Law:

Section:

It is not open to a discretionary trust to convert nature of trust from discretionary to specific Section 164 of the Income-tax Act, 1961 - Trust/trustees - Charge of tax where share of beneficiaries unknown - Assessment year 1975-76 - Assessee, a discretionary trust, passed a resolution, whereby it decided to disburse its income of relevant assessment year to one of its beneficiaries and gave income to said beneficiary - Assessee filed return showing nil income - Assessing Officer taxed aforesaid income in hands of assessee by applying section 164 - Whether by virtue of said resolution, an effort was made by assessee to convert nature of trust from discretionary to specific, which was not open to it to do so - Held, yes - Whether, therefore, Assessing Officer had rightly taxed said income in hands of assessee by applying section 164 - Held, yes FACTS The assessee, a discretionary trust, passed a resolution on 31-3-1974 to the effect that the income of the trust arising for the previous year ending on 31-3-1975 be paid to one of the beneficiaries of the trust by debiting the said amount to income and expenditure account in the books of the trust. Necessary intimation of the above fact had been given to the concerned beneficiary. In pursuance of the said resolution, the income of the relevant assessment year 1975-76 had been given to the beneficiary. Thereafter, the assessee filed the relevant return showing the total income as nil. The Assessing Officer, however, taxed the aforesaid income in the hands of the assessee in view of the provisions of section 164. On appeal, the Commissioner (Appeals) allowed the appeal. On further appeal,the Tribunal confirmed the impugned order. On reference : HELD The assessee, a discretionary trust, had passed a resolution, whereby it decided to disburse the income of the assessment year 1975-76 to the beneficiary and looking to the law laid down by the Gujarat High Court in the case of CIT v. Ambalal Sarabhai D. Trust No. 5 [1998] 231 ITR 540/ 99 Taxman 183 , it was clear that by virtue of the said resolution, an effort was made to convert the nature of the trust from discretionary to specific. According to the law laid down in…

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