TaxTMI 
TaxTMI 
1985 (7) TMI 122
X X X X Extracts X X X X
X X X X Extracts X X X X
....1978-79 to 1981-82, the ITO had framed the assessments in the hands of the assessee under section 161 of the Act, treating it as 'specified trust'. 4. For the year under appeal, during the course of assessment proceedings, the ITO enquired of the assessee as to whether it would still be assessable under section 161. Vide its letter dated 24-7-1982 (reproduced below), the assessee requested the ITO to assess the trustees and/or beneficiaries. "In continuation of the discussions we had today as desired by you, I am enclosing the deeds of assignment executed by the following beneficiaries in favour of the persons mentioned against their names. (1) Shri Pankaj Jasubhai---Arivindkumar Chandulal Thakkar (HUF) (2) Shri Kanubhai Natwarlal---Kanubhai Chandulal Thakkar (HUF) (3) Shri Bhupendra Ratilal---Ashokkumar Ratilal Thakkar (HUF) (4) Shri Bharatkumar Shantilal---Pravinkumar Chandulal Thakkar (HUF) (5) Shri Pareshkumar Jasubhai---Dhirajlal Natwarlal (HUF) 2. You have appreciated that the beneficiaries under a trust have the right to transfer their beneficial interest under the trust being their properties. However, as desired by your honour we submit the followin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....R 471 (SC) wherein their Lordships have to hold that 'property' is a term of widest import and subject to any limitation which the context may require, it signifies every possible interest, which a person can clearly hold or enjoy. 6. We do hope that the above submissions would be more than required in the instant case. We would request you to kindly assess the trustees and/or the beneficiaries as you may kindly decide upon. However, for the purpose of information, we would submit that till past years, the beneficiaries have been assessed directly and the beneficiaries have also filed their return of income for this assessment year also as has already been submitted to your honour." [Emphasis supplied] 5. Thereafter on 27-7-1982, the ITO framed the assessment in the following manner : "Return showing income of Rs. 2,62,690 was filed on 30-6-1982. Shri S.A. Sukhadia, advocate, represented the assessee in response to the notice issued under section 143(2) of the Act. Assessee is a specific trust doing shroff business. After discussion and from the data made available, total income is worked out as under : ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ove have not been specified as beneficiaries in the deed of trust. In view of this it appears that the Income-tax Officer erred in not determining the amount of tax payable by the trust as a discretionary trust. In the circumstances, the order of assessment passed by the Income-tax Officer appears to be erroneous insofar as it is prejudicial to the interests of revenue. I, therefore, propose to pass an order under section 263 directing the Income-tax Officer to revise the assessment in the case of the trust for the assessment year 1982-83 by assessing the trust as a discretionary trust and determining the amount of tax payable by the trust." 7. In its letter dated 14-7-1984 the assessee objected to the proposal of the Commissioner as under : "Without prejudice to the above and in the alternative the submissions are as under : We may bring to your kind notice that Jigna Natvarlal, one of the six persons alleged to have been not shown as beneficiary in the trust deed is not correct, Jigna Natvarlal is one of the beneficiaries in Group 'A' in the trust deed which can be verified by your honour from the notice given by you to us. With reference to the para 4 of your notice,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iscretionary trust used to become 'specific trust' by passing appropriate resolutions with a view to modify the provisions of the trust. However, after the insertion of the said Explanation, this mischief was 'plugged'. Since, in the instant case even prior to the insertion of the said Explanation the assessee-trust was never held to be a discretionary trust, the provisions of the Explanation to section 164 have been wrongly applied by the Commissioner. In this connection, he further submitted that if we were to ignore the deed of assignment executed by the aforesaid five beneficiaries then the terms and conditions of the original trust would be restored land in that case the assessee-trust would still be 'specific trust'. In other words, the learned counsel for the assessee wanted to impress upon us that by taking action under section 263, the Commissioner has started an exercise in futility. Thereafter, the learned counsel for the assessee invited our attention to sections 3, 8 and 58 of the Indian Trusts Act, 1882, to urge that the beneficiaries under the trust are competent to transfer their interest to whomsoever they desire. In this connection he relied on the decisions of th....