Case Law Details
Dinroze Estate Vs ITO (ITAT Chennai)
Introduction: The recent judgment from the Income Tax Appellate Tribunal (ITAT) Chennai in the case of “Dinroze Estate Vs ITO” brings up an intriguing discussion about the application of tax rates for trusts with known beneficiaries. The ITAT directed that such trusts should be taxed at rates applicable to individual assesses, and not at the maximum marginal rate of 30%. This article aims to delve into the nuances of this decision.
Background: The Dispute Over Tax Rates: Dinroze Estate, assessed as an Association of Persons (AOP), filed an appeal for the Assessment Year 2014-15 against the maximum marginal rate of 30% imposed on its income. The estate argued that, since the beneficiaries were known, the tax should be levied at individual rates. This reasoning was based on a similar treatment in the Assessment Years 2017-18 and 2018-19.
ITAT’s Argument: Why Individual Rates?
The ITAT scrutinized the case under the lens of Sec. 161 of the Income Tax Act, drawing attention to a Supreme Court ruling. ITAT emphasized that tax should be assessed for each beneficiary trust separately, essentially treating their income as that of an individual.
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