TaxTMI 
TaxTMI 
1992 (3) TMI 23
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....essed taking the status of the assessee as 'individual' and not 'association of persons' and, consequently, the deduction under section 80L of the Income-tax Act, 1961, should be allowed?" 2. Shortly stated, the facts are that the assessee is a discretionary trust and was assessed in the status of an "association of persons". The assessee claimed relief under section 80L of the Income-tax Act, 1961. The Income tax Officer was of the view that, having regard to the provisions of Explanation 2 to section 164 of the Income-tax Act, 1961, a discretionary trust has to be taxed as an association of persons and, therefore, deduction under section 80L was not available to the assessee-trust. The Commissioner of Income-tax (Appeal....
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....f tax where share of beneficiaries unknown. -(1) Subject to the provisions of sub-sections (2) and (3), where any income in respect of which the persons mentioned in clauses (iii) and (iv) of subsection (1) of section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as 'relevant income', part of relevant income' and 'beneficiaries', respectively), tax shall be charged on the re....
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....he provision contained in the main section 164(1) which is, admittedly, applicable in this case, Section 164(1) only lays down the rate of tax applicable to a discretionary trust. It is not concerned with the manner of computation of total income. In fact, this section comes into play only after the income has been computed in accordance with the other provisions of the Income-tax Act, 1961. Since the determination of the status of an assessee is a part of the process of computation of income, it is necessary to look into the general principles for determining whether the status of the trustees of a discretionary trust can be taken to be as "an association of persons" or as an "individual". 8. The Supreme Court in CIT v. Indira Balkrishn....
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.... 737, the Full Bench of the Kerala High Court held (Velu Pillai J. dissenting) that the term "individual" in section 3 of the Wealth-tax Act, includes a Moplah Muslim family which is governed by the usages similar to those that governed a Hindu undivided family. 12. It is now well-settled that the word "individual" does not necessarily and invariably always refer to a single natural person. A group of individuals may as well come in for treatment as an individual under the tax laws if the context so requires. Reference may be made in support of this proposition, to the Full Bench decision of the Kerala High Court in Kerala Financial Corporation v. WTO [1971] 82 ITR 477, where the statutory Corporation was held to be assessable as an indi....
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....of persons, or (ii) at the rate of sixty-five per cent., whichever course would be more beneficial to the Revenue." 14. Before such amendment, the provisions created a fiction whereby, in the case of a discretionary trust, the tax exigible was the tax payable by an association of persons or at the rate of 65 per cent. whichever course would be more beneficial to the Revenue. The expression "as if the relevant income or part of relevant income were the total income of an association of persons" is a clear pointer that the Legislature never conceived of assessment of a trust, answering the description of section 164(1), as an association of persons in the ordinary course. The assessability as an association of persons was only by ....