prpri Income Tax on Private Trusts | Determinate & Beneficiaries Share Income Tax on Private Trusts with Determinate & Know Share of Beneficiaries

Income Tax Implications On Private Trusts With Determinate & Know Share of Beneficiaries

Queries

The Querist seeks our advice on the following:

1. What are the implications of tax under the IT Act for gift received by the Trust, being movable or immovable property or money, from relatives?

2. What are the implications of tax under the IT Act for gift received by the Trust, being movable or immovable property or money, from persons other than relatives?

Applicable laws and judicial positions

1. In order to analyse the income tax implications, the beneficiary interest, whether determinate or not, and the status of the Trust under which it shall be so assessable, whether as an ‘association of persons’ or ‘individual’, needs to be understood, in the light of the provisions of the IT Act and various judicial pronouncements of the Hon’ble Supreme Court and Hon’ble High Courts.

2. In this regard, the judicial position held by the Hon’ble Supreme Court, in the landmark case of Commissioner of Wealth Tax vs. Trustees of HEH Nizam’s Family as reported in 1977 AIR 2103 (“Nizam Family case law”) had observed that, an arrangement where the trust, being a discretionary trust, the trustee may choose, from time to time, who among the beneficiaries is to benefit from the trust, and to the extent of such benefit, such trust cannot be considered to be indeterminate. As long as one is able to know the beneficiaries on the valuation date, the trust was held to be determinate[1]

3. Further, trust is an obligation[2] and not a distinct legal person in the eyes of law. Person as defined under S 2 (31) of IT Act does not include a ‘trust’ within its meaning. Though ‘association of persons’ is covered in IT Act within the meaning of ‘persons’, however, the IT Act does not define what constitutes an AoP which under S 2 (31)(v) of the IT Act is an entity or unit of assessment. In the absence of any definition, the words must be construed in their plain meaning. Relying on Commissioner of Income Tax vs. Indira Balakrishna reported in (1960) 39 ITR 546 (SC), it was held that, association of persons means two or more persons who join for a common purpose with a view to earn an income.[3]

4. Here it is pertinent to note that, while income derived from property under a private discretionary trust, where shares of beneficiaries are determinate, is chargeable to tax, in the hands of trustees in representative capacity, is governed by S 161 of the IT Act[4], however the pronouncements of the Hon’ble Courts that have been relied upon herein below are pronouncements with reference to S 164 of the IT Act, which deals with cases where shares of beneficiaries are indeterminate and unknown. Having said so, for being able to proceed with our contention, of whether private discretionary trusts, with determinate share of beneficiary or not, shall be treated as an ‘individual’ or an ‘association of persons’, we have taken the aid of S 164 of the IT Act which is pari materia to S 161 of the IT Act, inasmuch as both the sections do not make any reference to the status of the person under which the Trust shall have to be assessed, i.e., whether the Trust shall be an ‘individual’ or an ‘association of persons’ for the purposes of assessment under Income Tax laws.

5. Therefore, relying on the judgement of the Hon’ble Calcutta High Court in Commissioner of Income Tax vs. Shri Krishna Bandar Trust reported in 1993 201 ITR 989 Cal, it is noted that, under S 164 (1) of IT Act It is an admitted position that a discretionary trust is liable to be charged to tax at the Maximum Marginal Rate of tax (“MMR”). In the main section, as it stands at the relevant time, there is no reference to ‘an association of persons’ and in a case to which the main section is applicable, tax has to be charged at the maximum marginal rate. It is, therefore, clear that it is not permissible to assess the trustees in the status of an ‘association of persons’ with the aid of the provision contained in the main S 164(1) of the IT Act[5]. S 164(1) of the IT Act only lays down the rate of tax applicable to a discretionary trust. It is not concerned with the manner of computation of total income. In fact, this section comes into play only after the income has been computed in accordance with the other provisions of the IT Act. Since the determination of the status of an assessee is a part of the process of compilation of income, it is necessary to look into the general principles for determining whether the status of the trustees of a discretionary trust can be taken to be as ‘an association of persons’ or as an ‘individual’.

