THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.229 of 1996 Dated:25.11.2011 Between: Commissioner of Income Tax, Visakhapatnam. …Applicant and Vijaya Family Trust, Kakinada. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.229 of 1996 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The Commissioner of Income Tax, Visakhapatnam, got the following question referred under Section 256(1) of the Income Tax Act, 1961, for the decision of this Court. Whether on the facts and in the circumstances of the case, the Tribunal is justiﬁed in directing the A.O to tax at the maximum marginal rates only the income of each beneﬁciary and not the aggregate income of all the beneﬁciaries in the hands of the Trust? To the extent necessary, the fact of the matter is that the respondent (assessee) is a Trust carrying on money lending business. In their return for the assessment year 1988-1989 they disclosed the income under the head “money lending business” as well as income under the head “other sources” being dividends, interests and bank interests. During the scrutiny of the return it was contended by the assessee that the income admitted should not be charged to tax at the maximum marginal rate. The plea was rejected by the Assessing Oﬃcer, who by applying the provisions of Section 161(1A) of the Act applied the maximum marginal rate of 52.5%. The appeal was also dismissed by the Commissioner of Income Tax (Appeals). On appeal, the Income Tax Appellate Tribunal relying on the decision of the Special Bench of the Tribunal in Mohammed Omar Family Trust v Income Tax Officer[1] held that where the beneﬁciaries are known and their shares are determined, the tax at the maximum marginal rate is only attracted on the whole of the income of the beneﬁciary and not on the aggregate income of all the beneficiaries in the hands of the Trust. The Tribunal remanded the issue to the Assessing Oﬃcer to decide it afresh. Being aggrieved, the assessee as well as the Revenue sought reference of the question to the decision of this Court. The Junior Standing Counsel for Income Tax has brought to our notice that the same question was already decided by a Division Bench of this Court in R.C.No.145 of 1992, dated 03.07.2003, in favour of the assessee and against the Revenue agreeing with the decision of the Special Bench in Mohammed Omar Family Trust . Following the same, the reference is answered against the Revenue and in favour of the assessee. The Reference Case shall stand disposed of accordingly without any order as to costs. _______________ (V.V.S.RAO, J) ____________________ (B.N.RAO NALLA, J) 25.11.2011 vs [1] 40 IT D 1