TMI Blog1993 (4) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... firm was taken over by JNC Family Trust. The Assessing Officer observed that the said trust was introduced as a partner in the firm only to fragment the income of the assessee-firm and pay less tax. Such a device cannot be permitted in view of the judgment of Hon'ble Supreme Court in the case of McDowell Co.Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC). He, therefore, included the income of JNC Family Trust for the period from September to December, 1982 in the hands of the assessee-firm. 1.1. The CIT(A) held that such an arrangement clearly shows that income in fact remained with the original partners only either in their own names or in the names their minor children and wife and the erstwhile partners are the real o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability, the ratio of the Supreme Court judgment in the case of McDowell would be automatically applicable. The said decision does not lay down any such legal principle. This is not the correct reading of the said judgment of the Supreme Court. It only says that if, in fact, the income belongs to some other person but the same, by a colourable device is claimed as belonging to some ostensible owner, such a colourable device can be disturbed by the Revenue authorities. In the present case the income has really been earned by the said trust. It has been distributed amongst the beneficiaries in accordance with the trust deed. The trust has already been assessed. Assessments of all the beneficiaries have also been completed at an earlier dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the trust was made on substantive basis prior to assessment in the case of the appellant-firm would not disentitle the Assessing Officer to club the income of the trust in the hands of the assessee. He relied on the judgment in the case of Sohan Singh vs. CIT (1985) 49 CTR (Del) 115 : (1986) 158 ITR 174 (Del) to support this contention. As regards the assessment of beneficiaries having been completed on a prior date, the learned Departmental Representative submitted that assessments of the beneficiaries had been completed by different assessing authorities and not by the Assessing Officer of the appellant-firm. He relied on the decision reported in 9 ITC 886 to support his contention that under such facts, the judgment of Hon'ble Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under any other relevant provisions of law. It is also an admitted fact that the beneficiaries of the said trust have also been assessed by different assessing authorities on a prior date. The issue is thus clearly covered in favour of the assessee by the decision of Hon'ble Gujarat High Court in the case of Laxmichand Hirjibhai. In view of the aforesaid discussions, we hold that income of the said trust cannot be validly included in the hands of the appellant-firm. The Assessing Officer is directed to exclude the same. 2. The next point relates to disallowance of investment allowance. The Assessing Officer has observed that the plant and machinery was transferred by the assessee to JNC Family Trust in Sept.-Oct., 1982. Hence the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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