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TMI Blog2025 (5) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in not appreciating that the appellant Trust was the only discretionary Trust under the WILL of Late Nathiben Kalidas Patel so that charging tax maximum Marginal Rate instead of normal rate was wholly illegal and unlawful. 2.2 That the in the facts and circumstances of the ld. CIT(A), ought not to have upheld the charging tax maximum Marginal Rate instead of normal rate on the total income of the appellant Trust was the only discretionary Trust under the WILL of Late Nathiben Kalidas Patel. 3.1 The ld. CIT(A) has grievously erred in law and or on facts in upholding that CPC was justified in making adjustment u/s 143(1)(b) of the Act." 3. At the outset itself, Ld. Counsel for the assessee stated that the solitary issue/grievance of the assessee is against the levy of tax in the case of the assessee, a trust created by WILL, at the Maximum Marginal Rate ('MMR') as opposed to slab rate applicable to it as prescribed by law, in the intimation made u/s.143(1) of the Act. Ld. Counsel for the assessee pointed out that while the assessee had filed return of income declaring income of Rs. 1,04,610/- and had determined no tax payable on the same by applying slab rate of taxes app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nknown (such income, such part of the income and such persons being hereafter in this section referred to as "relevant income", "part of relevant income" and "beneficiaries", respectively), tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate : Provided that in a case where- (i) none of the beneficiaries has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case of an association of persons or is a beneficiary under any other trust; or (ii) the relevant income or part of relevant income is receivable under a trust declared by any person by will and such trust is the only trust so declared by him; or (iii) the relevant income or part of relevant income is receivable under a trust created before the 1st day of March, 1970, by a non-testamentary instrument and the Assessing Officer is satisfied, having regard to all the circumstances existing at the relevant time, that the trust was created bona fide exclusively for the benefit of the relatives of the settlor, or where the settlor is a Hindu undivided family, exclusively for the benefit of the members of such family, in circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of the association or body at the maximum marginal rate : Provided that, where the total income of any member of such association or body is chargeable to tax at a rate which is higher than the maximum marginal rate, tax shall be charged on the total income of the association or body at such higher rate. (2) Where, in the case of an association of persons or body of individuals as aforesaid [not being a case falling under sub-section (1)],- (i) the total income of any member thereof for the previous year (excluding his share from such association or body) exceeds the maximum amount which is not chargeable to tax in the case of that member under the Finance Act of the relevant year, tax shall be charged on the total income of the association or body at the maximum marginal rate; (ii) any member or members thereof is or are chargeable to tax at a rate or rates which is or are higher than the maximum marginal rate, tax shall be charged on that portion or portions of the total income of the association or body which is or are relatable to the share or shares of such member or members at such higher rate or rates, as the case may be, and the balance of the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the maximum marginal rate." 9. Ld.Counsel for the assessee contended therefore that the CBDT had clarified that trusts created by WILL would be governed for taxation purposes by the proviso to section 164(1) of the Act and would therefore be required to pay taxes on their income as per the normal rates applicable to AOP's and not at MMR. The assessee accordingly, he contended could not be subjected to tax at MMR but on the slab rate applicable. 10. He further pointed out that this issue had been dealt at length by the ITAT, Ahmedabad in the case of ITO vs. Rajnikant Gulabdas Sheth Family Trust, reported in [1987] 20 ITD 668 (AHD.) holding that trust which qualified to be excluded by virtue of the First Proviso to Section 164(1) of the Act are to be taxed at normal rate and not at MMR. Copy of the judgement was placed before me and attention drawn to the relevant findings of the ITAT as under: "13. We have carefully considered the rival submissions of the parties. At this juncture, it would be necessary to reproduce below the relevant portion of section 164: "(1) Subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards the assessee' s submission in respect of the provisions of proviso (1) to section 164(1), it is not necessary for us to express any opinion as the assessee has not preferred any appeal/ cross objection against the order of the AAC. 16. In the result, the appeal is dismissed." 11. The Ld. DR fairly agreed with the fact pointed out by the Ld. Counsel for the assessee that the Ld. Addl/JCIT(A) had failed to adjudicate on this specific grievance raised by the assessee before it of being wrongly taxed at the MMR. He agreed that the Ld. Addl/JCIT(A) had wrongly noted the said issue to be not in dispute. Further, Ld. DR was unable to controvert the legal position on the issue as pointed out by the Ld. Counsel for the assessee before us nor he was able to distinguish the case law relied upon by the Ld. Counsel for the assessee in the case of Rajnikant Gulabdas Sheth Family Trust (supra), in support of his contention that family trust is chargeable to tax at normal rate and not at MMR in terms of First Proviso to Section 164(1) of the Act. 12. I have carefully considered the contentions of both the parties, as also the relevant provisions of law, CBDT Circular and the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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