Niruben Ashokbhai Mehta Family Trust Vs ITO (ITAT Ahmedabad)
Maximum Marginal Rate Applied Because Trust Selected “AOP/BOI” in ITR — But Whether It Qualifies as ‘Individual’ u/s 164(3) for Will-Based Trust Requires Verification; Matter Remanded
In this appeal, Niruben Ashokbhai Mehta Family Trust challenged the CPC’s intimation u/s 143(1), wherein it was assessed as an AOP/BOI & taxed at the maximum marginal rate (MMR) under section 164. The Assessee had filed the return for AY 2024-25 showing income of Rs. 2,94,000/- & claiming refund. In the ITR, it had itself selected status: AOP/BOI and answered “No” to the specific questions that determine whether section 164(3) relief (individual rates) can apply—namely whether the trust was created by a Will, whether it was the only trust under such Will, and whether beneficiaries’ shares were determinate. Based on these self-declared fields, CPC applied section 164(1) & levied MMR @ 30% plus surcharge, interest u/s 234B/234C & additional tax.
Before the CIT(A), the Assessee argued that though the return selected AOP/BOI, the trust was actually a Will-created family trust & should be taxed at individual slab rates as per binding Gujarat High Court decisions in Deepak Family Trust & Harsiddh Specific Family Trust. These decisions hold that a trust created under a Will, being the only trust declared by the testator & having identifiable dependent relatives as beneficiaries, must be assessed in the status of “individual” & not as AOP. The Assessee contended that the CPC could not make debatable adjustments under section 143(1).
The CIT(A), however, emphasized that the ITR declarations showed indeterminate beneficiary shares & that beneficiaries were not disclosed as required. Relying on C.V. Divakaran Family Trust, Surendranath Gangopadhyaya Trust & Piarelal Sakseria Family Trust, CIT(A) held that discretionary trusts fall squarely under section 164(1) & must be taxed at MMR. However, he accepted the Assessee’s contention that surcharge is not leviable since income was below Rs. 50 lakhs & directed its deletion.
Before the Tribunal, the Assessee reiterated that the trust was created under a Will & satisfied Gujarat HC conditions for taxation as an individual. The Tribunal noted that crucial factual verification was never carried out—neither CPC nor CIT(A) examined the Will, trust deed, beneficiary details, or whether the trust was the only trust declared by the testator. These are mandatory conditions for escaping MMR under section 164(3). Tribunal observed that while the CIT(A) was justified in treating CPC’s 143(1) action as correct based on the declarations in the return, the deeper legal issue claimed by the Assessee required proper examination.
Since the Assessee had now produced judicial support & claimed fulfilment of section 164(3) exceptions, Tribunal held that the matter must be remanded to the Assessing Officer to verify:
— whether the trust was created under a Will
— whether it is the only trust under such Will
— whether beneficiaries are dependent relatives & identifiable
— whether the trust falls within section 160(1)(iv)
— whether beneficiaries’ shares are determinate on proper reading of the Will & trust deed
Only after such verification can it be decided whether the Assessee merits assessment as “individual” under Gujarat HC rulings or whether MMR under section 164(1) applies. Accordingly, Tribunal restored the matter to the AO for de-novo adjudication & allowed the appeal for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
