Law:

Section:

Section 161 of the Income-tax Act, 1961 - Trust - Assessment of - Assessment years 1988-89 and 1989-90 - Whether in case of a trust which is having income from business as well as income from house property, by virtue of provisions of section 161(1A), income from business earned by trust shall be taxed at maximum marginal rate treating it as a single unit and income from house property has to be assessed in hands of trustee in manner provided in section 161(1) - Held, yes FACTS The respondent-assessee was a private trust, carrying on business in the manufacture and sale of umbrellas. The trust had income from business as well as income from house property. The assessee claimed deduction in respect of rental income received from the building owned by the trust. The Assessing Officer disallowed the claim of the assessee holding that the building in question was an asset of the trust and the income therefrom had to be considered in the hands of the trust. The Assessing Officer, accordingly, treated the assessee as a representative assessee under section 161(1A) and charged tax on the whole of the income at the maximum marginal rate applicable. The Commissioner (Appeals) allowed the appeal of the assessee. On further appeal, the Tribunal confirmed the order of the Commissioner (Appeals). On reference : HELD In view of the decision of the High Court in CWT v. V. Thiruvenkata Reddiar [1981] 128 ITR 689/ 5 Taxman 321 and the decision of the Apex Court in CWT v. Trustees of HEH Nizam's Family (Remainder Wealth) Trust [1997] 108 ITR 555, the reason stated by the Assessing Officer that the beneficiaries were not the owners of the building could not be sustained. Hence, by applying the dictum laid down by the abovesaid Courts, the asset in question to the extent to which the beneficiary had a beneficial interest therein had to be deemed to be held by the beneficiary. [Para 10] The position under section 161(1) is that a trustee under a trust cannot be assessed on the aggregate income received by it as a single unit. The assessment in the name of the trustee in terms of the sub-section can be made in two ways. The Assessing Officer may make as many assessments in the name…

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