacity as a trustee. There were two other trustees. The Income Tax Officer treated them as an association of persons and assessed the income of ₹ 12,27,975/- as the income of the association of persons. The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee and the Tribunal confirmed the said decision relying on the decision of this Court in KT Doctor vs . CIT (Guj.) [1980]124ITR501(Guj) where this Court took the view that when the trustees are authorized to start any business, the business so done must be taken to be the business of the trust and the business itself would be property held under the trust. The trustees carried on the business and, therefore, the income of the business must be held to be the income of the trust. K.T. Doctor's case was carried in appeal to the Supreme Court [1998]2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed also included the following clause :- The Trustees shall hold and stand possessed of the said interest, right, title, benefit hereby settled in the said amount of ₹ 1,000/- (rupees One thousand only) and all other moneys, shares of joint Stock Companies, donations, contributions and all property or properties moveable or Immovable which may hereafter be paid, received or transferred to them and the investment for the time being representing the same and rents, income, profits, dividends and interest hereinafter referred to as the TRUST FUND upon the Trust with and subject to the powers and provisions herein contained and concerning the same i.e. to say :- a) ... ... ... ... to make all repairs and additions and alterations as may be deemed necessary or expedient by the Trustees in respect of any immovable property or properties, ownership flats, sheds or blocks in industrial estates belonging to the Trust Fund and pay all costs, charges and expenses thereon. The Assessing Officer observed that the trust deed could not have given such a midas touch to Mr Tilakraj and his two brothers so that whatever gets the benefit of their associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed in the balance-sheet. (v) M/s Saroj Synthetics took certain plant and machinery worth ₹ 4.58 lacs on hire from Pratik Prints by paying hire charges of ₹ 3,72,000/- in the assessment year. Apart from the fact that the hire charges of ₹ 3.72 lacs (₹ 31,000/- per month) for machinery worth ₹ 4,58 lacs are fairly high charges, Pratik Prints is a proprietary concern of Smt. Rajbharati, wife of the brother of Mr Tilakraj Sahani. (vi) The profits of M/s Saroj Synthetics of ₹ 14.74 lacs have been reflected in the accounts after depreciation and investment allowance reserve. After certain deductions, the net income of M/s Saroj Synthetics is ₹ 13.21 lacs and after deducting expenses, the net income of ₹ 12.27 lacs has been shown in the return of income of M/s Saroj Synthetics. 5.3 After considering all the aforesaid facts, the Assessing Officer held that the business carried on in the name and style of M/s Saroj Synthetics is the business of M/s Tilakraj Sahani, Rajkumar Sahani and Ajablal Sahani which is being carried on by them in their individual capacities and the three persons doing business constitute an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is matter i.e. the aforesaid amendment of section 161 made by the Finance Act, 1984. That amendment, if applicable, would have decided this issue in favour of the Revenue. However it is applicable only with effect from 1.4.1985. The decision of the Hon'ble Gujarat High Court in the case of K.T. Doctor (Supra) is of January, 1980 and so it was already four years old when the amendment was made. Inspite of that the legislature has chosen to give the amendment only a prospective effect. Further, in the Budget Speech of Finance Minister for 1984-85 the following paragraph relevant to the said amendment occurs : `...... I would like to refer to a tendency noticed to create private trusts which carry on business. To curb such practice, I propose to provide that where such trusts have profits and gains of business, the entire income of the trust will be charged to tax at the maximum marginal rate, ....' (Ref. (1984) 146 ITR Statues pg. 68) Thus the Finance Minister who introduced the amendment clearly chose not to make the amendment retrospective. Therefore we cannot accept the argument of the learned D.R. That would be contrary to the clear will and ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine the plea of device of a trust to start/run the business with a view to avoiding payment of taxes. 9. In view of this principle emerging from the decision of the Supreme Court in CIT vs . KT Doctor [1998]230ITR744(SC) which was applicable even for the assessment years 1972-73 and 1973-74, we are of the view that since the Tribunal did not at all go into the correctness or otherwise of the finding given by the Inspecting Assistant Commissioner that the three members had adopted the device of a trust for carrying on business and avoiding payment of taxes and since the examination of this question involves detailed examination of facts, we are of the view that this Court need not answer question No. 1 at this stage and that the matter deserves to be remanded to the Tribunal for examining the question whether M/s Tilakraj, Rajkumar and Ajablal Sahani had adopted the device of a trust for carrying on the business in the name and style of M/s Saroj Synthetics with a view to avoiding payment of taxes. 10. The learned counsel for the revenue is not in a position to state anything about the assessment years prior to 1981-82, but submits that in any view of the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e afresh as above. Mr Kureshi, learned counsel for the revenue did state that he was not aware about the orders passed pursuant to the aforesaid order of remand or any further litigation. 11. We agree with the learned counsel for the revenue that in the peculiar facts and circumstances of the case, when the Assessing Officer has given such elaborate reasons for holding that the trust in question was a device, even while we express no opinion on merits, we are of the view that since the Tribunal had not examined the matter in details to ascertain whether there was any colourable device or a sham for avoiding payment of taxes, the revenue has certainly made out a case for remanding the matter to the Tribunal for examining the controversy afresh after considering the decision of the Supreme Court in CIT vs. K.T. Doctor 210 ITR 744. 12. As far as question No. 2 is concerned, the CIT(A) as well as the Tribunal had held in favour of the assessee on the ground that in the previous years deduction under Section 80J was allowed and, therefore, in view of the decision of this Court in Saurashtra Cement Chemical Co. Ltd. [1980]123ITR669(Guj) , the question cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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