6. The Hon’ble Supreme Court in CIT v. Indira Balkrishna (supra), while considering what constitutes an association of persons, held that the word ‘association’ means ‘to join in any purpose’ or ‘to join in an action’. Therefore, ‘association of persons’ as used in S 2 (31)(v) of the IT Act, means an association in which two or more persons join in a common purpose or common action. The association must be one the object of which is to produce income, profits or gains. In the present case, neither the trustees nor the beneficiaries can be considered as having come together with the common purpose of earning income. The beneficiaries have not set up the trust. The trustees derived their authorities under the terms of the deed of trust. Neither the trust nor the beneficiaries have come together for a common purpose. They are merely in receipt of income. The mere fact that the beneficiaries or the trustees being representative assessees are more than one, cannot lead to the conclusion that they constitute ‘an association of persons’

7. Further, in Suhashini Karuri v. WTO reported in [1962] 46 ITR 953, Hon’ble Calcutta High Court held that joint trustees must be taken to be a single unit in law and not as an ‘association of persons’ and there is nothing wrong in treating such a unit as ‘an individual’.

8. Furthermore, in CIT v. Sodra Devi [1957] 32 ITR 615, the Hon’ble Supreme Court held that the word ‘individual’ does not mean only a human being, but is wide enough to include a group of persons forming a unit.

9. In Mammad Keyi v. WTO [1966] 60 ITR 737, the Full Bench of the Hon’ble Kerala High Court held (Velu Pillai J. dissenting) that the term ‘individual’ in S 3 of the Wealth-tax Act, includes a Moplah Muslim family which is governed by the usages similar to those that governed a Hindu undivided family.

10. Therefore, it is well-settled that the word ‘individual’ does not necessarily and invariably always refer to a single natural person. A group of individuals may as well come in for treatment as an individual under the tax laws if the context so requires. Reference may be made in support of this proposition, to the Full Bench decision of the Hon’ble Kerala High Court in Kerala Financial Corporation v. WTO reported in (1971) 82 ITR 477 (Ker), where the statutory corporation was held to be assessable as an individual. The said decision drew strength from a number of decisions of the Hon’ble Supreme Court including that in Sodra Devi’s case (supra). The other decision is Andhra Pradesh State Road Transport Corporation v. ITO [1964] 52 ITR 524 (SC). We may also refer to the decision in Jogendra Nath Nashar v. CIT [1969] 74 ITR 33, wherein the Hon’ble Supreme Court has observed that there could be no reason why the word ‘individual’ in S 3 of the Indian Income-tax Act, 1922, should be restricted to human being alone and not to juristic entities.

11. The matter can be viewed from another angle also. Before its amendment by the Finance (No. 2) Act, 1980, S 164(1) read as follows :

“Subject to the provisions of Sub-sections (2) and (3), where any income in respect of which the persons mentioned in Clauses (iii) and (iv) of Sub-section (1) of Section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as ‘relevant income’, ‘part of relevant income’ and ‘beneficiaries’, respectively), tax shall be charged –

(i) as if the relevant income or part of relevant income were the total income of an association of persons, or

(ii) at the rate of sixty-five per cent., whichever course would be more beneficial to the Revenue.”

12. Before such amendment, the provisions created a fiction whereby, in the case of a discretionary trust, the tax exigible was the tax payable by an association of persons or at the rate of 65% (sixty-five percent) whichever course would be more beneficial to the Revenue. The expression as if the relevant income or part of relevant income were the total income of an ‘association of persons’ is a clear pointer that the legislature never conceived of assessment of a trust, answering the description of S 164(1), as an association of persons in the ordinary course. The assessability as an association of persons was only by the artifice of a deeming clause. Therefore, by no stretch of imagination, could either the trustees or the beneficiaries be an association of persons because there is no element of volition on their part which is the essence of association. They do not join of their volition in a common effort or endeavour to produce income. Such are the incidents of an association of persons under the direct taxes.

