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TMI Blog2010 (9) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated July 11, 1989, on the application preferred by the Department. Before we disclose the exact nature of the questions referred to, we state the relevant facts. 3. The assessee is an individual. By a trust deed executed on April 15, 1978, the assessee and her husband Shri Bal Kishan Dass created a private trust by the name of U. B. Enterprises Trust. Each of the settlors had settled a sum of Rs. 10,000 in trust for the benefit of the five beneficiaries, namely, Smt. Shashi Agarwal, daughter-in-law of the settlors, Master Amit, Miss Ujala Agarwal, Master Kapil Agarwal and Miss Anupama, the grand-children of the settlors. The Income-tax Officer making the assessment on the assessee examined the trust deed and held that under the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 1979-80. 7. The rationale given by the Tribunal was that the transfer of money by the two settlors were not made directly or indirectly to the daughter-in-law of the assessee or her grand children, who were minors. On the contrary, transfer of funds had been made to an association of persons for the benefit of the assessee's daughter-in-law and her minor grand children. In such circumstances, according to the Tribunal, section 64(1)(vi) would not apply. In this backdrop the following questions are referred for the opinion of this court : "1. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the provisions of section 64(1)(vi) were not applicable to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) to any person or association of persons from assets transferred directly or indirectly on or after the 1st day of June, 1973, otherwise than for adequate consideration, to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit of his son's minor child or both." 9. All such incomes which arise directly or indirectly as stipulated in clause (vi) would also be included. Clause (vi) mentions that in case the assessee had transferred assets to his son's wife (i.e., daughter-in-law) or his/her grand children directly or indirectly then income from those assets is to be added in the total income of the assessee. Clause (viii) was inserted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "association of persons" is significantly missing in clause (vi). Insertion of clause (viii) makes it clear that the Legislature found this omission in clause (vi) and, therefore, incorporated the amendment. With the insertion of this clause even when there is transfer of an asset to a trust, i.e., association of persons, an income generated there from shall be included in the total income of the assessee. However, the said clause has been made effective with effect from April 1, 1985. This fact is taken note of by the Tribunal in the impugned judgment as is clear from the following : "The income derived by the trust would have been includible in the hands of the assessee and the other co-settlor provided the provisions of section 64(1)(v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ildren but since the transfer had not been made directly or indirectly to the above mentioned beneficiaries, the provisions of section 64(1)(vi) would not be applicable. The decision reported in D. M. Netarwalla v. CIT [1979] 120 ITR 848 (Bom) also does not help the case of the Department as in that case also the facts were entirely different. In that case, certain amounts held under trust had been transferred to the assessee's wife after the trust had come to an end. Their Lordships of the hon'ble Bombay High Court had held that when the assessee's wife received the trust funds after the determination of the trust, it amounted to indirect transfer by the assessee to his wife and that the interest received by the wife could be included in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law and hold that the income derived by the trust was assessable/includible in the hands of the assessee. In these facts and circumstances, the decisions of the hon'ble Supreme Court reported in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) and Workmen v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 (SC) and the decision of the hon'ble Full Bench of the Patna High Court reported in CIT v. Sheo Kumari Debi [1986] 157 ITR 13 (Patna) [FB] would not stand in the way of the assessee who has succeeded before the Appellate Assistant Commissioner. On the other hand, we find that in absolutely similar circumstances, the Madras Bench of the Income-tax Appellate Tribunal had held in the case of Smt. N. Muthammal [1983] 6 ITD 136 that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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