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Issues Involved:
1. Determination of individual shares of beneficiaries under the trust deed. 2. Applicability of Section 164 of the Income-tax Act, 1961. 3. Assessment of trust income in the hands of the trust estate versus beneficiaries. Issue-wise Detailed Analysis: 1. Determination of Individual Shares of Beneficiaries: The primary issue was whether the individual shares of the beneficiaries under the trust deed dated January 3, 1942, were indeterminate or unknown. The trust deed specified various directives for the trustees, including payments to the settlor's grandchildren and liquidation of debts. The deed also provided that the net rents, issues, and profits were to be distributed equally among specified beneficiaries after meeting certain expenses. The Income-tax Officer argued that the trustees had discretion to alter the distribution ratio, making the shares indeterminate. However, upon appeal, the Appellate Assistant Commissioner held that the trust deed did not give such discretion to the trustees. The Tribunal later reversed this decision, agreeing with the revenue that the shares were indeterminate. 2. Applicability of Section 164 of the Income-tax Act, 1961: Section 164(1) of the Income-tax Act, 1961, deals with the taxation of income where the individual shares of the beneficiaries are indeterminate or unknown. The Tribunal applied this section, concluding that the income should be assessed in the hands of the trust estate. The court analyzed Section 164 and its similarity to Section 41 of the Indian Income-tax Act, 1922. The court cited various precedents, including cases from the Calcutta High Court, Andhra Pradesh High Court, and Gujarat High Court, to interpret the applicability of Section 164. The court concluded that the law is well-settled, and the individual shares of the beneficiaries in the present case were determinate and known. 3. Assessment of Trust Income in the Hands of the Trust Estate versus Beneficiaries: The Income-tax Officer initially assessed the trust income in the hands of the trust estate, arguing that the deed did not clearly determine the shares of the beneficiaries. The Appellate Assistant Commissioner reversed this, holding that the income should be assessed in the hands of the beneficiaries. The Tribunal then reversed this decision, agreeing with the revenue's contention. The court ultimately held that the income was receivable on behalf of the beneficiaries and their shares were clearly defined. The court emphasized that the trustees had no discretion to alter the distribution once they decided to distribute the income, which must be done in equal shares as per the deed. Conclusion: The court answered the question referred to it in the negative and in favor of the assessee, concluding that the individual shares of the beneficiaries were determinate and known, and therefore, Section 164 of the Income-tax Act, 1961, did not apply. The income should be assessed in the hands of the beneficiaries, not the trust estate. There was no order as to costs.
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