COMMISSIONER OF INCOME-TAX vs. GAGALDAS H SANGHVI TRUST

ITR/130/1987HC GujaratGJHC24011863198720 August 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was correct in its decision. The relinquishment of her share by Surekha in favour of the sole remaining beneficiary, Rajesh, did not confer any discretion upon the trustees. The trust deed, executed on July 2, 1977, had already fixed the shares of the beneficiaries. With only one beneficiary remaining, there was no occasion for the trustees to exercise any discretion regarding the distribution of income. Therefore, the trustees were not liable to be assessed at the maximum marginal rate under Section 164 of the Act. The Court answered the reference in the negative, in favour of the assessee and against the Revenue.

What were the facts?

The assessee is a private trust. For assessment year 1981-82 (accounting year S.Y. 2036), the Revenue treated the trust as discretionary and levied tax at the maximum marginal rate under Section 164 of the Income Tax Act, 1961. This change in treatment occurred after one beneficiary, Surekha Bhikhalal Sanghvi, holding a 10% beneficial share, relinquished her share in favour of the other beneficiary, Rajesh Bhikhalal Sanghvi, through a release deed dated October 7, 1980. Previously, up to assessment year 1980-81, the trust was treated as specific. The assessee appealed to the Appellate Assistant Commissioner, who held that the trust deed's nature was unchanged by the release deed. The Revenue appealed to the Income Tax Appellate Tribunal, which upheld the Appellate Assistant Commissioner's order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and having regard to the provisions of the Trust deed dated 2-7-1977 and the release deed dated 7-10-1980, the trustees were liable to be assessed at the maximum rate u/s. 164 of the I.T. Act, 1961? (Question of law) Assessee's Contention: The assessee argued that the relinquishment of share by one beneficiary did not alter the fundamental nature of the trust, which remained specific. The trust deed's provisions determined the beneficiaries' shares, and no discretion was conferred upon the trustees regarding income distribution. Revenue's Contention: The Revenue contended that Surekha's relinquishment of her share in favour of Rajesh changed the nature of the trust from specific to discretionary, thereby making the trustees liable to be assessed at the maximum marginal rate under Section 164 of the Act.

Which sections of the Income-tax Act were involved?

Section 164

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 130 of 1987

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 164

All 181 judgments and leading authorities on Section 164 →

Recent GST High Court judgments

Search GST case law →