Law:

Section:

Section 4 of the Income-tax Act, 1961 - Association of persons - Assessable as Where shares of four beneficiaries of trust were specified, merely because such jointness had been imposed by author of trust by creating trust, assessment could not be made in status of AOP The concept of AOP applies where certain persons constituting the AOP voluntarily join together for any specific venture. Normally, the concept of AOP would not apply where 'this joining together' is not voluntary, but has been imposed because of external factors, as for example, in case of inheritance of joint property where the jointness is the result of the trust deed and, thus, has been imposed by the author of the trust. A trust was created by one BS by a trust deed dated 2-1-1978. There were four beneficiaries of the trust. The shares of the first two of the beneficiaries aforesaid were 20 per cent each and the shares of the other two beneficiaries were 30 per cent each. For the assessment year under consideration, the assessment was completed by the ITO in the status of AOP. The reason given by the Income-tax Officer for the assessment as AOP was that the shares of the beneficiaries were not determinate. Held that in view of the principle stated above, the assessment in the status of AOP was not justified. Piyush Agrawal for the Respondent. JUDGMENT We have heard learned counsel for the Income-tax Department. The assessment year involved is 1984-85. The following two questions have been referred: "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 assessment in the hands of the trust be framed under section 161 of the Income-tax Act, 1961?. 2. Whether, in view of the facts and circumstances of the case, the Income-tax Appellate Tribunal was correct in law in dismissing the Revenue's appeal by placing reliance on the decision of the Special Bench Babu Lal Grand Sons Family Trust v. ITO [1989] 31 ITD 52 (Delhi), where the matter for consideration was entirely different?" For appreciating the two questions, the relevant facts are set out concisely below: A trust under the name of "Baboolal Grandsons Family…

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