[Citation -1986-LL-0718]

Citation 1986-LL-0718
Court ITAT
Relevant Act Income-tax
Date of Order 18/07/1986
Assessment Year 1981-82, 1982-83
Judgment View Judgment
Keyword Tags permutation and combination • discretionary trust • payment of tax • tax evasion • black money • trust deed • evade tax
Bot Summary: The trust deed further provided for 100 beneficiaries, each of whom was again a trust. The learned Commissioner on the other hand had appended a chart to his order in respect of 10 of the 'subsidiary trusts' to show the close relationship between the trustee in the 'master trust' and the ultimate beneficiaries of the entire scheme, who are the trustees themselves. The observations of the Commissioner are as under: What the assessee has done in the present case is first to create a trust, with a certain number of beneficiaries whose shares are determinate in terms of the trust deed applicable to the present trust. The beneficiaries of B. D. Fibre Enterprises Trust, sharing 1 per cent of the income, in turn are themselves trusts which are discretionary as would be seen from a study of the chart attached as Annexure 1 to this order, wherein we have taken 10 cases of the beneficiary trusts and have given the names of trustees, beneficiaries, settler, the amount settled, etc. The beneficiaries in the 'master trust' who were entitled to 1 per cent of the net income each in turn were themselves trusts which were discretionary as shares were not specified. The persons who were the trustees in 'the 'master trust' and the 'subsidiary trusts' as well as the beneficiaries being the members of the AOP were common or were minor sons, daughters, wives and HUFs of the trustees. These persons are once again trustees in the 'subsidiary trust', namely, 'Urvashi Divyabala Rakesh Trust' whose trust deed is at pages 163 to 209 of the paper book.

appellant in these two appeals is trust. As many as 13 common grounds of appeal have been urged but gist of these grounds is aimed at assailing order of Commissioner under section 263 of Income-tax Act, 1961 ('the Act'). As these appeals are filed against consolidated order of Commissioner for both years we also propose to pass common order for sake of convenience. 2. trust under consideration, namely, B. D. Fibre Enterprise ('master trust') came into existence vide trust deed dated 25-5-1980. settler was one Shri Bhogilal Ranchhodlal Patel who settled upon trust sum of Rs. 10,000 and three trustees were: (1) Shri Baldebhai Dosabhai Pates, (2) Shri Bhailal Bhai Baldevbhai Patel, and (3) Shri Parvinchandra Baldevbhai Patel. trust deed further provided for 100 beneficiaries, each of whom was again trust ('subsidiary trust'). Each of these trusts was represented in 'master trust' through trustee. It was further provided in deed that each of 100 beneficiary trusts would be entitled to 1 per cent of net income. 3. IAC (Assessment) on basis of above facts, proceeded to finalise assessment order for both years on same date, i.e., 31-3- 1983. He did so on basis that shares of beneficiaries were determinate. assessed income for assessment year 1981-82 was Rs. 5,79,942 and for assessment year 1982-83 it was Rs. 5,07,818. However, no tax liability was attracted in case of appellant as entire income was allocated further amongst 100 beneficiaries. 4. This matter would have rested there but for that learned Commissioner issued notice under section 263 on 12-2-1985 as according to him there had been misapplication of provisions of section 164 of Act. This according to notice had resulted in assessment which was not only erroneous but prejudicial to interests of revenue. In response to this notice assessee did not choose to attend personally but sent written reply dated 20-2-1985 mentioning in brief objections against proposed action of Commissioner. 5. Commissioner after considering reply of assessee proceeded to discuss each objection in detail. He discussed background of entire scheme of 'master trust', 'subsidiary trusts' and ultimate beneficiaries. He also discussed various case laws including those of House of Lords. He finally concluded that 'the so-called determinability of interest of beneficiaries at first stage would be disregarded and that assessee would be taxed as if shares of beneficiaries are indeterminate'. assessments were, consequently, set aside. 6. We have only mentioned in brief Commissioner's order under section 263 although it is lengthy and detailed order. We have done so because arguments before Commissioner have also been addressed to us. As we shall be dealing with them at appropriate place, we have not considered it proper to repeat them here. 7. learned counsel of appellant detailed before us set up of trust. As we have already mentioned it in our order earlier, we do not do so now. new facts and his arguments are as follows: beneficiaries under each 'subsidiary trust' are two 'associations of persons' consisting of individuals (including minors) and HUFs. According to learned counsel shares of each of these individuals/HUFs are indeterminate. He also makes statement at bar that (i) none of trustees in 'master trust' are beneficiaries in 'subsidiary trusts', (ii) none of beneficiaries are related to 'settler' of 'master trust', and (iii) none of settlers of 'subsidiary trusts' are related to each other or to beneficiaries. 