COMMISSIONER OF INCOME-TAX vs. K S LOKHANDWALA FAMILY TRUST

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ITR/165/1995HC GujaratGJHC24022488199507 November 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA2 pages

AI SummaryRemanded

What did the High Court hold?

The High Court declined to answer the question referred by the Commissioner of Income-tax. The court's reasoning was based on the fact that the present reference was identical in terms to Income Tax Reference No. 202 of 1986, concerning the Managing Trustee. In that prior reference, the High Court had declined to answer the question due to the facts not being clear. Therefore, for the same reasons, the High Court decided not to answer the question in the present reference. The operative direction was that the reference is disposed of accordingly, with no order as to costs. No specific finding was reached on the substantive versus protective assessment issue.

What were the facts?

The Commissioner of Income-tax (Revenue) referred a question to the High Court of Gujarat concerning the assessment status of K S Lokhandwala Family Trust (Assessee) for an unspecified assessment year. The Income-tax Officer (ITO) had assessed the trust on a protective basis, believing the income should be substantively taxed in the hands of Shri Faridahmed Abdulsamad, the Managing Trustee. However, the Commissioner of Income-tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) held that the trust should be assessed on a substantive basis, not the Managing Trustee. The High Court noted a previous decision in Income Tax Reference No. 113 of 1987 between the same parties, which also dealt with the assessment of the trust. The High Court also referred to its decision in the case of the Managing Trustee (Income Tax Reference No. 202 of 1986) where it declined to answer due to unclear facts.

What were the issues?

1. Whether, the Appellate Tribunal is right in law and on facts in directing the I.T.O. to assess the trust in a substantive status as against on a protective basis assessed by the Income-tax Officer? (Question of law and fact, concerning the assessment status of the trust). Assessee's Contention: The ITAT held that the trust should be assessed on a substantive basis. (No specific arguments recorded for the assessee in this judgment). Revenue's Contention: The Revenue, through the Commissioner, sought to challenge the ITAT's direction to assess the trust substantively, implying it preferred the ITO's protective assessment approach. (No specific arguments recorded for the revenue beyond the reference itself, but the reference implies disagreement with the ITAT's finding). The High Court also noted that a similar question was raised in Income Tax Reference No. 202 of 1986 concerning the Managing Trustee, where the court declined to answer due to unclear facts.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 165 of 1995

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?

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

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?

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus K S LOKHANDWALA FAMILY TRUST -------------------------------------------------------------- Appearance: MR MH JOSHI FOR MR MANISH R BHATT for Applicant. NOTICE SERVED for Respondent No. 1

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

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE D.A.MEHTA

Date of decision: 07/11/2001

ORAL JUDGEMENT (Per : MR.JUSTICE D.A.MEHTA)

1 The Income Tax Appellate Tribunal has referred the following question at the instance of the Commissioner :

"Whether, the Appellate Tribunal is right in law and on facts in directing the I.T.O. to assess the trust in a substantive status as against on a protective basis assessed by the Income-tax Officer ?"

2 We have heard Mr.M.H.Joshi for the applicant-revenue. Though served none appears for the respondent-assessee. Our attention has been invited by Mr.Joshi to a decision dated 20/09/2001 in Income Tax Reference No. 113 of 1987 rendered between the same parties. In the said decision it has been stated as under.

3 The assessee is a trust. The assessment of the assessee-trust was computed on protective basis and it was held that the income was to be assessed substantively in the hands of one Shri Faridahmed Abdulsamad, the Managing Trustee of the trust. The C.I.T.(Appeals) and the Tribunal held that the assessee-trust had to be assessed on substantive basis and not the Managing Trustee.

4 In the case of the Managing Trustee in Income Tax Reference No. 202 of 1986 on 13th August,2001, we have declined to answer the question raised in that reference in view of the facts not being clear in the said reference. For the same reasons we decline to answer the question referred to us in the present reference which is identical in terms with the said reference.

5 The reference is disposed of accordingly with no order as to costs. (M.S.Shah,J) (D.A.Mehta, J)

m.m.bhatt

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