2004 (2) TMI 46

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....rmal rate instead of the maximum marginal rate? 2. Whether the Appellate Tribunal is right in law and on facts in deleting the interest charged under section 217 of the Act?" We have heard learned counsel for the Revenue, Mr. Manish R. Bhatt, in I.T.R. Nos. 67, 74 to 83 and 88 of 1997, Mr. Bharat Naik in I.T.R. Nos. 40, 43 and 44 of 1997, Mrs. Mauna Bhatt in I.T.R. Nos. 32, 36, 37, 38 and 39 of 1997 and Mr. Tanvish U. Bhatt in I.T.R. Nos. 45, 46 and 47 of 1997. Though served, none appears for the respondent-assessees. The facts found and the findings given by the Tribunal as set out in the common order of the Tribunal giving rise to these references are as under: One Mr. Ashok kumar S. Vaswani settled Rs. 5,000 and formed Sharda....

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....n the case of McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 is applicable to the facts of the case. The Tribunal found that the Revenue has accepted Sharda Trust (main trust) as genuine while completing its assessment. The assessment so made has not been disturbed by taking remedial action. There is rather no finding given by the Assessing Officer that formation of the Sharda Trust is a part of a device to avoid payment of legitimate taxes. The Assessing Officer has treated it as a specific trust and the income earned by it has been allocated amongst the beneficiaries as per their share ratio specified in the trust deed. This shows that the Revenue saw no colourable device so far as the formation of the Sharda Trust is concerned. Th....

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....he decision of the Commissioner of Income-tax (Appeals) on the merits, the question of charging interest under section 217 of the Act did not survive. Learned counsel for the Revenue, have submitted that the case was covered by the substantive part of section 164(1) of the Act and, therefore, maximum marginal rate was applicable. Learned counsel also submitted that the entire thing was a colourable device so as to avoid tax liability and, therefore, both the Commissioner of Income-tax (Appeals) and the Tribunal erred in setting aside the protective assessment made by the Assessing Officer against the beneficiary trust. At the outset, we would like to make it clear that though the Revenue had proposed three questions for reference to t....

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....nt year 1984-85 and since each of the beneficiary trusts allocated its income to its beneficiaries with determinate shares and each of those beneficiaries was not beneficiary in any other trust and the income of such individual beneficiary did not exceed the exemption limit, the proviso to section 164(1) was applicable and not the substantive part of section 164(1). The substantive part of section 164(1) would apply where the individual shares of the beneficiaries are indeterminate or not known and the proviso is not attracted. In the facts of the instant case, the findings given by the Tribunal are that the shares of the beneficiaries of the Shard a Trust were determinate at 5 per cent. for each beneficiary and that the individual benefici....