Taxability of discretionary trust distributions confirmed beyond trustees' hands under the governing Supreme Court principle.

Distributions received by an assessee from discretionary trusts were not taxable only in the hands of the trustees under section 164 of the Income-tax Act, 1961. The governing principle was treated as covered by CIT v. Kamalini Khatau, so the earlier High Court view in favour of the assessee could not be sustained. The legal position accepted was that such distributions were not confined to assessment in the trustees' hands, and the question was answered in favour of the Revenue and against the assessee.

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Issues: Whether distributions received by the assessee from discretionary trusts were assessable only in the hands of the trustees under section 164 of the Income-tax Act, 1961, and not in the hands of the assessee.

Analysis: The question had earlier been answered by the High Court in favour of the assessee, but the governing principle was held to be covered by the decision in CIT v. Kamalini Khatau. On that basis, the earlier view could not be sustained and the proper legal position was that the distributions were not assessable only in the hands of the trustees.

Conclusion: The question was answered in the negative, in favour of the Revenue and against the assessee.

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