13. But the amendment effected by the Finance (No. 2) Act, 1980, had done away with the deeming provisions whereby a trust, under S 164(1) of the IT Act could be assessed as though it were an ‘association of persons’.

14. Where, however, a case falls under sub-section (2) of S 164, the tax is chargeable as if the income to be charged were the income of an association of persons. But the fiction of an association of persons as contained in sub-section (2) or for that matter sub-section (3) of S 164 of the IT Act relates only to a charitable or public religious trust but not to a discretionary private trust dealt with by sub-section (1) of S 164. This position has come to stay with effect from the assessment year 1980-81 by reason of the amendment of the said sub-section through the Finance (No. 2) A 1980.

15. Having regard to the facts and circumstances of this case, the Courts have taken a consistent view that the trustees of the assessee-trust have to be assessed in the status of an ‘individual’.

16. Also, the status of the private discretionary trust has been categorised as an ‘individual’ in CBDT Circular no. 6/2012 dated 03-08-2012 – Relaxation from compulsory e-filing of return of income for assessment year 2012-13 – for representative assessees of non-residents and in the case of private discretionary trusts[6].

In light of the above we proceed to address the queries sought by the Querist. 

Taxation of irrevocable & determinate Trust

17. The Trust Deed, clearly defines ‘beneficiary’ and ‘beneficial interest’ vide sub-clauses 1.1.2 and 1.1.3 of Clause 1.1 of the Trust Deed respectively. ‘Beneficiary’ means the persons set out in Annexure 1 of the Trust Deed and ‘Beneficial Interest’ means, with respect to any beneficiary, the beneficial interest of such Beneficiary as determined by the Trustees from time to time as per the Trust Deed. As the beneficiaries are identifiable and their shares are determinate, the trustees can be assessed as representative assessee[7], and the tax shall be levied and recovered from him in the like manner and to the same extent as it would be leviable and recoverable from the person represented by him. Alternatively, assessment can be made in the hand of the beneficiaries.

18. Held in the Nizam Family case law (supra), the assessment of the trustee would have to be made in the same status as that of the beneficiary whose interest is sought to be taxed in the hands of the trustee. Thus, in case of determinate trust, status of trustee would depend upon the status of the beneficiaries and “that the trustee is assessable ‘in the like manner and to the same extent’ as the beneficiary[8].

 19. Circular No. 157 [F.No. 228/8/73-IT (A-II)] dated 26-12-1974 clarified the position giving an option to the department to tax either the representative assessee or the beneficial owner of the income[9] as contemplated in S 166 of the IT Act[10].

20. Income derived from property under a private discretionary trust, where shares of beneficiaries are determinate, is chargeable to tax as under:

a. Where trust income does not include business income [Section 161(1)]

i. Every representative assessee as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially;

ii. He shall be liable to assessment in his own name in respect of that income;

iii. However, any such assessment shall be deemed to be made upon him in his representative capacity only; and

iv. the tax shall, subject to the other provisions, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.

Thus, where there is only one beneficiary;

or,

where there are more than one beneficiary of a private trust and the share falling to each of the beneficiary is determinate, the assessments are to be made on the trustee(s) as a representative assessee under S 161 of the IT Act.

Such assessment will have to be made at the rate applicable to the total income of each beneficiary. Accordingly, separate assessment for each of the beneficiary on whose behalf the income is received by the trustee will have to made.

However, as per S 166 the ITA, department has an option to make direct assessment in the hands of each beneficiary entitled to the income.

The general principle is to charge all income only once. The Assessing Officer should keep this point in view at the time raising the initial assessment either of the trust or the beneficiary and adopt a course beneficial to the Revenue. Having exercised his option once it will not be open to the Assessing Officer to assess the same income for that assessment year in the hands of the other person as clarified in Circular No. 157, dated 26.12.1974 (supra)

b. Where trust income includes business income also [161(1A)[11]]: Notwithstanding anything contained in section 161(1), where the income of the beneficiary in the hands of trustee being representative assessee consists of or includes profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at MMR.

c.  Where maximum marginal rate of tax shall not be chargeable [Proviso to S 161(1A)[12]]:

The maximum marginal rate in the above case shall not be chargeable if such profits and gains are receivable under a trust on fulfilling all of the below 3 conditions:

– declared by any person by will;

– exclusively for the benefit of any relative dependent on him for support and maintenance; and

– such trust is the only trust so declared by him.

