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TMI Blog1987 (2) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... chandrapuram Taluk was the settlor and the author of the trust. She settled a sum of Rs. 10,000 for the benefit of Sri K. Veerraju Choudhary son of Sri Narayanamurthy of Kakinda. The appointed trustee is one Smt. Kantipudi Sitaratnam wife of Sri Veerraju Choudary of Kakinada. That means the trustee is none other than the wife of the beneficiary. According to clause 4 of trust deed the trust moneys can be invested in shares, stocks, securities and other investments in business, purchase of properties and the income thereof together with the trust fund should be aggregated or accumulated for a period of 10 years and after the expiry of 10 years from the date of trust deed the income of the trust fund will be applied for the benefit of the beneficiary. The accumulation shall not exceed the period of 10 years or the death of the settlor whichever is longer. Before the expiration of the period of determination of trust if the beneficiary dies then the heirs of the beneficiary or beneficiaries other than the settlor shall be treated as equal beneficiary under the trust. Even in such a case the income of the trust be accumulated and should not be applied for any beneficiary or beneficiari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1981 9,500 6. D. Ramakrishna, " 5-10-1980 23-4-1981 36,000 7. K. Subbamma, " 7-10-1980 not known 9,500 8. K. Pullayya alias Tatarao, " 7-10-1980 23-4-1981 7,500 9. V. Veerayya " 8-10-1980 24-4-1981 10,000 10. N.Venkataramayya Chowdary " 8-10-1980 23-4-1981 16,000 11. K.M. Veerraju, " 8-10-1980 24-4-1981 20,000 12. V. Ammi Reddi, " 9-10-1980 23-4-1981 15,000 13. N. Maheswara Rao, " 16-10-1980 23-4-1981 15,000 14. V. Satyanarayana Murthy " 5-11-1980 20-4-1981 11,000 15. K. Veerraju Chowdary " 11-11-1980 20-4-1981 60,000 16. G. Satyavathi " 7-10-1980 25-4-1981 5,000 . . . 2,63,000 4. In I.T.A. No. 1276 (Hyd.) 1983 the settlement deed is dated 23-1-1981. The settlor is one Sri Teledevara Pattabhiramayya, son of Lat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The names of the donors, date when they made the settlement, amount of gift, date of G.T. return and the date of gift-tax assessment, if any, made are all furnished in the table below : Sl. Name of the Date Date of G.T. return Amount No. Donor and address Rs. 1. Yelati Peda Veeraju, Peddapuram 18-2-1981 21-4-1981 20,000 2. Yelati Venkatarao, Peddapuram 18-2-1981 21-4-1981 18,000 3. Kongara Naryanarao, Jaggampeta 20-2-1981 21-4-1981 10,000 4. Bikkani Krishnamurty, Samalkot 20-2-1981 28-4-1981 8,500 5. Yarlagadda Raghavulu, Jaggampeta 20-2-1981 21-4-1981 15,000 6. Kantipudi SatyanarayanamyMurthy, Kakinada 22-2-1981 23-4-1981 16,000 7. Pynni Suryakantam 18-2-1981 12,000 8. Pynni Ravindranath 29-2-1981 16,000 9. Pynni Gangadharam 19-2-1981 17,000 10. Palacherla Govindarao 22-2-1981 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,000 7. Manyam Veera Venkata Satyanarayana Murthy, kakinada 16-3-1981 23-4-1981 17,000 8. Manyam Venkata Satyaprasad Babu 17-3-1981 20-4-1981 10,000 9. Smt. M.V.S. Bhavani " 17-3-1981 20-4-1981 10,000 10. Sunkavalli Veerraju, Vadlamuru 17-3-1981 20-4-1981 22,000 11. Golipardha saradhi Rao " 17-3-1981 20-4-1981 20,000 1,84,000 6. The assessment against Sitaratnam Family Trust for assessment year 1981-82 was completed by the Income-tax Officer on 14-8-1981 under section 143(3). So also, the assessment against Srihari Family Trust for assessment year 1981-82 was completed on 13-8-1981 under section 143(3). Similarly the assessment on KVR Family Trust for assessment year 1981-82 was completed on 14-8-1981 for assessment year 1981-82 under section 143(3). According to the learned CIT, Visakhapatnam who had revised the orders of the Income-tax Officer stating that they are erroneous and prejudicial to the interests of revenue firstly held in the case of Sitaratnam Family Trust that the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charged at the maximum marginal rate. " 8. Firstly we have to see whether this objection raised on behalf of the revenue is tenable. According to us it is not tenable. Firstly we must point out that the settlor had named the existing son of Sri Saradhi viz., Vijay as the beneficiary and it is further stated in the trust deed that if Vijay happens to beget more children then those children also become the beneficiaries under the trust. Who are the children of Saradhi can easily be found out and we hold that they are an identifiable class. In CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 at page 557 in the head-note the following ratio was propounded by the Hon'ble Supreme Court : " It is not at all relevant whether the beneficiaries may change in subsequent years before the date of distribution, depending upon contingencies which may come to pass in future. So long as it is possible to say on the relevant valuation date that the beneficiaries are known and their shares are determinate, the possibility that the beneficiaries are known and their shares are determinate, the possibility that the beneficiaries may change by reason of subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te.... Now in the present case there seems to be no difficulty in determining the shares of the beneficiaries during the relevant account period. The will clearly lays down as to who would be entitled to the income and it is a mere matter of calculation as to how many sons or grandsons were in existence at the relevant date and to calculate according to their respective shares, as provided under the testamentary trust. " The learned Judge also followed the ratio of the Gujarat High Court decision in Padmavati Jaykrishna Trust v. CWT [1966] 61 ITR 66. The judgment of the Calcutta High Court quoted above was also followed in other cases. In Khan Bahadur M. Habibur Rahman v. CIT [1945] 13 ITR 189 (Pat.) and CWT v. Puthiya Ponmanichintakam Wakf [1967] 63 ITR 787 (Ker.) the Hon'ble High Court of Gujarat in Padmavati Jaykrishna Trust's case at page 80 of the reported decision as follows : " These decisions are clear authorities for the proposition that in