U.T.SHAH, J.M. : Revenue has come up in appeal against order of AAC wherein he has held that assessee trust was not assessable at maximum marginal rate. assessee is trust and is assessed in status of AOP. asst. yr. 1981-82 and relevant previous year ended on 31st March, 1981. One Shri Pranlal Thakordas Shah had created two trusts viz. Shri Pranlal Thakords Trust and Rajnikant Gulabdas Family Trust as per Will dt. 10th March 1977, On 1st May 1979 Shri Pranlal Thakordas Trust was dissolved and its assets were distributed amongst beneficiaries. On aforesaid facts, assessee claimed before ITO that it should be taxed at normal rate as per First Proviso to s. 164(1) of IT Act, 1961. ITO, however, assessed assessee trust at maximum rate with following observations: "The assessee has claimed that income of trust is chargeable at normal rate as per first proviso to s. 164(1) as none of beneficiary in other trust. claim of assessee under proviso to s. 164(1) fails as one of beneficiary namely Deviayaniben has got taxable income. Regarding alternative claim of assessee under second proviso to s. 164(1),the basic condition to be satisfied is that relevant income is receivable under Trust declared by 'Will" and that trust is only trust so declared. In this case settlor had settled two trusts viz. Pranlal Thakore Das Trust and Ranjnikant Gulabdas Trust. It is contended that other trust i.e. Pranlal Thakordas Trust was dissolved with effect from 1st May, 1979 would to make any difference, so far as creation of two trusts at earlier stage. Further Trustees had no authority under Indian Trust Act to dissolve Trust. Considering above facts, claim of assessee to tax income at normal rate is rejected and tax is charged at maximum rate." In appeal before AAC assessee once again urged that it should be assessed at normal rate and not at maximum marginal rate as during relevant accounting year there was only one trust under Will left by late Shri Pranlal Thakordas Shah. In this connection, it was stated that other trust viz, Shri Pranlal Thakordas Trust was dissolved by trustees as under cl. 9(a) of Will. They were authorised to dissolve trust and determine shares of beneficiaries as on date of dissolution. Therefore under proviso (ii) to s. 164(1) ITO ought to have assessed assessee at normal rate. Relying on proviso (i) to s. 164(1), it was also submitted that since beneficiaries of assessee trust were not beneficiaries of any other trust during relevant accounting year, assessee should have been taxed at normal rate. In this connection assessee pointed out to AAC that Proviso (i) to s. 164(1) contains two limbs and assessee would be entitled to claim that it should be taxed at normal rate if it fulfils conditions of one of two limbs. It was therefore, submitted that fact that one of beneficiaries viz. Smt. Deviyaniben Ranjnikant Shah had taxable income would not debar Assessee to be taxed at normal rate. AAC in his order under appeal accepted first contention of assessee but rejected second one in following manner: " I have considered arguments of appellant's counsel. I shall first consider conditions regarding proviso (i) of s. 164(1), section provides for charging of tax at maximum marginal rate in case of discretionary trust unless it is covered by proviso to this section. It is true that in proviso (i) there are two limbs. Discretionary trust is not to be charged at maximum rate if beneficiaries have no taxable income or they are no beneficiary under any other trust. proviso to s. 164(1) are introduced with view to obviate hardship in genuine cases where circumstances are such that evasion of taxes could not be considered to be main purpose of creating trust. Under these circumstances it was necessary to see that beneficiaries under any other trust. It would be thus clear that to avail benefit to proviso (i) it is necessary that both conditions are fulfilled, since one of beneficiaries had taxable income trust could not be entailed to benefit under proviso (i). According to proviso (ii), income is to be taxed at normal progressive rate if it is sole-discretionary trust delayed under Will. In this case, settlor had declared two trust as per his Will dt. 10th March 1977. trusts came into existence after death of settlor on 17th March 1977. On 1st May, 1979, Pranlal Thakordas Trust was dissolved and assets were distributed amongst beneficiaries. Second proviso was modified by Finance (No.2) Act, 1080. It restricts benefit of concessional rate of tax only to trust which is only discretionary trust created under Will. In this case two trusts were declared under Will much before this amendment came into force. Since appellant expired long before and he had made provisions for two trusts, benefit under proviso (ii) could not be denied for all time to come. Since one trust had been dissolved by trustees who were so empowered under cl. 9A of Will and only one trust declared under Will was in existence in accounting year, I hold that this trust was entitled to be assessed. At normal progressive rate applicable in case of AOP. It was entitled to benefit of proviso (ii) to s. 164(1) ITO was not justified in assessing total income of this trust at maximum rate. He is, therefore directed to modify assessment as indicated above." Being aggrieved by order of AAC, Revenue has come up in appeal before Tribunal, ld. representative for Department straggle relied on order of ITO and submitted that AAC was not justified in holding that by virtue of provisions of Proviso (ii) to s. 164(1) of Act assessee was not liable to tax at maximum marginal rate as