COMMISSIONER OF INCOME-TAX vs. ABHA ARVINDBHAI TRUST

PDF · subscribers

ITR/18/1992HC GujaratGJHC24015369199216 October 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA2 pages

AI SummaryAllowed

What did the High Court hold?

The High Court answered the referred question in the affirmative, in favor of the assessee and against the revenue. The Court noted that the reference was filed by the revenue due to the department's SLP against the High Court's decision in Kum. Pallavi Mayor vs CIT. The Court found no reason to deviate from its earlier decision in that case. Therefore, the Tribunal was held to be correct in directing that the capital gains should be taxed in the hands of the assessee trust and not in the hands of the beneficiary. The ratio decidendi is that capital gains arising from the sale of assets by a trust are taxable in the hands of the trust itself, not the beneficiary, as per the established precedent of this Court. The reference was disposed of accordingly.

What were the facts?

The Commissioner of Income-tax (Revenue) has referred a question of law to the High Court of Gujarat at Ahmedabad concerning the assessment year 1980-81. The assessee is a private trust with a single beneficiary. During the assessment year, the trust transferred assets from its corpus, resulting in capital gains. The assessee contended that these capital gains should be taxed in the hands of the trust. However, the Income-tax Officer held that the capital gains constituted income for the sole beneficiary and should be taxed in their hands. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, following a previous High Court decision, ruled in favor of the assessee, holding that the capital gains were taxable in the hands of the trust.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in directing to exclude the capital gain from the income of the beneficiary of the assessee trust and to tax the same in the hands of the assessee trust? (Question of law and fact, concerning the taxability of capital gains arising from the sale of trust assets). Assessee's Contention: The capital gains arising from the transfer of assets forming part of the trust corpus should be taxed in the hands of the assessee trust itself. Revenue's Contention: The capital gains constitute income for the benefit of the sole beneficiary and hence should be assessed in the hands of the sole beneficiary. The revenue's reference to the High Court was prompted by the department's SLP against a prior decision of the High Court in Kum. Pallavi Mayor vs CIT.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 18 of 1992

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 ABHA ARVINDBHAI TRUST -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 18 of 1992 MR MIHIR H JOSHI with MR MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent No. 1

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

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

Date of decision: 16/10/2001

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

The Income-tax Appellate Tribunal, Ahmedabad Bench "B" has referred the following question for the opinion of this Court at the instance of the revenue :-

"Whether, the Appellate Tribunal is right in law and on facts in directing to exclude the capital gain from the income of the beneficiary of the assessee trust and to tax the same in the hands of the assessee trust ?"

The assessment year is 1980-81. The assessee is a private trust having only one beneficiary. During the year, certain assets forming part of the corpus of the trust were transferred by the assessee trust and capital gains arose as a result of such transfer. The case of the assessee trust was that such capital gains were liable to be assessed in the hands of the assessee trust itself and not in the hands of the sole beneficiary. The Income-tax Officer held that the capital gains applicant-revenue. Though served, none appears on behalf of the respondent-assessee. At the time of hearing of the reference, our attention was drawn to the fact that this reference is filed by the revenue only because the department had filed SLP against the decision of this Court in case of Kum. Pallavi Mayor. Nothing has been pointed out to us to take a different view from the aforesaid decision of this Court. The question referred is, therefore, answered in the affirmative i.e. in favour of the assessee and against the revenue.

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

(M.S. Shah, J.)

(D.A. Mehta, J.) sundar/-

Recent GST High Court judgments

Search GST case law →