COMMISSIONER OF INCOME-TAX V. HAMENDRA FAMILY TRUST

ITR/238/1985

AI Insights

The case before the High Court of Gujarat involved the Commissioner of Income-Tax contesting the method of income assessment for the Hamendra Family Trust for the assessment year 1978-79. The primary legal question was whether the income of the trust should be assessed on a substantive basis or a protective basis, the latter being suggested by the Income-tax Officer. The court referenced and followed precedents set by earlier decisions, particularly the K.T. Doctor vs. CIT and CIT vs. Mangaldas Bechardas Family Trust, which had established that trusts could be partners in partnership firms and their incomes should be assessed directly in the hands of the trusts themselves, not protectively against individual partners.

• Counselvise Citation: [2000] 140 COUNSELVISE.COM (IT) 677589 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 06-11-2000
• Assessment Year: misc
• Other Referred Cases: K.T. Doctor vs. CIT, CIT vs. Mangaldas Bechardas Family Trust, CIT vs. Hemendra Family Trust
• Laws Referred To: Income Tax Act
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: R K PATEL
• Assessee Lawyers: B B NAIK
• Keywords: Assessment; Income Tax; Protective basis; Substantive basis; Trust
• Section: 124 ITR 501; 236 ITR 574; 230 ITR 744

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 238 of 1985 For Approval and Signature: Hon'ble CHIEF JUSTICE MR DM DHARMADHIKARI and Hon'ble MR.JUSTICE M.S.SHAH ============================================================ 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 Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus HAMENDRA FAMILY TRUST -------------------------------------------------------------- Appearance: MR BB NAIK for Petitioner MR RK PATEL for Respondent No. 1 -------------------------------------------------------------- CORAM : CHIEF JUSTICE MR DM DHARMADHIKARI and MR.JUSTICE M.S.SHAH Date of decision: 06/11/2000 ORAL JUDGEMENT (Per : CHIEF JUSTICE MR DM DHARMADHIKARI) The following substantial question of law for the assessment year 1978-79 has been referred to us for answer at the instance of the revenue :- \"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal has been right in law in holding that the assessment in the case of the assess trust was required to be made on a substantive basis and not on a protective basis as held by the Income-tax Officer ?\" 2. The learned counsel appearing for the revenue as also the learned counsel appearing for the assessee state that the question referred to in this reference is squarely covered by the decision of Division Bench of this Court in K.T. Doctor vs. CIT, reported in (1980) 124 ITR 501 which was followed by another Division Bench of this Court in the case of CIT vs. Mangaldas Bechardas Family Trust, (1999) 236 ITR 574. It has also been informed that the appeal of the department against the decision in the K.T. Doctor (Supra) has been dismissed by the Supreme Court reported in (1998) 230 ITR 744. 3. In the case of the same assessee, similar question of law raised for the earlier assessment years was answered in favour of the assessee relying on the decision in the case of K.T. Doctor vs. CIT reported in (1980) 124 ITR 501. A copy of the order of this Court passed on 13.11.1987 in the case of CIT vs. Hemendra Family Trust (the assessee herein) in Income Tax Reference No. 4 of 1984 has been placed before us for perusal. In the case of K.T. Doctor and Mangaldas Bechardas Family Trust (Supra), the Division Bench of this Court had an occasion to consider similar question and it has been held that a trust can be a partner in a partnership firm and the income derived by that trust has to be substantively assessed in the hands of the trust. There cannot be any assessment on protective basis against the individual partner of the trust. As the question posed before us has been squarely answered by this Court in two cases mentioned above, the question has to be answered in favour of the assessee and against the revenue. The reference is accordingly disposed of with no order as to costs. (D.M. Dharmadhikari, CJ) (M.S. Shah, J.) sundar/- "