Discretionary trusts with indeterminate beneficiary shares are mandatorily subject to the maximum marginal tax rate under Section 164(1) of the Income-tax Act, 1961, unless they qualify for specific statutory exceptions under Section 164(3) or Section 160(1)(iv).

O R D E R

PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:

This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT (A)-2, Coimbatore vide order dated 14.03.2025 passed for A.Y. 2024-25.

2. The assessee has raised the following grounds of appeal:

“1. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in points of law and facts.

2. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has erred in holding status of assessee as AOP/BOI. The correct status is that of Individual.

3. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in holding to charge income tax at maximum marginal rate @ 30%.

4. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in holding to charge interest u/s 234B of I.T. Act of Rs. 4,356.

5. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in holding to charge interest u/s 234C of I.T Act of Rs. 3,667.

6. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in holding to charge additional tax of Rs. 1,150.

7. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in raising demand of Rs. 58,882.

8. Your appellant reserves the right to add, alter, amend all or any of the above grounds of appeal as may be advised from time to time.”

3. The brief facts of the case are that the assessee, Niruben Ashokbhai Mehta Family Trust, filed its return of income on 31.07.2024 declaring total income of Rs. 2,94,000/- and claiming a refund of Rs. 39,712/-. The return was filed under the status of AOP/BOI with sub-status of Business Trust. The return was processed by CPC, Bengaluru, and an intimation under section 143(1) of the Act was issued computing the income at Rs. 2,93,940/-. While processing the return, CPC treated the assessee as an AOP/BOI and computed tax at the maximum marginal rate of 30% and surcharge at 25%, and also levied interest under sections 234B and 234C and additional tax of Rs. 1,150/-, resulting in a total demand of Rs. 81,810/-. Aggrieved, the assessee filed an appeal before the CIT(A).

4. In appeal, the assessee challenged the assessment under section 143(1) of the Act. The submitted that the Assessing Officer erred in treating the assessee as an AOP/BOI instead of an “Individual”. The assessee submitted that the trust was settled under a Will and became effective on the death of the testator, Smt. Niruben Ashokbhai Mehta, and therefore the correct status was that of an individual. In support of this contention, the assessee relied heavily on the judgment of the Hon’ble Gujarat High Court in Deepak Family Trust v. CIT (1995) 211 ITR 575 (Guj.), wherein it was held that trustees of a discretionary trust should be assessed in the status of “individual” and not as an AOP, and therefore entitled to benefits available to individuals. The assessee also relied on Harsiddh Specific Family Trust v. CIT (2002) 258 ITR 785 (Guj.), where the Court held that trustees