The main legal point established in the judgment is the interpretation of Section 164 and the application of the rate of 65% for imposing tax on the trust income without allowing the basic exemption of Rs. 5,000 as laid down in the Finance Act.

( 1 ) THE assesses is a trust and the ITO while making the assessment for the year 1974-73 held that the shares of the beneficiaries were indeterminate. He took the status as association of persons but held that the basic exemption of Rs. 5,000 as available to the association of persons under the Finance Act was not applicable to the assessee's case. The ITO determined the income at Rs. 6,500. When the matter went up in appeal before the AAC he did not accept the assessee's contention regarding the allowance of basic exemption of Rs. 5,000. He allowed deduction of Rs. 3,000 under Section 80l of the I. T. Act, 1961. Thereupon, the matter went up before the Tribunal. It was submitted on behalf of the assessee that the provisions of Section 164 of the I. T. Act were not applicable to the total income of the trust and it was submitted further that on the basis of the trust deed the shares of the beneficiaries should be held to be determinate. It was also contended that even if the provisions of Section 164 applied to any part of the trust income, the rate of 65% as laid down in Section 164 could be applied only after allowing the basic exemption of Rs. 5,000. After considering the trust deed and the other facts of the case the Tribunal came to the conclusion that the trust deed had not been properly considered by the authorities below and it had not been found out as to which part of the income of the trust was hit by the provisions of Section 164. The Tribunal, therefore, sent back the matter to the ITO for determination of the question. Regarding the manner in which the tax was to be levied, the Tribunal observed as follows :"as regards the question of allowance of basic exemption, we are of the view that there is no force in the submission made by the assessee. The rate of 65% is laid down in the I. T. Act itself and this will have precedence over the rate which might be specified in the Finance Act. There is no question of applying a particular rate specified in the Act itself after allowance of any basic exemption which has not been provided in the Act itself. The status given by the ITO as association of persons has no relevance for this purpose. Under the old Act also the maximum rate was held to be applicable to all the income assessable under the proviso to Section 41 and no basic exemption was to be allowed. The ITO is, therefore, directed to compute tax on the above basis after ascertaining the fact regarding the part of income to which Section 164 would apply. "

( 2 ) UPON an application being made by the assessee under Section 256 (1) of the I. T. Act, 1961, the following question of law has been referred to this court :"whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that while imposing tax under Section 164 (3) (b) of the Income-tax Act on the assessee-trust, the rate of 65% was to be calculated without allowing the basic exemption of Rs. 5,000 as laid down in the Finance Act?"

( 3 ) IN view of the language used in Section 164 (3) (b), read in the background of Section 164 as also the provisions of the Finance Act, 1973, which was relevant for the year, and Sub-section (3) of Section 2 of the said Act, which is, inter alia, as follows, in our opinion, the Tribunal arrived at the correct conclusion :"section 2 (3 ). In cases to which Chapter XII or Section 164 of the Income-tax Act, 1961 (XLIII of 1961) (hereinafter referred to as the Income-tax Act) applies, the tax chargeable shall fee determined as provided in that Chapter or that Section, and with reference to the rates imposed by Sub-section (1) or the rates as specified in that Chapter or Section, as the case may be. "

( 4 ) THIS view we are taking is in consonance with the ratio of the decision of this court in the case of CIT v. Trustees to the Trust Estate of Tarun Kumar Roy [1974] 94 ITR 361. We do not find anything in the decision of this court in the case of Official Trustee v. Commi