COMMISSIONER OF INCOME-TAX vs. RAJENDRA CORPORATION

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ITR/24/1988HC GujaratGJHC24013101198817 October 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 held that the Tribunal was legally correct in its determination. The trust, initially determinate as per the trust deed dated July 2, 1977, did not lose its character by virtue of the release deed dated October 7, 1980. Consequently, the trust could not be classified as a discretionary trust subject to assessment at the maximum marginal rate under section 164 of the Income-tax Act, 1961. The reasoning was based on the precedent set by the Court in the assessee's own case for an earlier assessment year and a subsequent consistent ruling. The question referred to the Court was answered in the negative, favoring the assessee and against the revenue. The reference was disposed of accordingly, with no order as to costs.

What were the facts?

This case involves an Income Tax Reference filed by the revenue (Commissioner of Income-tax) against the assessee, Rajendra Corporation. The reference concerns the assessment year(s) not explicitly stated but implied to be prior to the judgment date of October 17, 2001. The core issue revolves around whether a trust, established by a trust deed dated July 2, 1977, and subsequently modified by a release deed dated October 7, 1980, can be treated as a discretionary trust. The revenue is challenging the Income Tax Appellate Tribunal's decision. The High Court heard the revenue's counsel, Mr. Akil Kureshi, as the assessee remained unrepresented despite being served.

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 trust can be treated as a discretionary trust liable to be assessed at the maximum marginal rate under section 164 of the Income-tax Act, 1961? Assessee's Contention: The judgment does not record any specific arguments made by the assessee. Revenue's Contention: The revenue, through its counsel Mr. Akil Kureshi, conceded that the question referred to the Court had already been decided by the same High Court in the assessee's own case for an earlier assessment year. This prior decision, dated August 28, 2001, in Income-tax Reference No. 130 of 1987, was also followed in another case on October 16, 2001. The revenue's stance implies acceptance of the prior ruling.

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 24 of 1988

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 -------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus RAJENDRA CORPORATION -------------------------------------------------------------- Appearance: MR AKIL KURESHI for Petitioner No. 1 SERVED BY RPAD - (N) for Respondent No. 1 --------------------------------------------------------------

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

Date of decision: 17/10/2001

ORAL JUDGEMENT (Per : MR.JUSTICE D.A.MEHTA) The Income Tax Appellate Tribunal has referred the following question for the opinion of this Court, at the instance of the revenue :

"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 trust can be treated as discretionary trust liable to be assessed at the maximum marginal rate under section 164 of the Income-tax Act, 1961 ?"

2.

We have heard Mr.Akil Kureshi appearing on behalf of the applicant-revenue. Though served, none appears on behalf of the respondent-assessee.

3.

It was fairly pointed by Mr.Kureshi that the question referred to us has already been decided by this Court in assessee's own case for an earlier assessment year by decision dated 28th August, 2001 in Income-tax Reference No.130 of 1987. Furthermore, the said decision has recently been followed in Income-tax Reference No.65 of 1991 on 16th October, 2001. 4. Following the aforesaid decision in assessee's own case, we hold that the Tribunal was right in law in holding that the trust which was determinate as per terms of trust deed dated 2nd July, 1977 did not loose its character by virtue of release deed dated 7th October, 1980, and hence, the trust could not be treated as discretionary trust liable to be assessed at the maximum marginal rate under section 164 of the Income-tax Act, 1961. The question referred to us therefore answered in the negative i.e. in favour of the assessee and against the revenue.

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

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