TMI Blog1985 (7) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of the assessee under section 161 of the Act, treating it as 'specified trust'. 4. For the year under appeal, during the course of assessment proceedings, the ITO enquired of the assessee as to whether it would still be assessable under section 161. Vide its letter dated 24-7-1982 (reproduced below), the assessee requested the ITO to assess the trustees and/or beneficiaries. "In continuation of the discussions we had today as desired by you, I am enclosing the deeds of assignment executed by the following beneficiaries in favour of the persons mentioned against their names. (1) Shri Pankaj Jasubhai---Arivindkumar Chandulal Thakkar (HUF) (2) Shri Kanubhai Natwarlal---Kanubhai Chandulal Thakkar (HUF) (3) Shri Bhupendra Ratilal---Ashokkumar Ratilal Thakkar (HUF) (4) Shri Bharatkumar Shantilal---Pravinkumar Chandulal Thakkar (HUF) (5) Shri Pareshkumar Jasubhai---Dhirajlal Natwarlal (HUF) 2. You have appreciated that the beneficiaries under a trust have the right to transfer their beneficial interest under the trust being their properties. However, as desired by your honour we submit the following for your records : (1) The trust is a specific trust wherein the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t import and subject to any limitation which the context may require, it signifies every possible interest, which a person can clearly hold or enjoy. 6. We do hope that the above submissions would be more than required in the instant case. We would request you to kindly assess the trustees and/or the beneficiaries as you may kindly decide upon. However, for the purpose of information, we would submit that till past years, the beneficiaries have been assessed directly and the beneficiaries have also filed their return of income for this assessment year also as has already been submitted to your honour." [Emphasis supplied] 5. Thereafter on 27-7-1982, the ITO framed the assessment in the following manner : "Return showing income of Rs. 2,62,690 was filed on 30-6-1982. Shri S.A. Sukhadia, advocate, represented the assessee in response to the notice issued under section 143(2) of the Act. Assessee is a specific trust doing shroff business. After discussion and from the data made available, total income is worked out as under : Net profit as per profit and loss account Rs. 2,62,689 Total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-7-1984 the assessee objected to the proposal of the Commissioner as under : "Without prejudice to the above and in the alternative the submissions are as under : We may bring to your kind notice that Jigna Natvarlal, one of the six persons alleged to have been not shown as beneficiary in the trust deed is not correct, Jigna Natvarlal is one of the beneficiaries in Group 'A' in the trust deed which can be verified by your honour from the notice given by you to us. With reference to the para 4 of your notice, we have to respectfully submit that the instant case is a case of specific trust and not a discretionary trust. The Explanation referred to by you in your letter does not apply to this case. Further, the five persons have not been made beneficiaries by virtue of the exercise of discretion of the trustees which of course is not in the trust deed but because of assignment being made by some beneficiaries in their favour. In the facts and circumstances of the case and in law, the provisions of Explanation to section 164 brought into effect from 1-4-1980 do not apply. In the circumstances, the order of assessment passed by the Income-tax Officer is not erroneous and/or is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee-trust would still be 'specific trust'. In other words, the learned counsel for the assessee wanted to impress upon us that by taking action under section 263, the Commissioner has started an exercise in futility. Thereafter, the learned counsel for the assessee invited our attention to sections 3, 8 and 58 of the Indian Trusts Act, 1882, to urge that the beneficiaries under the trust are competent to transfer their interest to whomsoever they desire. In this connection he relied on the decisions of the Hon'ble Supreme Court in the case of CIT v. Smt. Kasturbai Walchand Trust [1967] 63 ITR 656 and CIT v. Nawab Mir Barkat Ali Khan Bahadur [1974] 97 ITR 246. He, however, hastened to state that this action of the beneficiaries would not in any way convert the desire of the settlor as on their own volition they have assigned their interest to the named assignees. In this view of the matter, he submitted that since not applicable of the main section 164 were to be applied in the instant case, the Commissioner has wrongly passed his order under section 263, keeping in mind the Explanation inserted in the said section from 1-4-1980. He, therefore, urged that the order of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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