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- Interpretation of section 64(1)(vii) of the Income-tax Act, 1961 regarding clubbing of income from properties settled in trust for minor beneficiaries with the income of the assessee. Analysis: The judgment of the High Court of Andhra Pradesh involved a question referred by the Income-tax Appellate Tribunal regarding the clubbing of income from properties settled in trust for minor beneficiaries with the income of the assessee under section 64(1)(vii) of the Income-tax Act, 1961. The case revolved around a trust deed executed by the assessee, where a half share of a property was settled for the benefit of his two minor sons. The trust deed specified that the income should be utilized for the education and maintenance of the minors, with the remaining amount accumulated and handed over to the minors upon attaining majority. The Tribunal held that only the income actually spent on the minors should be included in the assessee's income, while the accumulated income need not be included. The controversy arose from differing interpretations of whether the deferred benefit to the minor should be within the minority or beyond it. The court analyzed the provisions of section 64(1)(vii) which require the inclusion of income arising from assets transferred for the immediate or deferred benefit of the spouse or minor child of the individual. The assessee argued that unless the benefit to the minor is payable during minority, it should not be included in the parent's income. On the other hand, the Revenue contended that any immediate or deferred benefit provided to the minor from the transferred property should lead to inclusion in the parent's income. The trust deed in question did not mandate the accumulation of income until the minors attained majority, but rather allowed for annual expenditure on education and maintenance, with accumulation of the remaining amount if any. The court agreed with the Bombay High Court's interpretation that deferred benefit should be within the minority of the child for it to be considered a benefit. Therefore, the income spent on minors annually should be included in the parent's income, while the accumulated income for payment upon attaining majority need not be included. The court distinguished other High Court decisions cited by the Revenue, emphasizing that those cases did not address the specific issue at hand. The judgments referred to by the Revenue did not deal with the interpretation of deferred benefit within the minority of the child as crucial for determining inclusion in the parent's income. Ultimately, the court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue. The judgment clarified that only income actually spent on minors in a given year should be included in the parent's total income, while accumulated income for future payment need not be included.
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