21. Relative as per S 2(41) of the IT Act, “in relation to an individual, means the husband, wife, brothers or sister or any other lineal ascendant or descendant of that individual.”

22. Further for the purposes of S 56 (x), for the meaning of ‘relative’ reference has been made to that as defined under Explanation to clause (vii) of the same section which provides an exhaustive definition under which the following persons would be treated as a relative of the donee / recipient:

a. spouse of the individual;

b. brother or sister of the individual;

c. brother or sister of the spouse of the individual;

d. brother or sister of either of the parents of the individual;

e. any lineal ascendant or descendant of the individual;

f. any lineal ascendant or descendant of the spouse of the individual;

g. spouse of the person referred to in clauses (a) to (f) above.

23. The term lineal ascendant or descendant is also an often-used term but never defined in various Indian laws. It means a straight line of relationship either upwards or downwards. For instance, a son, his father and grandfather would constitute a lineal ascendancy. A daughter, her mother and her grandmother or a son, his mother and his grandmother would also constitute a lineal relationship. All that is required is that the relatives should be in a direct straight line. Parallel / horizontal relations, such as cousins and uncles, would not constitute a lineal line. One of the most interesting facets of the above definition is that an uncle / aunt is a relative for a nephew / niece but the converse is not true. So a nephew can receive a gift from his uncle but the very same uncle cannot receive a gift from his nephew without paying tax on the same.

24. In this connection there have been conflicting decisions of the courts as to whether a gift received by a person from his sibling but made from the bank account of his sibling’s son would attract the rigours of this section. Reference can be made to decision of the Hon’ble Rajasthan High Court in PCIT vs. Gulam Farooq Ansari reported in ITA 230/2017 dated 22nd November, 2017 and Chandigarh Tribunal in Ramesh Garg vs. ACIT, [2017] 88 TAXMANN 347(Chandigarh – Trib.).

25. It is noteworthy to mention here that, a cousin (e.g., the recipient’s mother’s sister’s son) does not constitute a relative under this section as pronounced in ACIT vs. Masanam Veerakumar, [2013] 34 taxmann.com 267 (Chennai – Trib.). An interesting decision was delivered by the Mumbai ITAT in ACIT vs. Lucky Pamnani [2011] 129 ITD 489 (Mumbai) that, a relative of a father did not become the relative of a minor recipient just because the minor’s income was clubbed with his father. Since the minor received the gift, the relationship of the donor should be with reference to the minor who was to be treated as ‘the individual’. The IT Act also defines a child in relation to an individual to include a step-child and an adopted child[13].

26. Finally, taxation of gifts as contemplated in S 56 (2) (x) of IT Act shall be, when any person receives, in any previous year, from any person or persons on or after 1.4.2017, other than relatives, the following income, shall be chargeable to income tax under the head “income from other sources”:

(a) Any sum of money, without consideration, the aggregate value of which exceeds INR 50,000, the whole of the aggregate value of such sum;

(b) Any immovable property,

  • Without consideration, the stamp duty value of which exceeds INR 50,000, the stamp duty value of such property;
  • For a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely –
    • The amount of INR 50,000; and
    • The amount equal to 5% (10% e.f. A.Y. 2021-22), of the consideration then such excess shall be chargeable to income tax under the head ‘income from other sources’.

(c) Any property[14], other than immovable property,-

  • Without consideration, the aggregate fair market value of which exceeds INR 50,000, the whole of the aggregate fair market value of such property;
  • For a consideration which is less than the aggregate fair market value of the property by an amount exceeding INR 50,000, the aggregate fair market value of such property as exceeds such consideration.

