Law:

Section:

Section 161 of the Income-tax Act, 1961 - Representative assessee - Liability of - Assessment year 1983-84 - Whether trustee is not to be assessed for all income which trust receives where beneficiaries are known and their shares are determinate - Held, yes - Whether liability of trustee cannot be higher than that of beneficiaries - Held, yes - Assessee, a beneficiary as well as trustee, claimed refund of tax deducted at source out of lottery prize money received by trustees - ITO rejected claim and held that entire amount should be treated as income in hands of trustees - Trust deed directed trustees to augment corpus with gifts, donations, prize money received, etc. and corpus could not be distributed until duration of trust - Whether since prize money received by trustees was not an amount in which beneficiaries could claim a share in year of account and which amount could not have been assessed in their hands, amount of prize money was not assessable in hands of trustees who only represented beneficiaries for purpose of assessment - Held, yes FACTS One 'L' created a trust for the benefit of 'M' (the assessee), 'T' and minors 'M' and 'K'. 'M', 'B' and 'K' were appointed as trustees. The instrument directed the trustees to augment the corpus with all gifts, donations, etc., received and any prize money received on lottery tickets as well as 2/3rds share of the net interest earned from investments made by the trustee. The trust deed also provided that the corpus of the trust shall not be divided or distributed among the beneficiaries until the duration of the trust which was to be for a period of fifteen years, or sooner, if all the beneficiaries unanimously agreed to terminate the trust even before the expiry of fifteen years. For the relevant assessment year, the trustees filed a return of income and wanted to be assessed in the status of representative assessee. The assessee also claimed a refund of tax deducted at source which had been received by them as a lottery prize. The ITO, however, rejected the claim for refund and held that the entire amount received should be treated as income in the hands of trustees as an AOP. On appeal, the Commissioner…

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