8. It is also mentioned that separate assessments of 'subsidiary trusts' have been finalised and in fact copy of assessment order of one such trust, namely, 'Urvashi Divyabala Rakesh Trust' for assessment year 1981-82 has been placed at page 343 of paper book. It is also contended that AOPs who are beneficiaries under 'subsidiary trusts' are fluctuating bodies, whose membership may undergo change both as regards number and persons. 9. According to learned counsel, Commissioner erred in looking into and depending upon records of cases other than that of appellant for initiating proceedings under section 263. He contended that trust deeds of 'subsidiary trusts' are not part of records of present case. 10. According to him once Commissioner had accepted fact that 'master trust' contained names of beneficiaries and their respective shares were defined, matter ended. Commissioner could not go further and had to confine himself to deed of 'master trust'. He was legally bound not to take other events into account. 11. It is also urged that profit had been duly credited to account of each beneficiary although no payments had been actually made. He drew our attention to balance sheet of appellant on page 385 of paper book. 12. To query from Bench as to whether trustees can be beneficiaries (as in subsidiary trusts) learned counsel took us through provisions of sections 3 and 9 of Indian Trusts Act, 1882, and also referred to (i) Scott on Trusts, 1967, Third edn., (ii) Halsbury's Laws of England, Fourth edn., and (iii) Jowitt's Dictionary of English Law. (Extracts from these three are placed on files). It was contended that there was no legal bar on trustees being beneficiaries as well. According to him any person who could hold properly could be beneficiary. It was also submitted that beneficiaries could always enforce their rights against trustees and beneficiaries always had such right. 13. It was further submitted that it was not case of 'tax avoidance' as made out by Commissioner but case of 'tax planning'. He argued that this was not case where income of one person was being shown as that of somebody else. According to learned counsel department had not been able to bring case within ambit of section 164 which is charging section. action of Commissioner in doing so by looking into material available on files of other assessees was not in accordance with law. 14. As regards decisions relied upon by Commissioner, learned counsel argued that English decisions were distinguishable on facts and could not be applied to every case. According to him some of our High Courts had held in case of trusts that department was not entitled to 'lift veil' and probe underneath. He went step further to submit that 'tax planning' was permitted provided it was within four corners of law. This was in response to observation of Commissioner that this was 'tax avoidance scheme'. He finally contended that case of appellant was squarely covered by section 161 of Act as shares were determinate and action of Commissioner in bring same under section 164 was against law. It was accordingly prayed that order under section 263 be quashed. 15. We would here like to give list of cases cited and referred to by learned counsel and which are duly considered while passing this order-CIT v. Manilal Dhanji [1962] 44 ITR 876 (SC), CIT v. Smt. Kamalini Khatau [1978] 112 ITR 652 (Guj.) (FB), CIT v. Lady Ratanbai Mathuradas [1968] 67 ITR 504 (Bom.), B. P. Mahalaxmiwala v. CIT [1954] 26 ITR 177 (Bom.), K. T. Doctor v. CIT [1980] 124 ITR 501 (Guj.), McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC), CIT v. Chunilal Khushaldas [1974] 93 ITR 369 (Guj.), Furniss v. Dawson [1984] 1 All. ER 530 and Ganga Properties v. ITO [1979] 118 ITR 447 (Cal.). 16. learned departmental representative on other hand argued that t h e very fact that trust was created with 100 beneficiaries was something abnormal on face of it. He in fact went step further by saying that there could be no commercial justification for doing so. He also contended that these 'subsidiary trusts' further had two AOPs each as beneficiaries. He also submitted that all persons constituting 'master trust', 'subsidiary trusts' and AOPs were related to each other. According to him appellant had by such subterfuge succeeded in not paying any tax at all on business income of lakhs of rupees. According to him it was substance and not form of any transaction that had to be looked at. 17. departmental representative also argued that term 'beneficiary' is to be understood as in Income-tax Act and not as defined in Indian Trusts Act. According to him beneficiary was person who received income and was not somebody who was mere figurehead. He also submitted and in fact drew our attention to pages 161 and 163 of paper book filed by appellant that 'master trust' and 'subsidiary trusts' were created on same date, i.e., 23-5-1980 and was part of associated operation. According to him there was new line of thinking in Courts in England and India and stress was being laid on substance and not form of any transaction. He argued that 'master trust' could not be viewed in isolation but had to be seen as part of 'associated operation'. 18. He also contended that 'master trust' itself was discretionary trust. He drew our attention to clauses 3, 5 and 14 of trust deed for following propositions: 1. Trustees are given full powers to determine nature of receipt. 