COMMISSIONER OF INCOME-TAX V. GULATI FAMILY TRUST

ITR/163/1992

AI Insights

The case revolves around the question of whether the Gulati Family Trust, assessed in the status of an Association of Persons (A.O.P.), was liable to deduct tax at source under Section 194A of the Income-tax Act when paying interest to its creditors. The Income Tax Officer (ITO) had levied interest for late payment, which was contested by the Trust. The CIT (Appeals) and the Tribunal ruled in favor of the Trust, leading to this reference by the revenue. The High Court, referencing a previous decision, upheld that the trustees are considered individuals for tax purposes, and thus Section 194A does not apply, negating any interest liability under Section 201(1A).

• Counselvise Citation: [2004] 140 COUNSELVISE.COM (IT) 734059 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 28-01-2004
• Assessment Year: misc
• Other Referred Cases: M.L. Family Trust v. State of Gujarat, (1995) 213 ITR 152
• Laws Referred To: Income-tax Act
• Result in Favour of: Respondent
• Court: HIGH COURT
• Assessee Lawyers: MAUNA BHATT
• Keywords: Assessment Year; Deduction at Source; Income Tax; Interest; Trust
• Section: 201(1A); 194-A

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 163 of 1992 For Approval and Signature: HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE A.M.KAPADIA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus GULATI FAMILY TRUST -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 163 of 1992 MRS MAUNA BHATT FOR MR MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE A.M.KAPADIA Date of decision: 28/01/2004 ORAL JUDGEMENT (Per : HON'BLE MR.JUSTICE M.S.SHAH) In this reference at the instance of the revenue, following question has been referred for our opinion in respect of the assessment year 1983-84:- \"Whether, the Appellate Tribunal is right in law and on facts in cancelling the interest under section 201 (1A) of the Income-tax Act?\" 2. The respondent assessee is a Private Specific Trust assessed in the status of an A.O.P. The beneficiaries are known and their shares are determinate. During the assessment year under consideration, the assessee paid interest to the tune of Rs.4,14,934/- to its creditors. Out of the aforesaid payment, the respondent deducted tax at source to the tune of Rs.32,361/- and paid the same to the Government Account on 17.7.1983. According to the ITO, the payment was late by 11 months and hence the assessee was liable to payment of interest u/s. 201 (1A) of the Income-tax Act. By means of an order dated 24.12.1985 the ITO levied interest to the tune of Rs.3,553/- Before the CIT (Appeals), the assessee contended that it was not liable to deduct tax at source within the meaning of section 194-A of the Income-tax Act and, therefore, there was no liability to pay interest under section 201 (1A) of the Income-tax Act. The CIT (Appeals) held in favour of the assessee and the Tribunal confirmed the said decision. Therefore this reference is filed at the instance of the revenue. 3. We have heard Mrs. Mauna Bhatt, learned Standing Counsel for the revenue. Though served, none appears on behalf of the respondent assessee. 4. At the hearing of the reference today, our attention is drawn to the decision dated 6.11.2001 of this Court in ITR No.152 of 1993 and connected matters wherein this Court has followed the decision of this Court in M.L. Family Trust v. State of Gujarat, (1995) 213 ITR 152. In the said case the assessee filed an application for quashing the complaint against the Trust being prosecuted for offences relating to non-deduction of tax under Section 194A of the Income-tax Act. In that case it has been specifically held that the status of the trustees would be that of individual and section 194A of the Income-tax Act would not apply and therefore there was no question of deduction of tax and hence the complaint was liable to be quashed. Since this Court has consistently held that trustees are to be treated as individual, Section 194A of the Income-tax Act would not apply and hence there is no liability to pay interest under Section 201 (1A) of the Income-tax. In view of the above discussion, we answer the question in the affirmative i.e., in favour of the assessee and against ther revenue. The reference stands disposed of accordingly. (M.S. Shah, J.) (A.M. Kapadia, J.) --- (karan) "