Rc/229/1996 Of The Commissioner Of Income Tax Vizag v. Vijaya Family Trust Kakinada

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLAREFERENCE CASE No.229 of 1996 Dated:25.11.2011 Between: Commissioner of Income Tax,Visakhapatnam. …Applicant and Vijaya Family Trust,Kakinada. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.229 of 1996 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) The Commissioner of Income Tax,Visakhapatnam, got the following question referredunder Section 256(1) of the Income Tax Act, 1961, forthe decision of this Court. Whether on the facts and in thecircumstances of the case, the Tribunal isjustified in directing the A.O to tax at themaximum marginal rates only the income ofeach beneficiary and not the aggregate incomeof all the beneficiaries in the hands of theTrust? To the extent necessary, the fact of the matteris that the respondent (assessee) is a Trust carrying on money lending business. In their return for theassessment year 1988-1989 they disclosed the incomeunder the head “money lending business” as well asincome under the head “other sources” being dividends,interests and bank interests. During the scrutiny of thereturn it was contended by the assessee that theincome admitted should not be charged to tax at themaximum marginal rate. The plea was rejected by theAssessing Officer, who by applying the provisions ofSection 161(1A) of the Act applied the maximummarginal rate of 52.5%. The appeal was also dismissedby the Commissioner of Income Tax (Appeals). Onappeal, the Income Tax Appellate Tribunal relying onthe decision of the Special Bench of the Tribunal inMohammed Omar Family Trust v Income Tax Officer[[1]]held that where the beneficiaries are knownand their shares are determined, the tax at themaximum marginal rate is only attracted on the wholeof the income of the beneficiary and not on theaggregate income of all the beneficiaries in the hands ofthe Trust. The Tribunal remanded the issue to theAssessing Officer to decide it afresh. Being aggrieved,the assessee as well as the Revenue sought reference ofthe question to the decision of this Court. The Junior Standing Counsel for Income Tax has brought to our notice that the same question wasalready decided by a Division Bench of this Court inR.C.No.145 of 1992, dated 03.07.2003, in favour of theassessee and against the Revenue agreeing with thedecision of the Special Bench in Mohammed Omar Family Trust . Following the same, the reference isanswered against the Revenue and in favour of theassessee. The Reference Case shall stand disposed ofaccordingly without any order as to costs. _______________ (V.V.S.RAO, J) 25.11.2011vs ____________________(B.N.RAO NALLA, J) [1]40 IT D 1