S. Sankarasubban, J.
1. These income-tax references relate to the assessment years 1988-89 and 1989-90 and arise out of I. T. A. Nos. 666 and 667 (Coch.) of 1993. The questions of law referred for the opinion of this court are as follows :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding-
(i) the trust cannot be treated as an association of persons ?
(ii) the beneficiaries are to be treated as individuals ?
(iii) they are not liable to deduct tax at source as per Section 194A of the Income-tax Act, 1961
2. Whether, on the facts and in the circumstances of the case (the trust being neither an 'individual' nor a 'Hindu undivided family', which alone are exempt from the provisions of Section 194A) the levy of interest is unjustified ?
3. Whether, on the facts and in the circumstances of the case-
(i) should the tests of an association of persons or a body of individuals be satisfied in order to assess the trustees as an association of persons or body of individuals ?
(ii) do not the trustees satisfy the tests such as common purpose, common action with the common object of producing income ?'
4. Shabandari Family Trust, Calicut, is the assessee. During the assessment of the above assessee for the years 1988-89 and 1989-90, it was noticed from the details of interest payments furnished by the assessee that interest exceeding Rs. 2,500 was paid to 19 persons totalling to Rs. 1,60,599 during the year relevant to the assessment year 1988-89 without deduction of tax at source as stipulated in Section 194A of the Income-tax Act, 1961, Similarly, for the assessment year 1989-90, interest exceeding Rs. 2,500 was paid to 21 persons aggregating to Rs. 1,62,180 without deduction of tax at source as stipulated in Section 194A of the Income-tax Act, 1961. Hence, letters were issued to the assessee. The assessee's representative in his reply, stated that the assessee is a specific trust having the shares of the beneficiaries determined and since all the beneficiaries are individuals, the status of the trust is that of an individual and, hence, the provisions of Section 194A were not attracted. But this contention was not accepted by the Assessing Officer. Since the assessee failed to deduct tax at source, interest under Section 201(1A) was also leviable. For the assessment year 1988-89, a total amount of Rs. 27,460 and for the assessment year 1989-90 a total amount of Rs. 25,331 were demanded from the assessee. Against those orders, the assessee preferred appeals before the Deputy Commissioner of Income-tax (Appeals). Both the appeals were heard together. The Deputy Commissioner of Income-tax (Appeals) held that the assessee is not governed by the provisions under Section 194A of the Income-tax Act and, therefore, levy of interest under Section 201(1A) for both years was cancelled.
5. The Revenue filed appeals as I.T.A. Nos. 666 and 667/Coch. of 1993 before the Income-tax Appellate Tribunal. In paragraph 5 of the order of the Appellate Tribunal, it is stated as follows : 'In short if the beneficiaries are definite and if their shares are determinate, the income earned by the trust has to be treated as if the income has been earned by the beneficiaries themselves. Such income has to be assessed in their individual hands. Therefore, the beneficiaries being individuals and the income being assessed in their individual hands, the trust cannot be treated as an association of persons. If the income is to be assessed in the individual hands of the beneficiaries, in that case they are to be treated as individual and hence they are not liable to deduct tax at source as per Section 194A of the Income-tax Act. In this view of the matter, the view held by the Deputy Commissioner of Income-tax (Appeals) is correct and no interference with his order is called for. The Revenue fails and the appeals are dismissed'. It is against the above order that the references are made to this court.
6. The main contention taken by the Revenue is that Section 194A of the Income-tax Act casts an obligation on all persons other than an individual or a Hindu undivided family making payment of interest to a resident to make deduction of tax at source and that the assessee-trust in the return filed by it having admitted the status of an association of persons and the Department completed the assessments as an association of persons. Since, the assessee failed to do so, the penal provisions of Sections 201 and 201(1A) of the Income-tax Act were attracted. On the other hand, the contention of the assessee is that the assessee, being a trust which is liable to be assessed under the provisions of Section 161 of the Income-tax Act, is not an association of persons and that the provisions of Section 194A of the Act are not attracted. The assessing authority held that since the assessee itself has adopted the status of an association of persons for the purpose of assessment in the past as well as for the subsequent years, it claims the status of an individual while considering the applicability of Section 194A of the Act. The first appellate authority applied the test laid down by the Supreme Court for assigning the status of an association of persons and relying on the decision of the Bombay High Court held that the trust cannot be treated as an association of persons and, therefore, it is not governed by the provisions of Section 194A of the Act. The Tribunal also relied on the decision of the Bombay High Court in CIT v. Marsons Beneficiary Trust : [1991]188ITR224(Bom) and held that if the income is to be assessed in the individual hands of the beneficiaries, in that, they are to be treated as individuals, they are not liable to deduct tax at source.
7. It is not disputed that the assessee is a family trust. But neither the assessing authority nor the appellate authority nor the Tribunal considered the question whether the family trust is one declared by a duly executed instrument in writing or an oral trust, whether it is liable to be assessed as a representative assessee under Section 161(1) or whether the income is liable to be assessed to the maximum marginal rate under Section 161(1A) of the Act. They have also not considered the circumstances under which the assessee happened to pay interest to 19 persons for the year 1988-89 and to 21 persons for the year 1989-90. There is no material on record to show the activities of the trust and how the income is derived by the trust, who are the beneficiaries under the trust. In order to decide the question whether the trust can be treated as an association of persons, it is absolutely necessary to decide the matter with reference to the trust deed, the accounts and other records maintained by the assessee. None of the authorities including the Tribunal had considered the matter with reference to the said documents. As such we are not in a position to answer the questions referred either way and we decline to answer the same.
8. In the circumstances, we are of the view that the matter must go back to the assessing authority for consideration afresh. We set aside the assessment orders and the appellate orders and the orders of the Tribunal. We direct the assessing authority to consider the matter afresh and in accordance with law and in the light of the observations made in this judgment.