1992 (6) TMI 48 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Trust Deeds executed by the assessee in 1969 were revocable transfers under section 63 of the Income-tax Act, 1961.
2. Whether the income from the trust property should be assessed in the hands of the assessee under section 61 of the Act.
3. Inclusion of the beneficial interest of the minor sons in the hands of the assessee under section 64 of the Act.

Detailed Analysis:

1. Revocability of Trust Deeds:
The primary issue was whether the Trust Deeds executed by the assessee in 1969 were revocable transfers within the meaning of section 63 of the Income-tax Act, 1961. The Assessing Officer held that these Trust Deeds were revocable, thereby making the entire income from the property assessable in the hands of the assessee under section 61 of the Act. This decision was based on the premise that the assessee reassumed power over the income by receiving a share for Devseva purposes.

The Dy. Commissioner(Appeals) disagreed, holding that the Trust was not revocable as there was no provision for retransfer of income or assets to the assessee nor any right to reassume power over them. The Tribunal upheld this finding, stating that the assessee was merely acting as an agent for Devseva and had no personal benefit from the income, thus confirming that the Trust was not revocable.

2. Assessment of Income from Trust Property:
The Assessing Officer initially included the entire income from the property in the hands of the assessee for the assessment years 1971-72 and 1972-73, following the order of the AAC for the assessment year 1977-78. This was done under section 143(3) read with section 147 of the Act.

For subsequent years (1973-74 to 1976-77), the Assessing Officer included the income of the minor sons and the share for Devseva in the hands of the assessee. The Dy. Commissioner(Appeals) later held that only the beneficial interest of the minor sons should be taxed in the assessee's hands, not the entire income from the property. The Tribunal confirmed this, stating that the income from the Trust property should not be assessed in the hands of the assessee except for the minor sons' shares under section 64 of the Act.

3. Inclusion of Minor Sons' Beneficial Interest:
The Assessing Officer included the 1/9th share of each of the three minor sons and the share for Devseva in the hands of the assessee. The Dy. Commissioner(Appeals) upheld the inclusion of the minor sons' beneficial interest but not the entire income from the property. The Tribunal agreed, confirming that the beneficial interest of the minor sons should be included in the assessee's income under section 64 of the Act.

Conclusion:
The Tribunal upheld the Dy. Commissioner(Appeals)'s findings that the Trust Deeds were not revocable transfers and that the income from the Trust property should not be assessed in the hands of the assessee except for the beneficial interest of the minor sons under section 64 of the Act. The appeals filed by the Revenue were dismissed.