Conclusion

In the instant case, the Trust, by virtue of sub-clauses 1.1.2 and 1.1.3 of Clause 1.1 is a trust wherein the beneficiaries and the beneficiary interest thereof is known. Further, as discussed (supra), the Trust for the purposes of assessment under the IT Act for receiving property, being movable or immovable property, or money, whether from relatives or not, shall be treated as an ‘individual’ and therefore taxed accordingly.

1. What are the implications of tax under the IT Act for gift received by the Trust, being movable or immovable property or money, from relatives?

Not taxable if property, whether movable or immovable or money is received from person within the meaning of ‘relative’ as discussed in Clauses 21 and 22 above.

2. What are the implications of tax under the Act for property received by the Trust from persons other than relatives?

Taxable in the hands of either Trustee of the Trust, having more than one beneficiary and the share falling to each of the beneficiary is determinate, as a representative assessee under S 161 of the IT Act. Such assessment will have to be made at the rate applicable to the total income of each beneficiary. Accordingly, separate assessment for each of the beneficiary on whose behalf the income is received by the trustee will have to made. However, as per S 166 the ITA, department has an option to make direct assessment in the hands of each beneficiary entitled to the income.

The general principle is to charge all income only once. The Assessing Officer should keep this point in view at the time raising the initial assessment either of the trust or the beneficiary and adopt a course beneficial to the Revenue. Having exercised his option once it will not be open to the Assessing Officer to assess the same income for that assessment year in the hands of the other person as clarified in Circular No. 157, dated 26.12.1974 (supra).

Therefore, it appears that the trustees shall, for the purposes of reporting of private discretionary trusts, have to file the income of the Trust, in ITR 5 meant for, among other things, ‘body of individuals’ or ‘trust other than trust eligible to file Return in ITR 7’ and also disclose details such as whether the Trust is specific or discretionary and whether has business income.

[1] Relevant extract of the judgment in the Nizam Family case law held that,

“…The Wealth Tax Officer has to determine who are the beneficiaries in respect of the remainder on the relevant date and whether their shares are indeterminate or unknown. It is not at all relevant whether the beneficiaries may change in subsequent years before the date of distribution, depending upon contingencies which may come to pass in future. So long as it is possible to say on the relevant valuation date that the beneficiaries are known and their shares are determinate, the possibility that the beneficiaries may change by reason of subsequent events such as birth or death would not take the case out of the ambit of sub-section (1) of section. 21. It is no answer to the applicability of sub- section (1) of section 21 to say that the beneficiaries are indeterminate; and unknown because it cannot be predicated who would be the beneficiaries in respect of the remainder on the death of the owner of the life interest. The position has to be seen on the relevant valuation date as if the preceding life interest had come to an end on that date and if, on that hypothesis, it is possible to determine who precisely would be the beneficiaries and on what determinate shares, sub-section (1) of section 21 must apply and it would be a matter of no consequence that the number of beneficiaries may vary in the future either by reason of some beneficiaries ceasing to exist or some new beneficiaries coming into being …. this view has been followed by the Calcutta High Court in Subhashini Karuri v. Wealth (1) 13 I.T.R. 189. 9707SCI/77 Tax Officer Calcutta… The Calcutta High Court pointed out in Subhashini Karuri’s case: ‘the share of a beneficiary can be said to be indeterminate if at the relevant time the share cannot be determined but merely because the number of beneficiaries vary from time to time, one cannot say that it is i[n]determinate.’ The same proposition was formulated in slightly different language by the Bombay High Court in Trustees of Putlibai R.F. Mulla Trust’s case: ‘The question whether the shares of the beneficiaries are determinate or known has to be judged as on the relevant date in each respective year of taxation.’

