Smt. Pashiben Prajapati Family Trust (DISC) Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) in Ahmedabad addressed the tax treatment of the trust declared by Smt. Pashiben Shambhubhai Prajapati through her notarized will, dated July 21, 2006, which came into effect upon her death on October 2, 2006. This ruling focused on the application of Section 164(1) and the denial of Chapter VI-A deductions.
Background of the Case
The trust was set up to benefit Smt. Pashiben’s two sons—Shri Dhulabhai Shambhubhai Prajapati and Shri Ashokbhai Shambhu Prajapati—along with their wives, children, and families. The revenue authorities contended that the trust was a private discretionary trust. Since the shares of the beneficiaries were indeterminate or unknown, the income was taxed at the maximum marginal rate. They further argued that no deductions under Chapter VI-A were allowable.
Assessee’s Argument
The assessee argued that the trust is the only trust declared by Smt. Pashiben Shambhubhai Prajapati for her family’s benefit. According to them, the trust should be taxed as an individual, and income tax rates should be applied in a slab manner, rather than at the maximum marginal rate. Additionally, the assessee claimed eligibility for deductions under Section 80C of Chapter VI-A.
