Section 160

Section 160 — the law in short

What the courts have decided on section 160, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Kamalini Khatau Supreme CourtHelps department
  A discretionary trust distributed income to me during the year and the trustees have already been assessed on it. Can the Assessing Officer also assess me?
  Yes — the Revenue has an option, and it can assess either the trustees or the beneficiary, but only in respect of income actually distributed to and received by the beneficiary during the accounting year. Section 164 is not a code in itself; it fixes only how tax is charged, while the liability to be assessed comes from s.161, and s.5 read with s.4 lets the beneficiary be taxed directly on what he actually received.
• CIT v Toshoku Ltd Supreme CourtHelps taxpayer
  I credited commission in my books to a foreign selling agent who works entirely outside India, and remitted it later. Is that commission taxable in India in his hands?
  No. The Supreme Court held that a credit entry in the exporter's own books is not receipt by the non-resident: a credit balance without more is only a debt, and a book entry in the debtor's own books is not payment discharging it, so the amounts were neither received nor deemed received in India. Nor did the commission accrue or arise here. Under the Explanation to section 9(1)(i), where all the operations of a business are not carried out in India only the part of the income reasonably attributable to Indian operations is deemed to accrue here - and these agents carried out no operations in India at all.
• N.V. Shanmugham & Co v CIT Supreme CourtHelps department
  A court receiver is running the dissolved firm's business and paying each of us a monthly sum. The department wants to tax the profits as an AOP. Can it, when we are fighting each other?
  Yes, on these facts. The receivers themselves are not an association of persons — they are representatives — but the persons they represent were held to be an AOP, because the control and management of the business was unified, the profits were earned on behalf of persons having a common interest created by the court's order, and all of them took the monthly payments. Liability to tax depends on the earning of profits by a unit, not on how the profits are ultimately divided.
• C.R. Nagappa v CIT Supreme CourtHelps department
  The trustees of my settlement are being assessed on the trust income. The department has now also included the same income in my own assessment under s.64. Does s.161(2) stop it?
  No. Section 161(2) does not deny the Assessing Officer the option to assess the person represented instead of the representative assessee; it only requires that when the representative assessee is the one assessed, he is assessed under Chapter XV and not under any other provision. But the same income cannot be charged twice — the Court recorded that the assessments already made on the minor beneficiaries would be annulled and any tax recovered refunded.
• CIT v Marsons Beneficiary Trust High CourtHelps taxpayerSuperseded by amendment
  Our private trust has determinate beneficiaries and the deed lets the trustees carry on business. The Assessing Officer has assessed the whole business income as one unit in the status of AOP. Is that right?
  For years before assessment year 1985-86, no. Where the shares of the beneficiaries are known and determinate, s.164 has no application, the trustees must be assessed under s.161(1), each beneficiary's share is taxed as if it formed part of that beneficiary's income and the trustees' liability is the sum of those amounts — and this is so whatever the nature of the income, including business income. For assessment year 1985-86 onward this is displaced by s.161(1A), which charges the maximum marginal rate where the income consists of or includes profits and gains of business; the judgment expressly says at para 2 that it does not deal with that provision.
• Seva Trust v ITO ITATHelps departmentValidity unconfirmed
  Our trust stopped running its distributorship itself and let another concern run it for a monthly fee. Does the income still 'consist of or include profits and gains of business' for s.161(1A)?
  On these facts, yes. The Tribunal held that the distributorship agreement was a commercial asset, that letting it out temporarily did not take the income out of the business head, and that the income was business income attracting s.161(1A), which was inserted with effect from 1 April 1985 and which the Tribunal found to contain no ambiguity whatsoever. The appeals were dismissed and the assessment in the status of association of persons was upheld.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.