TaxTMI 
TaxTMI 
2025 (11) TMI 1903
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....in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in holding to charge income tax at maximum marginal rate @ 30%. 4. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in holding to charge interest u/s 234B of I.T. Act of Rs. 4,356. 5. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in holding to charge interest u/s 234C of I.T Act of Rs. 3,667. 6. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in holding to charge additional tax of Rs. 1,150. 7. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income Tax (Appeals) has grossly erred in raising demand of Rs. 58,882. 8. Your appellant reserves the right to add, alter, amend all or any of the above grounds of appeal as may be advised from time to time." 3. The brief facts of the case are that the assessee, Niruben Ashokbhai Mehta Family Tr....
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.... beneficiaries' shares were determinate or known, that all beneficiaries had income below the basic exemption limit, and that the trust was the only trust declared under a Will. Based on these declarations, the CIT(A) held that the trust fell within the provisions of section 164(1) and 164(3), which mandate taxation at the maximum marginal rate when shares of beneficiaries are "indeterminate" or "unknown". The CIT(A) also relied on the decision of the Hon'ble Kerala High Court in CIT v. C.V. Divakaran Family Trust (2002) 254 ITR 222 (Ker.), wherein it was held that where beneficiaries' shares are indeterminate, the trust must be assessed at the maximum marginal rate, and that the statutory definition leaves no scope for alternative interpretation. The Kerala High Court further relied on Surendranath Gangopadhyaya Trust v. CIT (1983) 142 ITR 149 (Cal.) and Piarelal Sakseria Family Trust v. CIT (1982) 136 ITR 583 (MP), which also held that discretionary trusts with indeterminate beneficiary shares must be taxed at maximum marginal rates. Applying these judicial principles, the CIT(A) rejected the assessee's claim of individual status and upheld the maximum marginal rate of taxation. ....
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.... in writing whether testamentary or otherwise receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees." 10. Section 164(1) reads as under: "164. (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 sub-section (1) of section 160 are liable as representative assessee's 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, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate." 11. Section 164(3) provides exceptions and reads: "164(3) In a case where the relevant income is receivable under a trust declared by any person by will and such trust is the only trust so declared by him; or where none of the beneficiaries has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case of an association of persons; or where the relevant in....
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.... extensively on the judgment of the Kerala High Court in CIT v. C.V. Divakaran Family Trust [2002] 122 Taxman 405 (Ker.), which held that "maximum marginal rate" means the rate applicable to the highest slab of income for an AOP, and further supported by the decisions of the Calcutta High Court in Surendranath Gangopadhyaya Trust v. CIT [1983] 142 ITR 149 and the Madhya Pradesh High Court in Piarelal Sakseria Family Trust v. CIT [1982] 136 ITR 583, the Gujarat High Court confirmed that discretionary trusts with indeterminate shares cannot be assessed at concessional or individual rates. It held that the Tribunal had committed an error in directing assessment otherwise than at the maximum marginal rate, and therefore set aside the orders below, directing the Assessing Officer to reassess the matter afresh strictly in light of the statutory provisions and the judicial interpretation mandating application of the maximum marginal rate. In the case of the Hon'ble Kerala High Court in CIT v. C.V. Divakaran Family Trust (2002) 254 ITR 222 (Ker.), the Court undertook a detailed examination of the scheme of section 164 of the Income-tax Act and held that the provision operates as an indepen....
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....the trustees acted for the benefit of individuals. The Hon'ble Madhya Pradesh High Court in Piarelal Sakseria Family Trust v. CIT (1982) 136 ITR 583 (MP) also dealt with the issue of taxation of discretionary trusts where the beneficiaries' shares were not specified. The Court held that the statutory provisions contained in section 164 were designed to address situations where the allocation of income was uncertain and therefore capable of being manipulated to reduce tax liability. The Court noted that when the trust deed did not specify the proportionate entitlement of beneficiaries and the trustees retained discretion to distribute income, the beneficiaries' shares were necessarily indeterminate. In such cases, the trustee, as a representative assessee under section 160(1)(iv), was liable to be taxed at the maximum marginal rate. The Court also rejected the contention that the trust should be treated as an individual for tax purposes, holding that such treatment was only available where the trust satisfied the conditions contemplated in the proviso to section 164. Since the trust before it did not fall within any statutory exception, the Court held that the maximum marginal rate ....