Trust income assessed individually for beneficiaries, not as association of persons. Trustees don't need beneficiary consent.

The appeal involved the assessment of a trust as an association of persons for the assessment year 1984-85. The court upheld the decision that the trust income should be assessed in the hands of the beneficiaries individually, not as an association of persons, following legal principles from previous judgments. The appeal was dismissed, ruling against the Revenue's argument and affirming that trustees do not require consent from beneficiaries to carry out their duties in assessing trust income.

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Issues involved:
Assessment of a trust as an association of persons for the assessment year 1984-85.

Analysis:
The judgment pertains to an appeal against the order of the Income-tax Appellate Tribunal, Madras Bench, regarding the assessment of an assessee-trust for the assessment year 1984-85. Initially, the assessment was completed under section 143(1) with the total income determined at Rs. 1,99,940. However, the Commissioner of Income-tax found the Assessing Officer's order erroneous as the trust was not assessed as an association of persons. Consequently, the assessment was set aside, and a reassessment was completed under section 143(3) in 1990.

Subsequently, the assessee appealed before the Commissioner of Income-tax (Appeals), who, following a previous decision involving a similar issue, held that the trust income should be assessed in the hands of the beneficiaries individually, not as an association of persons. The Revenue then appealed to the Income-tax Appellate Tribunal, Chennai Bench, which upheld the decision of the Commissioner of Income-tax (Appeals), leading to the current appeal.

The substantial question of law raised in this appeal was answered against the Revenue by referring to a Division Bench judgment of the Bombay High Court in CIT v. Marsons Beneficiary Trust [1991] 188 ITR 224. The Bombay High Court held that the income of a trust should be assessed as if it were the income of the beneficiary, without distinguishing between different types of trust income. The judgment emphasized that trustees, under the authority of a trust deed, are not equivalent to receivers and do not require consent from beneficiaries to carry out their duties.

This legal principle was reiterated by a Division Bench of the Madras High Court in a previous judgment. Consequently, the substantial question of law was answered against the Revenue, and the appeal was dismissed.

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