during relevant accounting year there was only one trust under Will left by Shri Pranlal Thakordas Shah. According to ld, representative for Departmnet once two discretionary trusts are created under Will there is no question of adopting normal rate of taxation merely because one of such trusts was not in existence in relevant accounting year. He therefore urged that order of AAC should be reversed. ld. counsel for assessee on other hand, kly relied on order of AAC and submitted that AAC was fully justified in accepting assessee's submissions regarding applicability of provision of Proviso (ii) to s. 164(1) of Act. In this connection, he highlighted fact that other trust namely Shri Pranlal Thakordas Trust was dissolved on 1st May, 1979 i.e. much before introduction of Finance (No. 2) Bill 1980 on 18th June 1980 in much before introduction of Finance (No. 2) Bill 1980 on 18th June 1980 in Parliament. Therefore, no motive could be attached so as to apply maximum marginal rate in assessee's case. In this connection, he invited our attention to relevant notes on clauses to said Finance Bill which read as under: "Clause 27 seeks to amend s. 164 of IT Act relating to taxation of discretionary trusts. Sub-cl. (a) (i) seeks to amend sub-s(1) of s. 164. Under existing provisions, income received by trustees of discretionary trust is chargeable to income-tax at flat rate of 65 per cent. or rate which would be applicable if such income were total income of association of persons whichever course would be more beneficial to Revenue. Under proposed amendment, income received by trustees of discretionary trust would be chargeable at rate of income-tax, including surcharge applicable to highest slab of income of association of persons as specified in Finance Act of relevant assessment year. Sub-cl.(a) (ii) seeks to amend to proviso to sub-s 164. first amendment seeks to provide that provisions of sub-s. (1) will not apply to discretionary trust in which none of beneficiaries has and other income chargeable to income-tax and none of them is beneficiary, in any other trust. For this purpose, none of beneficiaries should have income assessable under IT Act exceeding exemption limit for relevant assessment year. second amendment seeks to amend cl.(ii) of proviso to s. 164(1). Under existing provision, were discretionary trust is declared under Will, income of discretionary trust is charged to tax at rates applicable to association of persons and not at flat rate of 65 per cent. Under proposed amendment, benefit of concessional tax treatment will be withdrawn if person declaring such trust has declared any other trust by Will." He also invited our attention to relevant portion of Memorandum explaining Provisions of said Finance Bill, which read as under: "Experience has, however, showed that provisions of s. 164 have not been fully effective in curbing use of private trusts for avoiding proper tax liability. It is accordingly proposed to made following amendments in s. 164 with view to surfing tax avoidance through medium of such trusts: (i) It is proposed to provide that discretionary trust will be liable to tax at maximum marginal rate of income-tax. As result, entire income of discretionary trust will be liable to tax at maximum marginal rate of income- tax (including surcharge) applicable, under Finance Act of relevant year, to highest slab of income in case of association of persons. (ii) As already stated, existing provision relating to levy of flat rate of 65 per cent. does not apply in case where none of beneficiaries of trust has any other income chargeable to income-tax. This special dispensation has been misused by creation of large number of is certiorari trusts, beneficiaries of which do not have any other income chargeable to income-tax. With view to ensuring that provision is not misused in this manner, it is proposed to provide that discretionary trust would be liable to tax at maximum marginal rate unless none of beneficiaries has and other income chargeable to tax under Act nor is he beneficiary under any other private trust. It is also being clarified that, in this context, income chargeable to tax would mean total income above exemption limit for relevant year. (iii) At present, where discretionary trust is created under Will, income of discretionary trust is charged to tax at rates applicable to association of persons and not at flat rate of 65 pr cent. This provision was originally mad with view to relieving hardship in case when person genuinely creates one discretionary trust by will for benefit of his relations. However, it has been observed that this provision has been misused to large extent by persons creating number of discretionary trusts by will. It is accordingly proposed to withdraw benefit of concessional tax treatment in cases were person has created more than one discretionary trusts by Will." He therefore urged that keeping aforesaid background in proper perspective, AAC was fully justified in accepting assessee's submission that during relevant time, there was only one discretionary trust created by Will. In support of his aforesaid submissions, he also relied on certain observation made by Hon'ble Supreme Court in following case: CIT vs. J.H. Gotla (1985) 48 CTR (SC) 363: (1885) 156 ITR 323 at 339 (SC) "Where plain littoral interpretation of statutory provision produces manifestly unjust result which could never have been intended by Legislature, Court might modify language used by Legislature as to achieve intention of Legislature and produce rational construction. task of interpretation of