2. Beneficiaries (if admitted they are specific) are only for income and not any other assets. 19. He further submitted that in fact income is not even receivable by aforesaid 100 trusts (beneficiaries). According to him word used in Act was 'benefit '. In other words one had to see whether any benefit had in fact accrued to 'beneficiaries'. He accordingly contended that this was nothing but 'tax avoidance' scheme. He argued that tax should be attracted at first stage itself (master trust) and that is what learned Commissioner had done. He accordingly urged that order under section 263 be upheld. 20. learned departmental representative during course of his arguments referred to following judgments-McDowell & Co. Ltd.'s case (supra), Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 (SC), Manilal Dhanji's case (supra), Kum. Pallavi S. Mayor v. CIT [1981] 127 ITR 701 (Guj.) and N. V. Shanmugham & Co. v. CIT [1971] 81 ITR 310 (SC). 21. learned counsel in rejoinder argued that idea for forming trust was to legally reduce liability to pay tax. According to him it was only deed of 'master trust' that had to be looked at. As beneficiaries were determinate and so were shares, nothing else remained to be done. He also repeated his arguments to effect that beneficiaries were to be understood as under Indian Trusts Act. He, however, accepted fact that 'subsidiary trusts' were discretionary trusts. 22. counsel also objected to arguments of departmental representative as to 'master trust' being 'discretionary trust'. He argued that representative as to 'master trust' being 'discretionary trust'. He argued that case before Commissioner had never proceeded on these lines and it is not open to revenue to urge so now. Without conceding this point he further submitted that clauses pointed out by departmental representative in trust deed were general in nature and dealt with investment of funds. According to him these clauses were to be read in reasonable and sensible manner and were for purposes of internal administration. According to him what had to be seen was whether shares were determinated and not income. That according to learned counsel is scheme of at Act. He also urged that decisions cited by revenue were not applicable to facts of his case. He placed further reliance on following judgments-CIT v. Balwantrai Jethalal Vaidya [1958] 34 ITR 187 (Bom.) and CWT v. Trustees of H. E. H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 (SC). 23. We have learned these appeals at great length and have also perused voluminous paper book running into 480 pages filed before us. We have also gone through plethora of judgments cited before us by parties but do not propose to discuss each one in detail. We will discuss at appropriate places judgments which are necessary for passing order. We would, however, like t o make it clear that judgments not specifically mentioned have also been considered. 24. first objection of learned counsel for appellant was to action of Commissioner in looking to facts of cases outside assessment records. learned Commissioner rejected objection as according to him decision in case of Ganga Properties (supra) relied upon by assessee was distinguishable on facts. We agree with learned Commissioner on this point as in fact decision cited supra does not support appellant being different on facts. learned Commissioner was entitled to look into records of ancillary trusts as they were part of chain that started with 'master trust' and ended with 'association of persons' who were supposed to be ultimate beneficiaries. 25. second objection raised was to action of Commissioner in probing 'underneath veil' even after fact that 'master trust' identified beneficiaries and specified their shares. learned counsel referred to Hon'ble Gujarat High Court decision in case of K. T. Doctor (supra). According to us Commissioner was entitled to do so as he came to conclusion that 'master trust' was only part of associated operation designed to 'avoid tax'. learned Commissioner observed as under: "It is right of Income-tax Department to go to real state of affairs being facade which might have been created by assessee. I would show ... how whole scheme devised by assessee is scheme for tax avoidance which is in reality nothing but tax evasion." 26. Commissioner also referred to various decisions of House of Lords explaining position of law as it was earlier and subsequent change in judicial thinking in England. He observed as under: "So far all tax avoidance schemes were looked at in light of decision of House of Lords in case of IRC v. Duke of Westminster [1935] All ER 259, [1936] AC at p. 19 and Duke of Westminster v. IRC 19 Tax Cases 490 at p. 520. Therein Lord Tomlin had held as under: 'Every man is entitled of he can to order his affairs so as that tax attaching under appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative commissioners of inland revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay increased tax. This so- called doctrine of "the substance" seems to me to be nothing more than attempt to make man pay notwithstanding that he has so ordered his affairs that amount of tax sought from him is not legally claimable.' Fortunately for revenue and unfortunately for assessee, above is no longer good law. House of Lords in W. R. Ramsay Ltd. v. IRC [1982] C 300, [1981] 1 All ER 865, [1981] STC 174 held that 'where courts are asked to