2001 PLP 2686 (PTD)

(Appeals by special leave from the judgment and order, dated July 1, 1999 of the Rajasthan High Court in I.T.As. Nos.7, 9, 10; 16, 17 and 18 of 1999). ‑‑‑‑Representative assessee-‑‑Trust‑‑‑Shares of beneficiaries specific and determined‑‑‑ Assessing Officer applying provision relating to assessment on trustees at maximum marginal rate in the case of profits and gains of business‑‑‑Appeal to Appellate Tribunal‑‑‑Tribunal holding that assessment should be in respect of each beneficiary and not on aggregate income‑‑ Appeal to High Court‑‑‑Dismissal, at stage of admission‑‑‑Substantial question of law‑‑‑Supreme Court‑‑‑Decision of High Court set aside and matter remanded‑‑‑Indian Income Tax Act, 1961, Ss. 161(lA) & 260A. G created a trust for the benefit of the children of his sister. Though the Assessing Officer found the shares of the beneficiaries to be specific and determinate, he invoked the provisions of section 161(lA) of the Income Tax Act, 1961, which provided for the assessment on the trustees at the maximum marginal rate where the income included profits and gains of business. The Appellate Tribunal, on appeal, held that the trustees were to be assessed 'separately in respect of each beneficiary and they could not be assessed at the maximum marginal rate on the total income of the trust. On appeal under section 260A, the High Court observed that the Tribunal had applied the law correctly to the admitted facts of the case and rejected it at the stage of admission of the appeal. On appeal to the Supreme Court: Held, setting aside the order of the High Court and remanding the ratter, that the High Court should have admitted the appeals under section 260A and decided the matter on the merits. "Heard the learned counsel for the appellant. In our view, no substantial question of law arises for consideration less a question of law. In paragraph 6 of the impugned order, the Tribunal has stated thus: 'The undisputed facts of these appeals are that this trust was created by Shri Ghanshyamdas vide trust deed, dated April 12, 1982, for the benefit of the children of his sister, Smt. Bhagwanti Bai. The Assessing Officer, in his order, admitted that the shares of the beneficiaries are specific and determined. He also admitted that the trustees are representatives of the assessees of the beneficiaries. Even then he invokes the provisions of section 161(1 A) and, according to him, these amended provisions are applicable to the facts of this case. He, therefore, by applying the marginal rate of tax, assessed the total income of the trust in the hands of the appellant firm. In this connection, a decision of the apex Court in the case of CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust (1977) 108 ITR 555 is worth mentioning. The Special Bench of the Income‑tax Appellate Tribunal in the case of Mohammed Omer Family Trust v. ITO (1992) 40 ITD 1 under the similar facts and circumstances' of the case has held that in a case where the beneficiaries are known and their shares were determinate and the total income of the trust included income from profits and gains of business tax at the maximum marginal rate had to be charged in the hands of trustee only in respect' of the whole of the income of each beneficiary and not on the aggregate income of all beneficiaries. In this very case, the Special Bench was of the opinion that the association of persons cannot be created by imposing tax at the maximum marginal rate on the total income of the trust.' On the admitted facts, the Tribunal did not find merit in the appeals filed by the Revenue and, hence, they were dismissed. The Tribunal in the impugned order though has not referred to a proviso to section 161(1 A), but it applied the law correctly to the admitted facts of the case. That being the position, the appeal does not merit admission. Hence, it is dismissed at this stage.