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Issues Involved:
1. Applicability of Section 16(3)(b) of the Income-tax Act to the income received by a trustee for the benefit of a minor child. 2. Taxability of income received by an individual under a trust deed for the benefit of himself, his wife, and children under Section 41 of the Income-tax Act. Issue 1: Applicability of Section 16(3)(b) of the Income-tax Act The primary question was whether an amount of Rs. 410, received by the assessee as a trustee, should be included in his total income under Section 16(3)(b) of the Income-tax Act. The amount was received for the benefit of his minor daughter, Chandrika, but she was to receive the income only upon attaining the age of 18 years. During her minority, she had no right or beneficial interest in this income. The court analyzed Section 16(3)(b), which deals with notional income and aims to prevent tax avoidance through trust creation. The court noted that Section 16(3)(b) requires the income to be actually received or derived by the minor in the year of account. Since the Rs. 410 was to be added to the corpus and not enjoyed by the minor during her minority, it could not be considered part of the assessee's total income. The court concluded that the Rs. 410 did not form part of the total income of the assessee. Issue 2: Taxability of Income under Section 41 of the Income-tax Act The second issue involved a sum of Rs. 14,170 received by the assessee under a trust deed created by his father. The trust deed stipulated that the income was for the maintenance of the assessee, his wife, and his children. The Tribunal had ruled that the assessee was the sole beneficiary and could use the amount as he wished. The court disagreed, stating that the amount was impressed with a trust for the benefit of the wife and children, making the assessee accountable as a trustee. The court referred to Lewin on Trusts to distinguish between a motive for a gift and a trust, concluding that the language of the trust deed created a trust, not just a motive for a gift. The court then examined Section 41 of the Income-tax Act, which allows the Department to tax either the trustees or the beneficiaries. The court noted that although the Department could choose to tax the assessee directly, the assessee could argue that he was acting as a trustee and should be taxed under Section 41(1), which includes provisions for taxing trustees at the maximum rate if the beneficiaries' shares are indeterminate. The court concluded that the assessee was a trustee under a duly executed instrument and could be taxed only as a trustee under Section 41. Conclusion: The court answered both questions in the negative, ruling that: 1. The Rs. 410 received by the assessee as a trustee did not form part of his total income under Section 16(3)(b). 2. The Rs. 14,170 received under the trust deed could not be added to the assessee's total income as he was acting as a trustee and should be taxed under Section 41.
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