determine legal effect of transaction carried out in steps as part of pre-arranged scheme, Courts are entitled to compare position after last step with that before first and levy tax on that basis; Courts are not limited to examining each steps separately. Still later, House of Lords in Furniss (Inspector of Taxes) v. Dawson & Related Appeals [1984] 1 All ER 530, have held that in pre-planned tax saving scheme no distinction is drawn for fiscal purposes because none exists in reality between (i) series of steps which are followed through by virtue of arrangement which falls short of binding contract, and (ii) like series of steps which are followed through because participants are contractually bound to take each step seriatim." He also referred to decision of Hon'ble Supreme Court and Hon'ble Gujarat High Court as under: "In India, in cases of limited companies principles as presently laid down by House of Lords have already been accepted by Supreme Court in Juggilal Kamlapat v. CIT [1969] 73 ITR 702 at p. 710, wherein their Lordships of Supreme Court had observed as under: 'It is true that from juristic point of view company is legal personality entirely distinct from its members and company is capable of enjoying rights and being subjected to duties which are not same as those enjoyed or borne by its members. But in certain exceptional cases Court is entitled to lift veil of corporate entity and to pay regard to economic realities behind legal facade. For example, Court has power to disregard corporate entity if it is used for tax evasion or to circumvent tax obligation or to perpetrate fraud.' Somehow, it was being argued all through, that while department is entitled to lift veil of corporate entity in company case and to pay regard to economic realities behind legal facade, it was not entitled to do so in case of trusts. Gujarat High Court said so in case of K. T. Doctor v. CIT [1980] 124 ITR 501. But latest decision of House of Lords in Furniss v. Dawson & Related Appeals [1984] 1 All ER 530 has made things very clear. If revenue can lift veil of corporate entity and pay regard to economic realities behind legal facade in cases of tax evasion or where assessees are trying to circumvent tax obligation or to perpetrate fraud, there is no reason why revenue cannot do same in other cases including trusts. It can be nobody's case that trusts are entitled to evade tax by avoidance scheme while corporations are not entitled to do so. Actually, in law, company derives its legal identity from certificate of registration which is recognition given by sovereign. trust is creation of individual and does not enjoy such recognition. Hence theoretically doctrine of lifting of veil ought to apply with greater sanctity in case of trusts. law of land should be same for all assessees. When taxpayer devises scheme consisting of may stages which ultimately lead to complete avoidance as well as evasion of taxes on income which has been earned by group of people, it cannot be said that this assessee should be shown any mercy or should be treated kindly simply because his ingenuity has taken care of existing provisions of statute by creating wheels within wheels or constructing flight of steps in order to achieve ultimate purpose and that tax law should look at only first flight of steps and not at all flights and their destination." 27. Another point raised by learned counsel is that profit has been duly credited to account of each beneficiary. (Balance sheet on page 385 of paper book.) We, however, find that this fact does not help assessee as it is not clear whether any amounts have been paid to alleged 'beneficiaries'. If appears that entire amount continues to lie with Baldevbhai Dosabhai & Sons (Bombay) of which proprietor is 'master trust' (appellant). 28. We would also refer at this point to statement made at bar by learned counsel to effect that (1) none of trustees in 'master trust' are beneficiaries in subsidiary trusts, (2) none of beneficiaries are related to settler of 'master trust', and (3) none of settlers of subsidiary trusts are related to each other or to beneficiaries. learned Commissioner on other hand had appended chart to his order in respect of 10 of 'subsidiary trusts' (beneficiaries) to show close relationship between trustee in 'master trust' and ultimate beneficiaries of entire scheme, who are trustees themselves. observations of Commissioner are as under: "What assessee has done in present case is first to create trust, with certain number of beneficiaries whose shares are determinate in terms of trust deed applicable to present trust. number of beneficiaries is kept so large, that divisible income of business carried on escapes taxability altogether making use of proviso to section 164(1). beneficiaries of B. D. Fibre Enterprises Trust, sharing 1 per cent of income, in turn are themselves trusts which are discretionary as would be seen from study of chart attached as Annexure 1 to this order, wherein we have taken 10 cases of beneficiary trusts and have given names of trustees, beneficiaries, settler, amount settled, etc., respectively. assessee and its discretionary trust beneficiaries have gone step further. beneficiary trusts consist of association of persons as beneficiaries and those AOPs consist of individuals and HUFs who are shown in column 7 of Annexure I and once again shares are indeterminate. trustees