statutory provision is attempt to discover intention of Legislature from language use. It is necessary to remember that language is at best imperfect instrument for expression of human intention. It is well to remember warring administered by judge. Learned Hand that one should not make for-tress out of dictionary but remember that statutes always have some purpose or object to accomplish and sympathetic and imaginative discovery is surest guide to there meaning." Saroj Aggarwal vs. CIT (1985) 49 CTR (SC) 183: (1985) 156 ITR 497 at 508 (SC): "Facts should be viewed in natural perspective, having regard to compulsion of circumstances of case. Whether it is possible to draw two inferences from facts and where there is on evidence of any dishonest or improper motive no assessee, it would be just and equitable to draw such inference in such manner that would be just equitable to draw such inference in such manner that would lead to equity and justice. Too hypertechnical or legalistic approach should be avoided in looking at provision which must be equitably interpreted unjustly administered. It is true that there must be succession by inheritance. But it is possible in particular case without any express provision either in deed or in writing to infer from conduct of parties that there was succession, and if such view is possible in spite of absence of express provision either in deed or in writing to infer from conduct of parties that there was succession, and if such view is possible in spite of absence of express provision in our opinion, such inference could be and should be drawn. Court should whenever possible, unless prevented by express language of any section to compelling circumstances of any particular case, make benevolent and justice-oriented inference. Facts must be viewed in social milieu of country". Shree Sajjan Mills Ltd. vs. CIT (1985) 49 CTR (SC)193: (1985) ITR 585 156 at 603 (SC): "The principle that fiscal statues should be strictly construed does not rule out application of principles of reasonable construction to give effects to purpose or intention of any particular provision as apparent from scheme of Act, with assistance of such external aids as are permissible under law." According to ld. counsel for assessee even under Proviso (i) to s. 164(1), assessee would be entitled to claim that it should be assessed at normal rate. In this connection, he submitted that under said proviso discretiobnary trust has to be taxed at normal rate if none of its beneficiaries has any other income chargeable under Act or none of its beneficiaries is beneficiary under any other trust ld. counsel for assessee was fair enough to state that one of beneficiaries of assessee trust, Smt.Deviyaniben Rajnikant Shah, had taxable income. However, he hastened t o state that since said beneficiary was not beneficiary under and other trust, assessee would be entitled to claim that its income should be taxed at normal rate. He therefore urged that AAC was not justified in holding otherwise. We have carefully considered that rival submissions of parties. At this juncture, it would be necessary to reproduce below relevant peroration of s. 164 of Act: "164. (1) Subject to provisions of sub-s. (2) and (3), where any income in respect of which persons mentioned in cls.(iii) and (iv) of sub-s (1) of s. 160 are liable as representative assessee or any part thereof is not specifically receivable on behalf or for benefit of any one person or where individual shares of persons on whose benefit such income of such part thereof is receivable are indeterminate or unknown (such income, such part of income and such persons being hereafter in this section referred to as "relevant income", part of relevant income" and "beneficiaries". respectively), tax shall be charged on relevant income or part of relevant income at maximum marginal rate: Provided that in case where (i) none of beneficiaries has any other income chargeable under this Act exceeding maximum amount not chargeable to tax in case of AOP or is beneficiary under any other trust; or (ii) relevant income or part of relevant income is receivable under trust declared by any persons will and such trust is only trust so declared by him; (iii) xx xx xx (iv) xx xx xx tax shall be charged on relevant income or part of relevant income as if it were total income of AOP." On plain reading of aforesaid provision of Act, we are of view that AAC was fully justified in holding that by virtue of Proviso *ii) to s. 164(1) of Act, assessee would be required to be taxed at normal rate. It is no doubt true that initially under Will two discretionary trusts were created by late Shri Pranlal Thakordas Shah. However, much prior to introduction of Finance (No.2) Bill, 1980 on 18th June 1980, Shri Parnlal Thakorda Trust was dissolved on 1st May 1979 year, there was only one discretionary trust crated under Will. Keeping in mind fore said observation of Hon'ble Supreme Court, we are of view that provisions of Proviso (ii) to s. 164(1) of Act have to be construed reasonably and not in manner, ITO has construed. Since there was only one discretionary trust created under Will, we are of view that AAC was fully justified in holding that maximum marginal rate was not applicable to assessee. As regards assessee's submission in respect of provisions of Proviso (i) to s. 164(1) of Act, it is not necessary for us to express any specific opinion as assessee has not preferred any appeal/cross objection against order of AAC. In result, appeal is dismissed. *** INCOME TAX OFFICER v. RAJNIKANT GULABDAS SHETH FAMILY TRUST