1988 (2) TMI 126 - AT - Income Tax

Summary

Issues:
1. Whether income arising from properties settled on a trust for the benefit of a minor can be included in the minor's hands.
2. Whether income accrued from an estate left by a deceased person and bequeathed to a minor under a will should be assessed in the hands of the minor or the executor.

Detailed Analysis:

1. The first issue in this case revolves around the inclusion of income arising from properties settled on a trust for the benefit of a minor in the minor's hands. The Income-tax Officer made an addition to the minor's income, which was subsequently deleted by the CIT (Appeals) based on a previous Tribunal order. The Tribunal upheld the CIT (Appeals) decision, stating that as the matter was directly covered by the Tribunal's order, there was no justification to interfere. The Tribunal concluded that the income arising from the trust properties should not be included in the minor's hands.

2. The second issue pertains to the assessment of income accrued from an estate left by a deceased person and bequeathed to a minor under a will. The Income-tax Officer added this income in the minor's hands, arguing that the minor was the sole beneficial owner of the estate. However, the CIT (Appeals) held that under section 168(2) of the Income-tax Act, it was mandatory to assess the estate of the deceased in the hands of the executor until the administration of the estate was complete. The CIT (Appeals) directed the deletion of the income added by the Income-tax Officer. The Tribunal analyzed the will and relevant legal provisions, concluding that the estate vested in the executor until the minor attained majority. Therefore, the Tribunal upheld the CIT (Appeals) decision to delete the addition of income in the minor's hands.

3. The Tribunal further emphasized that the provisions of section 168 of the Income-tax Act mandated that income of a deceased person's estate should be charged to tax in the hands of the executor until the estate administration was complete. The Tribunal highlighted the mandatory nature of these provisions and the requirement to exclude income distributed to specific legatees from the executor's total income. Since the income had already been assessed in the hands of the executor and not excluded as required by the law, the Tribunal upheld the decision to delete the addition of income in the minor's hands. The Tribunal dismissed the appeal, affirming the CIT (Appeals) order.

In conclusion, the Tribunal's judgment clarified the treatment of income arising from trust properties for a minor and the assessment of income from an estate bequeathed to a minor under a will. The decision underscored the legal provisions governing such scenarios and upheld the CIT (Appeals) order to delete the additions in the minor's hands, based on the specific directions in the will and the mandatory nature of the relevant tax provisions.