in beneficiary trusts of assessee are mostly common and it is they who have orgainsed whole scheme in order to evade tax and play fraud on revenue, fraud which apparently appears to be legal and in accordance with provisions of section 164(1) read with proviso thereto. deliberate effort has been made to keep number of beneficiary trusts of assessee so large that resultant divided income does not attract any tax or very little tax. Further on beneficiary or beneficiaries shown in column 4 are association of persons of which members as shown i column 7 belong to families of trustees. These ultimate beneficiaries are written by permutation and combination and are members, majors as well as minors of same families. It is very closed group of persons. Some of these persons have other income, b u t under impugned arrangements income from assessee-trusts does not get added any where to their income and escapes assessment altogether. It would be obvious to anyone that whole exercise had been carried out with set purposes of evading payment of legitimate tax dues on income of assessee or ultimate beneficiaries." 29. According to Commissioner real beneficiaries are less than 20 members of Patel family who are beneficiaries in more than one trust. 30. We also observe from chart filed by appellant (from pages 251 to 327 of paper book) that same set of persons are members of various AOPs (beneficiaries in subsidiary trusts) in one combination or other. It may be seen that names of following trustees in 'master trust' appear in most of AOPs as members as well as trustees in subsidiary trusts: 1. Shri Baldevbhai Dosabhai Patel 2. Shri Bhailalbhai Baldevbhai Patel 3. Shri Pravinchandra Baldevbhai Patel 31. In view of these clear facts we are in agreement with Commissioner on point that ultimate beneficiaries are closely knit group of persons of same family. 32. learned counsel's argument that it was case of 'tax planning' within four corners of law also engaged our minds. learned Commissioner cited various English decisions to show that it was case of 'tax evasion'. He observed as under: "As pointed out by House of Lords in case of Furniss v. Dawson & Related Appeals [1984] 1 All ER 530, before coming to conclusion of planned evasion, facts have to be noticed. In present case, facts as given above indicate that firstly there is pre-ordained series of transactions in single composite transaction. Secondly, these transactions contain steps which were inserted without any commercial or business purposes, apart from tax advantage. Thirdly, corpus settled by settler is insignificant at every stage. These facts are undisputed. We have, thereafter, to look at net result of these facts. net result is that B. D. Fibre Enterprises Trust does not pay any tax while income is kept within close group of families and their members, who too in turn pay no taxes even after pocketing substantial income and controlling large income-generating business with all its perks and advantages. Whichever way we look at it, net result is same. arrangements are self-cancelling and are mala fide, sole intention being tax evasion." 33. We would at this stage like to refer to decision of Hon'ble Supreme Court in case of McDowell & Co. Ltd. (supra) which was cited by both sides during course of hearing. learned counsel for appellant drew our attention to pages 170 and 171 of reported judgment for proposition that 'tax planning' was legitimate within framework of law. learned departmental representative on other hand termed this as case of 'tax evasion' intended to defraud exchequer of legitimate taxes. 34. We observe that judgment in McDowell & Co. Ltd.'s case (supra) was delivered on 17-4-1985, whereas order of Commissioner under section 263 was passed on 21-3-1985, i.e., earlier. decision of Commissioner was very much influenced by various decisions of House of Lords on point of 'tax planning' and he did not have benefit of decision of Hon'ble Supreme Court. It is, however, seen that English decisions have been discussed and followed in McDowell & Co. Ltd.'s case (supra) in separate judgment confined to points of tax avoidance by his Lordship Justice Chinnappa Reddy. In judgment his Lordship has traced history of English law on subject and observed: "I have referred to English cases at some length, only to show that in very country of its birth, principle of Westminster has been given decent burial, and in that very country, where phrase 'tax avoidance' had originated, judicial attitude towards tax avoidance had changed and smile, cynical or even affectionate though it might have been at one time, has now frozen into deep frown. Courts are now concerning themselves not merely with genuineness of transaction, but with intended effect of it on fiscal purposes. No one can now get away with tax avoidance project with mere statement that there is nothing illegal about it." (p. 158) 35. His Lordship also referred to earlier judgments of Supreme Court in case of CIT v. A. Raman & Co. [1968] 67 ITR 11 and CIT v. B. M. Kharwar [1969] 72 ITR 603 and disapproved observations on 'tax avoidance'. 