Statutory position — s.160: the five, and only five, classes of representative assessee, and what Explanations 1 and 2 do to an unwritten trust
CBDT Circulars & InstructionsCuts both ways
The Assessing Officer has issued a notice describing me as the 'representative assessee' of a family trust. Who can lawfully be made a representative assessee, and does being called one make me the assessee?
Section 160(1) is an exhaustive list of five classes and nobody outside it can be made a representative assessee: (i) the agent of a non-resident, in respect of income of the non-resident specified in section 9(1), including a person treated as an agent under section 163; (ii) the guardian or manager of a minor, lunatic or idiot who is entitled to receive or is in receipt of the income on that person's behalf; (iii) the Court of Wards, the Administrator-General, the Official Trustee or any receiver or manager (including any person, whatever his designation, who in fact manages property on behalf of another) appointed by or under an order of a court; (iv) a trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise, including a wakf deed valid under the Mussalman Wakf Validating Act, 1913; and (v) a trustee appointed under an oral trust. Section 160(2) then says that every representative assessee shall be deemed to be an assessee for the purposes of the Act, so yes — you are an assessee, with an assessee's rights of appeal as well as an assessee's exposure.
Statutory position — s.164: the maximum marginal rate where beneficiaries' shares are indeterminate, and every proviso that takes a trust out of it, in sequence
CBDT Circulars & InstructionsCuts both ways
Our discretionary trust has been charged at the maximum marginal rate under section 164 because the beneficiaries' shares are not fixed. What exactly takes a trust out of that rate, and does it help that the trust was created by my father's will?
Section 164(1) charges the relevant income at the maximum marginal rate where income for which a section 160(1)(iii) or (iv) representative is liable is not specifically receivable on behalf of any one person, or where the individual shares of the persons for whose benefit it is receivable are indeterminate or unknown. The FIRST PROVISO takes a case out of that rate — not into exemption, but into tax 'as if it were the total income of an association of persons' — in four situations, and only four: (i) none of the beneficiaries has any other income chargeable under the Act exceeding the maximum amount not chargeable to tax in the case of an association of persons, and none is a beneficiary under any other trust; (ii) the relevant income is receivable under a trust declared by any person by will and such trust is the only trust so declared by him; (iii) the relevant income is receivable under a trust created before 1 March 1970 by a non-testamentary instrument which the Assessing Officer is satisfied was created bona fide exclusively for the benefit of the settlor's relatives, or, where the settlor is a Hindu undivided family, of the members of that family, in circumstances where they were mainly dependent on the settlor for support and maintenance; or (iv) the relevant income is receivable by trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in that business or profession. The SECOND PROVISO then cuts all four down where there is business income: where the income of a section 160(1)(iv) trustee consists of, or includes, profits and gains of business, the first proviso applies only if those profits and gains are receivable under a trust declared by a person by will exclusively for the benefit of a relative dependent on him for support and maintenance, and that trust is the only trust so declared by him.