Law: Income Tax Act, 1961

Section: 164(1),160

Income-tax--- ----Assessment---Representative assessees---Rate of tax---Private trust---No beneficiary having taxable income---Assessment must be made at the rate appropriate to an association of persons---Indian Income Tax Act, S.164(1), prov. (i). The assessee was a private discretionary trust. The Income-tax Officer, in the course of assessment proceedings for the assessment year 1972-73, finding that one of the beneficiaries. by name RS was assessed to tax, held that the assessee's income should be taxed at the rate of 65 per cent. in view of the provisions of section 164(1) of the Income Tax Act, 1961, as the said provisions stood then. The contention of the assessee was that, save RS, no other beneficiary was assessed to tax and even in the case of RS she had relinquished her right and interest as a beneficiary by a release deed dated January 18, 1972, and she derived no taxable income as a beneficiary. It was urged that the case would be covered by proviso (i) to subsection (1) of section 164 as the said provision stood then and hence the income of the assessee should be charged to tax at the rate applicable to an association of persons. This contention was rejected by the Income-tax Officer but accepted by the Tribunal. On a reference. Held, that with regard to RS, the Tribunal had adverted to the deed of relinquishment and a categoric finding had been rendered on appreciation and assessment of the recitals therein that she had released her beneficial interest and she was in fact not entitled to any income as a beneficiary in view of the relinquishment during the relevant previous year. This was a pure finding of fact. As RS was not entitled to any income in view of this relinquishment and since other beneficiaries did not have any taxable income, the assessee was liable to tax at the appropriate rate of tax applicable to an association of persons. JUDGMENT S. NAINAR SUNDARAM, C.J.---The following questions stand referred to us for our consideration: "(1) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the income of the trust was assessable to tax at the appropriate rate…

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