COMMISSIONER OF INCOME TAX vs. SUNISHA SIDHARTH FAMILY TRUST

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ITR/43/1992HC GujaratGJHC24015394199217 July 2002Bench: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE K.A.PUJ3 pages
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What did the High Court hold?

The High Court held that the assessee trust is a specific trust and its income is liable to be taxed at the normal rate applicable to specific trusts. The reasoning was based on the principle of consistency and the binding nature of previous judicial pronouncements. Specifically, the Court referred to its own order in Income-tax Reference No. 131 of 1984, which had upheld the Income-tax Officer's view that the assessee was a specific trust for assessment years 1976-77 and 1977-78. Since the earlier order of the ITO for those years was upheld by the High Court, the Court found no reason to deviate from that conclusion for the assessment years under consideration. The questions referred to the Court were answered in the affirmative, in favour of the assessee and against the revenue. No issue was left undecided.

What were the facts?

The Commissioner of Income Tax (Revenue) filed references before the High Court of Gujarat concerning assessment years 1980-81, 1981-82, 1982-83, and 1985-86. The core dispute revolved around whether the assessee, Sunisha Siddharth Family Trust, was a specific trust or a discretionary trust. The Income Tax Officer (ITO) initially held it to be a discretionary trust, liable for taxation at the maximum marginal rate. The assessee appealed to the Appellate Assistant Commissioner (AAC), who, relying on previous Tribunal orders for assessment years 1976-77 and 1977-78, directed the ITO to treat it as a specific trust and tax it at normal rates. The Revenue appealed to the Tribunal, which confirmed the AAC's order. The High Court noted a prior reference (ITR No. 131 of 1984) where it had upheld an ITO order treating the trust as specific for assessment years 1976-77 and 1977-78.

What were the issues?

1. Whether the Appellate Tribunal was right in law and on facts in holding that the assessee trust is a specific trust and to tax the same at normal rate? (Question of law and fact, concerning the nature of the trust and applicable tax rate). Assessee's Contention: The assessee contended that it was a specific trust and should be assessed under Section 161(1) of the Income Tax Act, 1961, at normal rates. This contention was supported by earlier orders of the Tribunal and the High Court itself in the assessee's own case for earlier assessment years. Revenue's Contention: The Revenue argued that the assessee was a discretionary trust and thus liable to be taxed at the maximum marginal rate. This was the initial stand of the Income Tax Officer. The Revenue's appeal to the Tribunal was based on challenging the AAC's and Tribunal's subsequent findings that it was a specific trust.

Which sections of the Income-tax Act were involved?

Section 161(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 43 of 1992 with INCOME TAX REFERENCE No 416 & 416A of 1992 with INCOME TAX REFERENCE No 111 of 1993

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH 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 SUNISHA SIDHARTH FAMILY TRUST -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 43 of 1992 MR MANISH R BHATT for Petitioner No. 1 SERVED BY RPAD - (N) for Respondent No. 1

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

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE K.A.PUJ

Date of decision: 17/07/2002

COMMON ORAL JUDGEMENT (Per : MR.JUSTICE K.A.PUJ)

Since common question is involved in these three references, the same are disposed of by this common judgment.

2.

ITR No.43 of 1992 is in respect of assessment year 1981-82 and the following question of law is referred for the opinion of this Court at the instance of the revenue.

"Whether, the Appellate Tribunal is right in law and on facts in holding that the assessee trust is a specific trust and to tax the same at normal rate?

3.

Though there is slight variation in framing of the question in ITR Nos.416 & 416A of 1992 which are for assessment years 1980-81 and 1982-83 and in ITR No.111 of 1993 which is in respect of assessment year 1985-86, the controversy involved in all the three references is the same.

4.

While drawing the statement of case for assessment year 1981-82, the Tribunal has observed that the assessee's case before the Income-tax Officer was that the assessee was a specific trust and as such, assessment should be made in accordance with the provisions of Section 161(1) of the Act. The ITO further held that the assessee was a discretionary trust and accordingly the assessee was liable to be taxed at the maximum marginal rate.

Being aggrieved of the said order, the assessee has preferred an appeal before the Appellate Assistant Commissioner and relying on the order of the Tribunal in assessee's own case for assessment years 1976-77 and 1977-78 in ITA Nos.2153 and 2154/Ahd/1980 dated 22-8-1981, the Appellate Assistant Commissioner directed the ITO to treat the assessee as specific trust and tax the income at normal rate applicable to specific trust.

Being aggrieved by the said order, the department filed an appeal before the Tribunal and relying on its earlier decision, the Tribunal has confirmed the view taken by the Appellate Assistant Commissioner.

5.

The earlier order of the Tribunal has given rise

to Income-tax Reference No.131 of 1984 which was decided by this Court on 11-11-1998. In that case, the order of the Commissioner passed under Section 263 was challenged by the assessee before the Tribunal and the Tribunal has set aside the said order and restored the order of the Income-tax Officer wherein the ITO has taken the view that the assessee was a specific trust and the income was liable to be taxed at the normal rate as applicable to the specific trust. Since the order passed by the ITO for assessment years 1976-77 and 1977-78 was upheld by this Court in the above reference, we are of the view that the assessee is a specific trust and income of the assessee trust is liable to be taxed at the normal rate as it is applicable to specific trust.

We, therefore, answer the questions referred to us in all these references in the affirmative i.e. in favour of the assessee and against the revenue.

6.

All the references are accordingly disposed of with no order as to costs.

(M.S. Shah,J) (K.A. Puj,J) zgs/-

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