Commissioner of Income-tax Vs. Dr. Anand Sarabhai Trust and Executors and Trustees of Estate of Dr. Vikram Sarabhai - Court Judgment

Excerpt:
.....from discretionary trusts was exempt from tax as amount was paid out of dividends received by trusts - high court answered first question in negative and declined to answer second question - apex court reversed high court's answer to first question - direction given to high court to consider second question. head note: income tax deduction under s. 80k--dividends attributable to profits and gains from new industrial undertaking--whether beneficiaries entitled to special deduction. ratio & held : since the high court had held in favour of assessee on the first question, i.e., whether the tribunal was right in law in holding that the distributions received by the assessee from various discretionary trusts were assessable only in the hands of the trustees of the respective trusts..........answer to question 1. inasmuch as we have reversed the high court's answer to question 1, question 2 now requires to be gone into and answered. accordingly, the matters are remitted to the high court to consider and answer question 2 alone in accordance with law.3. appeals are allowed in part and the matters are remitted to the high court. no costs.

Judgment:
ORDER

1. Both these appeals are preferred by the Revenue against the judgment and order of the Gujarat High Court. The question referred in both these appeals are identical. They read as follows:

(1) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the distributions received by the assessee from various discretionary trusts were assessable only in the hands of the assessee of the respective trusts under Section 164 of the Income Tax Act, 1961 and not in the hands of the assessee.

(2) Whether, on the facts and in the circumstances of the case, the In come Tax Appellate Tribunal was right in law in holding that the amount received by assessee from various discretionary trusts is exempt from tax inasmuch as the amount was paid out of dividends, received by the trusts which were exempt under Section 80-K of the Income Tax Act, 1961.

The first question was answered by the High Court in the affirmative, i.e. , in favour of the assessee and against the Revenue. It is , however, agreed now before us by counsel for both the parties that the judgment of the High Court has to be reversed following the decision of this Court in CIT v. Kamalini Khaitan. : [1994]209ITR101(SC) . Accordingly, the first question is answered in the negative, i.e. , in favour of the Revenue and against the assessee.

2. So far as the second question is concerned, the High Court has declined to answer that question in view of its answer to Question 1. Inasmuch as we have reversed the High Court's answer to Question 1, Question 2 now requires to be gone into and answered. Accordingly, the matters are remitted to the High Court to consider and answer Question 2 alone in accordance with law.

3. Appeals are allowed in part and the matters are remitted to the High Court. No costs.