| Case ID |
0b876c25-3b41-450b-96c1-1e4af1874b3d |
| Body |
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| Case Number |
Income-tax Reference No. 1 of 1997 |
| Decision Date |
Feb 26, 1998 |
| Hearing Date |
|
| Decision |
The court held that the character of a discretionary trust cannot be changed by a resolution passed by the trustees. The assessment of the discretionary trust was required under section 164 of the Income Tax Act, 1961, where the shares of beneficiaries were indeterminate. The Income-tax Officer was justified in applying the flat rate of 65 percent tax as the trust deed stipulated that the trustees had the discretion to distribute the income among beneficiaries. The court confirmed that the representative assessee continued to be a discretionary trust despite the resolution for distribution of net income to one beneficiary. |
| Summary |
In the case of 'COMMISSIONER OF Income tax Vs AMBALAL SARABHAI D. TRUST N0.5', the Gujarat High Court addressed significant issues regarding the nature of discretionary trusts under the Income Tax Act, 1961. The case focused on whether the character of a discretionary trust could be altered through a trustee resolution. The court determined that the discretionary nature of the trust remained intact, emphasizing that the distribution of income to beneficiaries does not fix their shares. The court's ruling clarified that the Income-tax Officer was correct to assess the trust under section 164, applying a flat tax rate of 65 percent due to the indeterminate shares of the beneficiaries. This case reinforces the principles governing discretionary trusts in tax law, shedding light on the obligations of trustees and the nature of beneficiary interests. It affirms that mere resolutions by trustees cannot modify the inherent characteristics of discretionary trusts, a critical consideration for tax assessments in similar cases. The decision serves as a precedent for future cases involving discretionary trusts and highlights the importance of understanding the legal framework surrounding trust income and taxation. |
| Court |
Gujarat High Court
|
| Entities Involved |
Not available
|
| Judges |
R. K. ABICHANDANI,
KUNDAN SINGH
|
| Lawyers |
B. B. Nayak,
Manish R. Bhatt,
R. K. Patel,
D. A. Mehta
|
| Petitioners |
COMMISSIONER OF Income tax
|
| Respondents |
AMBALAL SARABHAI D. TRUST N0.5
|
| Citations |
1999 SLD 623,
1999 PTD 4166,
(1998) 231 ITR 540,
(1999) 79 TAX 161
|
| Other Citations |
CIT v. Kamalini Khatau (1994) 209 ITR 101 (SC),
Mrs. Arundhati Balkrisha v. CIT (1989) 177 ITR 275 (SC),
CIT v. Ambalal Sarabhai D. Trust (1998) 231 ITR 528 (SC),
CIT v. Gosar Family Trust (1991) 189 ITR 18 (Guj.),
CWT v. Trustees of H. E. H. Nizams Family (Remainder Wealth) Trust (1977) 108 ITR 555 (SC),
C. R. Nagappa v. CIT (1969) 73 ITR 626 (SC),
Trustees of Putlibai R. F. Mulla Trust v. CWT (1967) 66 ITR 653 (Born.)
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
14,
161
|