1982 (9) TMI 8 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the trusts created by the deeds dated January 22, 1969.
2. Determination and certainty of the beneficiaries of the trusts.
3. Rule against perpetuity and its application to the trusts.
4. Certainty of the purpose of the trusts.

Issue-wise Detailed Analysis:

1. Validity of the Trusts Created by the Deeds Dated January 22, 1969:
The primary issue before the court was whether the trusts created by the assessee and his wife on January 22, 1969, were valid. The Revenue contended that the trusts were invalid as they allegedly violated the rule against perpetuity and had indeterminate and uncertain beneficiaries. The Tribunal, however, held that the reopening of the assessment under section 147(b) of the Income Tax Act was proper and justified, and that the trusts were valid and did not offend the rule against perpetuity. The court concurred with the Tribunal, stating that the trust deeds did not offend the rule against perpetuity as the interest created by the trust was to take effect within the lifetime of the persons living at the time of the execution of the trust deeds.

2. Determination and Certainty of the Beneficiaries of the Trusts:
The Revenue argued that the beneficiaries of the trusts were indeterminate and uncertain, thereby rendering the trusts invalid. The court examined the terms of the trust deeds and found that the intention of the testator was clear-to benefit the prospective wives of his sons, Dileep Kumar and Pradeep Kumar. The court held that the beneficiaries could not be said to be uncertain merely because the actual beneficiaries could not be known until the marriage of the sons took place. The court emphasized that a trust could be created in favor of an unborn person, provided it satisfied the conditions laid down in section 13 of the Transfer of Property Act.

3. Rule Against Perpetuity and Its Application to the Trusts:
The Revenue contended that the trusts violated the rule against perpetuity. The court referred to Section 14 of the Transfer of Property Act, which states that no transfer of property can create an interest to take effect after the lifetime of persons living at the date of the transfer and the minority of a person in existence at the expiration of that period. The court found that the trusts operated to create an interest within the lifetime of Dileep Kumar and Pradeep Kumar, who were living at the time of the execution of the trust deeds, and the operation was not postponed beyond their lifetime. Therefore, the court concluded that the rule against perpetuity was not offended.

4. Certainty of the Purpose of the Trusts:
The Revenue also argued that the purpose of the trusts was vague and indeterminate. The court examined the terms of the trust deeds and found that the intention was to benefit the prospective wives of the assessee's sons, and if that failed, the benefit would go to charitable purposes. The court held that even if the details of the charitable purposes were not mentioned, the trust would still be valid as long as the trust was created for charitable purposes. The court distinguished the present case from other cases cited by the Revenue, where the trusts were held invalid due to the vagueness and uncertainty of the objects.

Conclusion:
The court held that the trust deeds were valid, did not offend the rule against perpetuity, and the beneficiaries were not indeterminate or uncertain. The court answered both questions in the affirmative and against the Revenue, affirming the validity of the trusts created by the deeds dated January 22, 1969. The assessee was awarded costs from the Revenue, with counsel's fee set at Rs. 500.