Determinate trust shares prevent assessment of trustees as a body of individuals, even when the trust carries on business.
Where a trust has determinate and ascertainable beneficiary shares, its income must be assessed in the same manner and to the same extent as it would be in the hands of the beneficiaries. The fact that the trust carries on business does not, by itself, justify assessment of the trustees as a separate body of individuals. The beneficiaries' minority was treated as immaterial, and did not affect the assessment principle. On this reasoning, assessment in the status of a body of individuals was not justified, and the impugned assessment treatment was set aside.
Issues: Whether the income of a trust carrying on business, where the beneficiaries had determinate shares and were minors, could be assessed in the hands of the trustees as a body of individuals instead of being assessed in the same manner and to the same extent as in the hands of the beneficiaries.
Analysis: The beneficial interests were fixed and ascertainable under the trust deed. The fact that the trust carried on business did not alter the character of the assessment where the beneficiaries' shares were known or determinate. The circumstance that the beneficiaries were minors was held to be immaterial and, if anything, supported the conclusion that their consent to the trustees carrying on business was not relevant.
Conclusion: The assessment of the trust income in the status of a body of individuals was not justified. The income could be assessed in the hands of the beneficiaries or the trustees only in the same manner and to the same extent as it would have been assessed in the hands of the beneficiaries.
Final Conclusion: The writ petition succeeded and the impugned assessment treatment was set aside.
Ratio Decidendi: Where the beneficiaries of a trust have determinate shares, the trust income must be assessed in the same manner and to the same extent as in the hands of the beneficiaries, and the mere fact that the trust carries on business does not justify assessment of the trustees as a separate body of individuals.
TaxTMI 
AI Drafter ✕
TaxTMI 
