COMMISSIONER OF INCOME-TAX vs. RAJNIBEN CHINUBHAI

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ITR/9/1992HC GujaratGJHC24015360199216 January 2001Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE MR. JUSTICE MOHIT S. SHAH2 pages

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What did the High Court hold?

The High Court answered the reference in favour of the assessee and against the revenue. The Court relied on its own prior decision in CIT vs. RajnibEn Chinubhai (Indl.) (ITR No. 175/85, decided on October 19, 2000). In that precedent, a Division Bench of the High Court had held that capital gains earned by a trust should be taxed in the hands of the trust itself, and not in the hands of the beneficiary, even if the beneficiary is the sole beneficiary. Therefore, the Tribunal was correct in its view that the capital gains in question should not be taxed in the hands of the assessee. The reference was disposed of accordingly, with no order as to costs.

What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench "B", referred a question of law to the High Court of Gujarat concerning Assessment Year 1983-84. The Income Tax Officer (ITO) had included capital gains of Rs. 21,300 earned by a trust in the total income of the assessee, who was the sole beneficiary of the trust. The Commissioner of Income Tax (Appeals) [CIT(A)] and the ITAT had both held that the capital gains could not be assessed in the hands of the assessee. The revenue preferred this reference to the High Court.

What were the issues?

1. Whether the Tribunal is right in law in holding that the capital gains is to be taxed in the hands of the trust and not in the hands of the assessee, a sole beneficiary? (Question of law turning on the interpretation of provisions related to the taxation of capital gains and trusts). Assessee's Contention: The judgment does not record any specific arguments made by the assessee. The CIT(A) and ITAT had previously held in favour of the assessee. Revenue's Contention: The learned counsel for the revenue stated that the controversy was settled by a previous decision of the same High Court in CIT vs. RajnibEn Chinubhai (Indl.) in ITR No. 175/85, decided on October 19, 2000. This earlier decision held that capital gains should be taxed in the hands of the trust, not the beneficiary.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 9 of 1992

For Approval and Signature:

Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.S.SHAH

============================================================ 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 RAJNIBEN CHINUBHAI -------------------------------------------------------------- Appearance: MR AKIL QURESHI with MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1

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

CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.S.SHAH

Date of decision: 16/01/2001

ORAL JUDGEMENT (Per : MR.JUSTICE J.M.PANCHAL)

At the instance of the revenue, the Income-tax Appellate Tribunal, Ahmedabad Bench "B" has referred the following question of law for opinion of this Court in respect of Assessment Year 1983-84 :-

"Whether the Tribunal is right in law in holding that the capital gains is to be taxed in the hands of the trust and not in the hands of the assessee, a sole beneficiary ?"

The ITO included in the total income of the assessee, the capital gains of Rs.21,300/- earned by the Trust of which the assessee is the beneficiary. Following the decisions of the CIT(A) as well as ITAT, Ahmedabad Bench "B" on this issue, the CIT(A) held that the capital gains earned by the trust cannot be assessed in the appellant's hands. The Tribunal has confirmed the assessee) in ITR No. 175/85, decided by the Hon'ble the Chief Justice and Mr Justice A.R. Dave on October 19, 2000. The Division Bench in the aforesaid case has held that the amount of capital gains should be taxed in the hands of the Trust and not in the hands of the beneficiary.

In view of the decision referred to above, the reference is answered in favour of the assessee and against the revenue. The reference accordingly stands disposed of with no order as to costs.

(J.M. Panchal, J.)

(M.S. Shah, J.)

sundar/-

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