Law: Income Tax Act, 1961

Section: 160(1),164,164(1)

Income-tax---Representative assessee---Trustee---Maximum marginal rate of tax--­Condition precedent---Beneficiaries or shares of beneficiaries should be indeterminate or unknown---Discretion to trustees regarding time and extent of disbursal of income to beneficiaries is not relevant---Indian Income Tax Act, 1961, S.164. Section 164 of the Income Tax Act, 1961, only deals with the receipt of income in the hands of the representative assessee and the person for whose benefit or on whose behalf that income is received. If the beneficiary is one, and it is known that the trustees received the income for that beneficiary alone and do not have the discretion to use the receipts for any purpose other than the benefit of the beneficiary, section 164 is clearly not attracted. It is the obligation under which the money received as income is held that is material, and not the extent to which the beneficiary has control over that income. The discretion that the trustees may have in deciding the time at which and the extent to which the income so received should be disbursed to the beneficiary does not in any manner affect their obligation to apply the income so received on behalf or for the benefit of the beneficiary, solely for the benefit of such beneficiary. So long as that obligation is clear, the trust is not liable to be taxed at the highest marginal rate. For the purpose of deciding the extent to which the statutory provision is attracted regard must first be had to the clear words used in the section, the context in which the section occurs and the object of the enactment as a whole. It is not permissible to assume a state of affairs which the law intended to discourage and thereafter read requirements into the section which are not spelt out in the section either explicitly or implicitly. If on a plain reading of section 164(1) it is clear that the conditions, which would render that section inapplicable have been satisfied in a given case, it is impermissible to proceed to look into the other provisions of the trust deed to infer a discretion with the trustees and thereafter deny to the trust benefit of a normal rate of tax on the ground that despite the…

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