COMMISSIONER OF INCOME TAX vs. AMBALAL SARABHAI & SARLADEVI SARABHAI D TRUST NO.2

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ITR/39/1992HC GujaratGJHC24015390199203 December 2003Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE K.A.PUJ2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court answered both referred questions in the negative, meaning against the assessee and in favour of the revenue. The court's reasoning was based on the similarity of facts to a previous reference (I.T.R. No. 100/91) which was decided in favour of the revenue, and the established law laid down by the High Court in CIT v. Ambalal Sarabhai D. Trust No. 5, 231 ITR 540. The ratio decidendi is that the character of a discretionary trust cannot be altered by a trustee's resolution, and consequently, the Income Tax Officer was justified in applying the rate of 65% under Section 164 of the Income-tax Act, 1961. The reference stands disposed of accordingly, with no order as to costs. No issue was expressly left undecided.

What were the facts?

This case concerns Income Tax Reference No. 39 of 1992 before the High Court of Gujarat at Ahmedabad. The reference arises from an order dated October 18, 1985, passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C', in ITA No. 1648/Ahd/1983 for the Assessment Year 1978-79. The questions have been referred to the High Court for its opinion at the instance of the revenue, following an order by the Supreme Court in Civil Appeal No. 3574 of 1989. The assessee is Ambalal Sarabhai & Sarladevi Sarabhai D Trust No. 2, and the revenue is the Commissioner of Income Tax. The dispute involves the character of a discretionary trust and the applicability of a specific tax rate.

What were the issues?

The Tribunal had to decide two questions of law referred by the revenue: 1. Whether the character of a discretionary trust could be changed by a resolution passed by the trustees? 2. Whether the lower authorities were justified in law in holding that the Income Tax Officer was not justified in applying the rate of 65% under Section 164 of the Income-tax Act, 1961? The assessee's contentions are not explicitly recorded in the judgment. The revenue's argument, as implied by the reference and the court's decision, is that the character of the trust could not be altered by a trustee resolution and that the rate under Section 164 was applicable. The judgment notes that the facts are similar to I.T.R. No. 100/91, which was disposed of in favour of the revenue, and relies on the High Court's decision in CIT v. Ambalal Sarabhai D. Trust No. 5, 231 ITR 540.

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 39 of 1992

For Approval and Signature:

HON'BLE MR.JUSTICE A.R.DAVE and HON'BLE MR.JUSTICE K.A.PUJ

============================================================ 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 concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals?

-------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus AMBALAL SARABHAI & SARLADEVI SARABHAI D TRUST NO.2 -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 39 of 1992 MR MANISH R BHATT for Petitioner No. 1 MR BD KARIA for the Respondent 1

--------------------------------------------------------------

CORAM : HON'BLE MR.JUSTICE A.R.DAVE and HON'BLE MR.JUSTICE K.A.PUJ

Date of decision: 03/12/2003

ORAL JUDGEMENT (Per : HON'BLE MR.JUSTICE A.R.DAVE)

In view of the order passed by the Hon'ble Supreme Court in Civil Appeal No. 3574 of 1989 dated 22.8.1989 and 26.9.89, at the instance of the revenue, the following questions have been referred to this court for its opinion under the provisions of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), arising out of an order dated 18.10.1985 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' in ITA No. 1648/Ahd/1983 for the Assessment Year 1978-79. "

1.

Whether the character of the discretionary trust could e changed by resolution passed by the trustees?

2.

Whether the Courts below are justified in law in holding that the Income-tax Officer was not justified in applying the rate of 65% under sec. 164 of the Income-tax Act, 1961?"

2.

Senior Standing Counsel Shri M.R. Bhatt has appeared for the applicant revenue, whereas learned advocate Shri B.D. Karia has appeared for the respondent assessee.

3.

The learned advocates have submitted that the facts involved in this reference are similar to those involved in I.T.R. No. 100/91. Looking to the fact that the said reference has been disposed of in favour of the revenue and against the assessee, and looking to the law laid down by this court in the case of CIT v. Ambalal Sarabhai D. Trust No. 5, 231 ITR 540, we answer both the questions in the negative i.e. against the assessee and in favour of the revenue.

The reference stands disposed of accordingly with no order as to costs.

(A.R. Dave, J.)

(K.A. Puj, J.) (hn)

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