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TMI Blog1991 (5) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessee trust as discretionary trust and charged maximum rate under s. 164(1) of the Act. The assessee filed appeal before the AAC. The AAC examined the deed of settlement and found that the trust was a specific trust and directed the ITO to make assessment in accordance with the provisions of s. 161(1) of the Act. The Department is now in appeal before the Tribunal. ITA No. 2233/Ahd/1986; Asst. yr. 1982-83. 3. The ITO relied on the reasons given in the assessment order for asst. yr. 1981-82 and treated the assessee trust as discretionary trust and charged tax at maximum rate. The AAC held that the assessee trust was specific trust. The Department is now in appeal before the Tribunal. 4. It is necessary to refer to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be alive on the last day of Accounting year." "3(ii)(c). The period of distribution of the corpus of the trust shall be period of 18 years from the execution of these presents or such earlier period as may be unanimously decided upon by the trustees." "(d) On the expiry of the period of distribution, the trustees shall distribute the entire corpus of the Trust Fund to all the beneficiaries as mentioned in sub-cl. (b) of this clause." 5. The ITO has referred to above clauses and observed that these clauses indicated that the beneficiaries who were not in existence were also made beneficiaries and as such condition stipulated in Expln. 1 to s. 164 was not fulfilled. Attention of the ITO was drawn to the Circular No. 281 issued by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he beneficiary was known and she was the sole beneficiary. In the year in which a child was born to Popatlal, the income would be shared equally by Manisha with that child. If subsequent child was born, the income would be shared equally amongst the children of Popatlal and Manisha. if any child died, the remaining beneficiaries would share the income equally. Thus, no discretion of any sort has been given to the trustees. In all contingencies, the shares of the beneficiaries are determinate. The beneficiaries are known. As already stated the first beneficiary is Manisha and subsequent beneficiaries would be child or children of Populate provided child or children were born. For determining the question whether the beneficiaries were known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Court or the instrument of trust or wake deed, as the case may be, and are ascertainable as such on the date of such order, instrument or deed." I find that this Explanation was inserted in order to prevent misuse in those cases wherein the trust deeds the beneficiaries or their shares had not been specified but discretion was given to the trustees to decide the allocation of income every year and in several other ways. In such a situation the trustees and beneficiaries were able to manipulate the arrangements in such manner that a discretionary trust was converted into specific trust whenever it stated them taxies. The present case does not fall in that category. As already stated no discretion had been given to the trustees. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO did not issue any notice to the assessee and purported to pass assessment order under s. 143(1) of the Act. However, in the said orders the ITO treated the assessee trust as discretionary trust for reasons given in the assessment order for asst. yr. 1980-81. The assessee filed appeal before the AAC. The AAC held that the only remedy of the assessee was to file application under s. 143(2) of the Act before the ITO objecting to the assessment in the status of a discretionary trust and that the assessee was not entitled to file any appeal against the assessment orders. Thus according to the AAC, the appeals were not maintainable. He dismissed the appeals on this ground. The assessee has now come in appeals before the Tribunal. 10. The fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) objecting to said change. I hold that the orders passed by the ITO looking to the substance of the matter, were appealable to AAC and AAC was not justified in refusing to entertain the appeals. Consequently, the orders passed by the AAC cannot be sustained. 11. Normally, it would have been necessary to rector the matter to AAC to decides the appeals on merits. However, on merits, the point in controversy is covered in favour of assessee by the orders of the Tribunal for earlier two assessment year passed above. Consequently, it would be futile to restore the mater to the AAC. For reasons given while dealing with appeals for asst. yrs. 1980-81 and 1981-82 I hold that the trust in question was a specific trust and that assessment was re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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