determining whether the shares of beneficiaries are determinate and known, so that assessment should be made under sub-section (1) of section 41 of the Income-tax Act, what the revenue authorities have to see is whether such shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913) receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees. (v) in respect of income which a trustee appointed under an oral trust receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees. Explanation 1 : A trust which is not declared by a duly executed instrument in writing including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913) shall be deemed for the purposes of clause (iv) to be a trust declared by a duly executed instrument in writing if a statement in writing signed by the trustee or trustees, setting out the purpose or purposes of the trust, particulars as to the trustee or trustees, the beneficiary or beneficiaries and the trust property, is forwarded to the Income-tax Officer--- (i) where the trust has been declared before the 1st day of June, 1981, within a period of three months from that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or from the date of duly executed trust deed would itself be considered to be a trust and all such cases should be taken to be a trust and declared a duly executed instrument. If such a procedure is not followed but at if a settlor makes a gift to a beneficiary under an existing trust then it would be considered to be an oral trust not declared by a duly executed instrument in writing under Explanation 2 to section 160(1) and the income thereon should be charged with maximum marginal rate under section 164(1). 10. Now we have to see whether this finding of the learned Commissioner is tenable on a consideration of facts and circumstances of the case. It is argued by Sri B. Satyanarayana Moorthy, the learned counsel for the assessee that this is not an oral trust and this is a trust made by each of the settlors enumerated in the three lists noted in the order above. They made the gifts to the respective trusts after fully knowing the terms of those respective trust deeds and also the beneficiaries of the respective trusts. He submitted that the settlors not only made the gifts but also submitted the gift-tax returns shown against each one of their names in the three tables above. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x return. In such a case the trust cannot be said to be an oral trust and the same terms and stipulations of the trust deeds would govern the disposal of the gifted amounts also. The gifted amounts according to Sri B. Satyanarayanamurthy would form part of the corpus of the trust. There are instances where the Hon'ble Supreme Court as well as the Andhra Pradesh High Court held that when additional amounts were gifted to the already existing trust evidenced by written instrument then the gifted amount should be considered to be governed by the same terms and stipulations as found in the written trust deeds. He had cited before us two decisions---the first being Sardar Bahadur S. Indra Singh Trust v. CIT [1971] 82 ITR 561. In the case before the Supreme Court the assessee is a charitable trust constituted under a trust deed dated 19-12-1944 supplemented by another trust deed dated 16-1-1951. The object of the trust deed is stated to be advancement of learning and education, amelioration of the sufferings of all citizens of Indian Union irrespective of caste, colour or creed for maintaining library or libraries for the free use of the public in general etc. etc. Sardar Ajaib Singh is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a private trust is not at all relevant for appreciation of ratio laid down by the Hon'ble Supreme Court. Further, Sri B. Satyanarayana Murthy, learned counsel for the assesses invited our attention to Andhra Pradesh High Court decision reported in CIT v. Trustees of H.E.H. the Nizam's Dependants Khanazads Trust [1983] 139 ITR 517. In that case H.E.H. the Nizam executed a trust deed dated 12-8-1957 by transferring shares bearing a face value of Rs. 85,01,650 for the benefit of the dependants and Khanazads of the Nizam. It was advised by the solicitors of Nizam that the trust was void. The trustees by a resolution on 4-3-1959 decided to close the trust account in the Central Bank of India and placed it at the disposal of the financial advisers of the Nizam. Accordingly the original account of the bank was closed and a new account 'Account of Nizam Khanazads' was opened. As the Nizam created the trust the Income-tax Officer initiated gift-tax proceedings against the settlor. The settlor contended that there was no gift. The Gift-tax Officer rejected this claim which was upheld in appeal. The settlor approached the CBDT. Sometime in October 1966 the settlor accepted that there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gifts. A reading of all the three trust deeds before us leaves us in no doubt to conclude that there are no clauses prohibiting receipt of gifts. On the other hand, there are relevant clauses contemplating additions to be made to the trust funds. Further under s. 2(viii) of the G.T. Act 'donee' is defined as to mean any person who acquires any property under a gift, and where a gift is made to a trustee for the benefit of another person includes both the trustee and the beneficiary. Therefore, there is no force in the contention that a trust cannot be a recipient of a gift. Having regard to all the above we hold that the gifts made by the settlors listed out in the three lists mentioned in the above paras of the order did not make any oral gifts. On the other hand, they made gifts only to the trusts and they completed the gifts by handing over the gift moneys to the trustees. Their intention was that their gifts should form part of the corpus of the trust fund and the disposal of the trust fund must be according to the terms of the trust deeds. The learned Departmental Representative cited before us Bhagwatiprasad Jhunjhunwala v. First WTO [1984] 7 ITD 216 (Bom.) and Trustees of H. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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