1984 (2) TMI 131 - AT - Income Tax

Tribunal excludes section 161 amount from 'gross total income' for capital gains tax exemption

The Tribunal upheld the AAC's decision, ruling that the amount assessed under section 161 should be excluded from 'gross total income' for the purpose of ... Capital Gains, Gross Total Income Issues:- Interpretation of 'gross total income' under section 80T(a) of the Income-tax Act, 1961.- Treatment of income paid to beneficiary in trust's 'gross total income'.Analysis:1. The appeal and cross-objection were heard together concerning the assessment of a private trust as an AOP for the year 1980-81, involving capital gains tax exemption under section 80T(a) of the Income-tax Act, 1961.2. The dispute arose when the assessee claimed that the capital gains of Rs. 8,064 should be exempt from tax as the gross total income did not exceed Rs. 10,000 after deducting the amount distributed to the beneficiary. The ITO disagreed and assessed the gross total income at Rs. 17,750, denying the exemption.3. The AAC allowed the assessee's appeal, citing a similar case precedent. The department's representative argued that the amount payable to the beneficiary cannot be deducted to arrive at 'gross total income' as defined in section 80B(5) of the Act.4. The assessee's representative contended that the trust deed did not specify treatment for surplus arising from asset conversion, distinguishing between income assessable under sections 161 and 164 of the Act. Referring to a Bombay High Court decision, the representative argued that the amount assessed under section 161 should be excluded from 'gross total income.'5. The department's representative countered, distinguishing the High Court decision's applicability to 'total income' and 'gross total income' under section 80B(5) of the Act.6. The Tribunal analyzed the definitions of 'gross total income' and 'total income' under the Act, referencing the High Court decision regarding income assessed in the hands of a beneficiary. It concluded that the amount assessed under section 161 should be excluded from 'gross total income,' upholding the AAC's decision.7. The Tribunal rejected the cross-objection as the AAC did not address the specific ground in the order, leading to its dismissal.8. Ultimately, both the departmental appeal and the assessee's cross-objection were rejected based on the interpretation of 'gross total income' and the treatment of income paid to the beneficiary in determining tax liability.