Rc/6/1997 Of Commissioner Of Income Tax Hyd v. M/S Jandj Laboratory

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLAREFERENCE CASE No.6 of 1997 Dated:25.11.2011 Between: Commissioner of Income Tax,A.P.II, Hyderabad. …Applicant and M/s.M.K.N.Patni Family Trust,Hyderabad. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOAND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.6 of 1997 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) The Commissioner of Income Tax, A.P.II,Hyderabad, got the following questions referred underSection 256(2) of the Income Tax Act, 1961, for thedecision of this Court. Whether on the facts and in thecircumstances of the case, the ITAT was correctin law in holding that the entire income of thetrust is not to be taxed in the hands of thetrustee at maximum marginal rate in the statusof AOP? Whether on the facts and in thecircumstances of the case, the ITAT was correctin directing to tax the income of eachbeneficiary separately at the maximum marginalrate. To the extent necessary, the fact of the matteris that the respondent (assessee) is a Trust carrying onbusiness in Transport Commission Agency in the nameand style “Bombay Andhra Transport Syndicate”. Intheir return for the assessment year 1989-1990 theydisclosed the income under the head “Net income fromM/s.Bombay Andhra Transport Synicate”. During thescrutiny of the return it was contended by the assesseethat the income admitted should not be charged to taxat the maximum marginal rate. The plea was rejectedby the Assessing Officer, who by applying the provisionsof Section 161(1A) of the Act applied the maximummarginal rate. The appeal was partly allowed by theCommissioner of Income Tax (Appeals). On appeal, theIncome Tax Appellate Tribunal relying on the decisionof the Special Bench of the Tribunal in Mohammed Omar Family Trust v Income Tax Officer[[1]]heldthat where the beneficiaries are known and their sharesare determined, the tax at the maximum marginal rateis only attracted on the whole of the income of thebeneficiary and not on the aggregate income of all thebeneficiaries in the hands of the Trust. The Tribunalupheld the order of the Commissioner of Income Tax. The Junior Standing Counsel for Income Taxhas 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