Specified beneficiary shares in a trust prevent assessment as an Association of Persons under representative taxation rules.

Where a trust has beneficiaries with specified and known shares, its income falls within representative assessment under the Income-tax Act, 1961. On that basis, the Madras HC held that such income could not be assessed in the status of an Association of Persons under section 161 or section 161(1A). The court therefore answered the question against the Revenue and in favour of the assessee, holding that the trust income was not liable to AOP assessment.

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Issues: Whether the income of a trust with specified and known shares of beneficiaries could be assessed in the status of an Association of Persons under section 161 of the Income-tax Act, 1961.

Analysis: The assessment years were 1985-86 to 1989-90. The shares of the beneficiaries were specified and known, and the trust income was therefore governed by the provisions relating to representative assessment. On that footing, the income could not be assessed as an Association of Persons under section 161 and section 161(1A) of the Income-tax Act, 1961.

Conclusion: The question was answered against the Revenue and in favour of the assessee; the trust income was not liable to be assessed in the status of an Association of Persons.

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