[2] S 3 of Indian Trust Act 1882 under Interpretation Clause states, 

A ‘trust’ is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner”

[3] Para 12 of the Indira Balkrishna case notes,

“… In re: B.N. Elias and Others MANU/WB/0247/1935: [1935]3ITR408(Cal) Derbyshire, C.J., rightly pointed out that the word ‘associate’ means, according to the Oxford dictionary, ‘to join in common purpose, or to join in an action.” Therefore, an association of persons must be one in which two or more persons join in a common purpose or common action… the association must be one the object of which is to produce income, profits or gains. This was the view expressed by Beaumont, C.J., in Commissioner of Income-tax, Bombay v. Laxmidas Devidas and Another (1937) 5 I.T.R. 484 at page 589 and also in Re : Dwarakanath Harishchandra Pitale and Another MANU/MH/0222/1937 : [1937]5ITR716(Bom) In re : B.N. Elias MANU/WB/0247/1935 : [1935]3ITR408(Cal) Costello, J., put the test in more forceful language. He said: “It may well be that the intention of the legislature was to hit combinations of individuals who were engaged together in some joint enterprise but did not in law constitute partnership……. when we find……that there is a combination of persons formed for the promotion of a joint enterprise……then I think no difficulty arises in the way of saying that these persons did constitute an association…….”

[4]161. (1) Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him”

5] “164. (1) Subject to the provisions of sub-sections (2) and (3), where any income in respect of which the persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as “relevant income”, “part of relevant income” and “beneficiaries”, respectively), tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate

[6] R 12 of the Income Tax Rules, 1962 mandates that an individual or Hindu undivided family, if his or its total income or the total income in respect of which he is or it is assessable under the Act, during the previous year, exceeds ten lakh rupees, shall furnish the return electronically for the assessment year 2012-13 and subsequent assessment years. As per Para 3 of the said Circular states ‘private discretionary trusts’ having total income exceeding ten lakh rupees are facing problems in filing their return of income electronically in cases where they are filing their return in the status of an individual. This is because the status of a private discretionary trust has been held in law as that of an ‘individual’. The existing e-filing software does not accept the return of a private discretionary trust in the status of an ‘individual’.

[7]S160. (1) For the purposes of this IT Act, “representative assessee” mean:

  • in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise [including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913),] receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees;”
  • …”

 [8] Relevant extract of the Nizam Family case law notes,

“It is also necessary to notice the consequences that seem to flow from the preposition laid down in section 21, sub-section (1) that the trustee is assessable ‘in the like manner and to the same extent’ as the beneficiary. The consequences are three fold. In the first place it follows inevitably from this proposition that there would have to be as many assessments on the trustee as there are beneficiaries with determinate and known shares, though for the sake of convenience, there may be only one assessment order specifying separately the tax due in respect of the wealth of each beneficiary. Secondly, the assessment of the trustee would have to be made in the same status as that of the beneficiary whose interest is sought to be taxed in the hands of the trustee… And lastly, the amount of tax payable by the trustee would be the same as that payable by each beneficiary in respect of his beneficial interest, if he were assessed directly.”

[9] Relevant extract of Circular No. 157,[F.No. 228/8/73-IT (A-II)] dated 26-12-1974:

‘Section 41 of the 1922 Act (corresponding to section 166 of the 1961 Act), gave an option to the department to tax either the representative assessee or the beneficial owner of the income. Once the choice is made by the department to tax either the trustee or the beneficiary, it is no more open to the department to go behind it and assess the other at the same time. The inclusion of the share income from the trust in the total income of the beneficiary for rate purposes would virtually amount to an assessment of the income which has already been assessed and subjected to tax. According to the scheme of the Act, if certain income is to be included for rate purposes in the total income, a specific provision in that behalf is made in the Act. In the absence of any such express provision, the general principle to charge all income only once would be applicable in such a case 

[10]D.—Representative assessees – Miscellaneous provisions: Direct assessment or recovery not barred

S 166. Nothing in the foregoing sections in this Chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income”

[11](1A) Notwithstanding anything contained in sub-section (1), where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate”

[12] “Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him”

[13] S 2 (15B) “child”, in relation to an individual, includes a step-child and an adopted child of that individual;

[14] Explanation to clause (vii) of S 56

“property” means the following capital asset of the assessee namely,

  • Immovable property being land or building or both;
  • shares and jewellery;
  • jewellery;
  • archaeological collections;
  • drawings;
  • paintings;
  • sculptures;
  • any work of art; or

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