36. His Lordship also observed as follows: "... evil consequences of tax avoidance are manifold. First, there is substantial loss of much needed public revenue, particularly in welfare State like ours. Next, there is serious disturbance caused to economy of country by piling up of mountains of black money, directly causing inflation. Then there is 'the large hidden loss' to community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of best brains in country being involved in perpetual war waged between tax-avoided and his expert team of advisers, lawyers and accountants on one side and tax-gatherer and his perhaps not so skil ful advisers on other side. Then again there is 'sense of injustice and inequality which tax avoidance arouses in breasts of those who are unwilling or unable to profit by it'. Last, but not least, is ethics (to be precise, lack of it) of transferring burden of tax liability to shoulders of guideless, good citizens from those of 'artful dodgers'. It may, indeed, be difficult for lesser mortals to attain state of mind of Mr. Justice Holmes, who said, 'Taxes are what we pay for civilized society. I like to pay taxes. With them I buy civilization.' But, surely, it is high time for judiciary in India too to part its ways from principle of Westminster and alluring logic of tax avoidance. We now live in welfare State whose financial needs, if backed by law, have to be respected and met. We must recognise that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is pretence to say that avoidance of taxation is not unethical and that it stands on no less moral plane than honest payment of taxation. In our view, proper way to construe taxing statute, while considering device to avoid tax, is not to ask whether provisions should be construed literally or liberally, nor whether transaction is not unreal and not prohibited by statute but whether transaction is device to avoid tax, and whether transaction is such that judicial process may accord its approval to it .... It is neither fair nor desirable to expect Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to Court to take stock to determine nature of new and sophisticated legal devices to avoid tax and consider whether situation created by devices could be related to existing legislation with aid of 'emerging' techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose devices for what they really are and to refuse to give judicial benediction." (p. 160) 37. We would now proceed to examine present appeals in light of Suprme Court judgment supra. 38. appellant, namely, 'master trust', was created with numerous beneficiaries whose shares were determinate. beneficiaries were kept so large (100 in number) that divisible income did not attract any tax in their hands by resorting to proviso to section 164(1). 39. beneficiaries in 'master trust' who were entitled to 1 per cent of net income each in turn were themselves trusts which were discretionary as shares were not specified. third step in entire scheme were AOPs who were beneficiaries in 'subsidiary trusts', such AOPs consisting of individuals and HUFs whose shares once again were indeterminate. 40. persons who were trustees in 'the 'master trust' and 'subsidiary trusts' as well as beneficiaries being members of AOP were common or were minor sons, daughters, wives and HUFs of trustees. I n other words substantial amount of income was under control of few persons closely related to each other. It is also quite clear that not single paisa was being paid as tax on substantial income being earned by 'master trust'. According to counsel of appellant this entire exercise was undertaken to avoid payment of tax liability. 41. We, however, come to conclusion that appellant cannot succeed on this score as to us it does not appear to be case of 'tax avoidance' in light of law laid down by highest Court of land to which we respectfully bow down. assessee by 'associated operation' created 'master trust' 100 subsidiary trusts and 200 AOPs with net effect of not only earning and retaining substantial amount of income but also getting away without shelling out anything by way of taxes. income was in fact under control of few persons of same family. 42. We do hold that case of appellant is squarely hit by judgment of Hon'ble Supreme Court in case of McDowell & Co. Ltd. (supra). We propose to decide accordingly. 43. In light of decision we are taking we do not pronounce our opinion on argument advanced as to whether trustee can be beneficiary o r not. We also do not adjudicate on point raised by departmental representative as to whether 'master trust' is discretionary trust or not. 44. Before parting with these appeals we would also like to mention another fact which came to our knowledge. In 'master trust' trustees are (1) Shri Baldevbhai Dosabhai Patel, (2) Shri Bhailalbhai Baldevbhai Patel, and (3) Shri Pravinchandra Baldevbhai Patel. These persons have appended their signatures at pages 81 and 82 of trust deed corresponding to pages 157 and 159 of paper book. These persons are once again trustees in 'subsidiary trust', namely, 'Urvashi Divyabala Rakesh Trust' whose trust deed is at pages 163 to 209 of paper book. These three persons have signed as trustees on pages 23 and 24 of trust deed corresponding to pages 207 and 209 of paper book. We on comparing these signatures find that they do not tally at all. 45. In light of discussion in preceding paragraphs we proceed to uphold consolidated order under section 263 passed by Commissioner and dismiss appeals filed by assessee. *** B.D. FIBRE ENTERPRISES v. INSPECTING ASSISTANT COMMISSIONER
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