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TMI Blog2014 (5) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... ent [1993 (4) TMI 1 - SUPREME Court] and the fact that the income has been retained and not disbursed to the beneficiaries, the view taken by the High Court cannot be said to be legally flawed. Merely because the Settlor and after his death, his son did not exercise their power to appoint the discretion exercisers, the character of the subject trusts does not get altered. In view of the facts noted above, in our opinion, the two U.K. trusts continued to be 'discretionary trust' for the subject assessment years. The above position with regard to the discretionary trust is equally applicable to the controversy in appeals under the Wealth Tax Act. The High Court has taken a correct view that the value of the assets cannot be assessed on the estate of the deceased Settlor. - Decided against the revenue. - Civil Appeal No. 2312 of 2007 Civil Appeal No. 329 of 2009 Civil Appeal No. 204 of 2010 Civil Appeal No. 203 of 2010 Civil Appeal No. 202 of 2010 Civil Appeal No. 201 of 2010 Civil Appeal No. 200 of 2010 Civil Appeal No. 199 of 2010 Civil Appeal No. - - - Dated:- 16-4-2014 - R. M. Lodha And Shiva Kirti Singh,JJ. JUDGMENT R. M. Lodha, J. Leave granted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall and accordingly the Trustees shall stand possessed of the Trust Fund and the income thereof upon the trusts following that is to say :- (1) UPON TRUST to raise and pay out of the capital thereof any further estate duty which may still be payable thereon in respect of the death of the Settlor's father His Late Highness Shri Bhojrajji Maharaja Saheb of Gondal who died on the Thirty-first day of July One thousand nine hundred and fifty-two and any interest payable on such duty and any costs incurred in connection with the ascertainment or payment of such duty and interest. (2) Subject as aforesaid UPON TRUST for all or such one or more exclusively of the others or other of the Beneficiaries at such age or time or respective ages or times if more than one in such shares and with such trusts for their respective benefit and such provisions for their respective advancement and maintenance and education at the discretion of the Trustees or of any other person or persons as the person who for the time being is the Maharaja or (if the title is abolished) would have been the Maharaja had the title not been abolished shall at any time during the specified period by any deed or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1970-71. Thereafter, it appears that the assessee Jyotendrasinhiji took the stand that the income from these trusts is not includible in his income. Jyotendrasinhiji also took the stand that inclusion of the said income in the returns submitted by his father for the assessment years 1964-65 to 1969- 70 and by himself for the assessment year 1970-71 was under a mistake. 8. Bereft of unnecessary details, suffice it to say that Jyotendrasinhiji approached the Settlement Commission with an application for settlement relating to income from U.K. trusts just as he made application for settlement relating to U.S. trusts. As regards U.K. trusts, the Settlement Commission observed as follows:- So far as the U.K. trusts are concerned, clause (3) did never come into operation inasmuch as no additional trustees were appointed as contemplated by it. If so, clause (4) sprang into operation whereunder the entire income under the settlements flowed to the settlor during his lifetime and on his death, to his elder son, the appellant herein. In other words, these settlements are in the nature of specific trusts. In any event, the entire income from these trusts was received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neficiaries; only then does the trust income belong to and has to be paid over to the settlor -and after the death of the settlor to his elder son, the appellant. Accordingly, the counsel says, the Commission was wrong in law in treating these trusts as specific trusts. 11. This Court, however, observed that the question urged on behalf of the assessee was academic in the facts and circumstances of the case. In para 38 of the Report, this Court stated:- 38. ... As a matter of fact, both the settlor and the appellant have been receiving the income from these trusts during the several assessment years concerned herein. Shri Vikramsinhji had voluntarily included the entire income from the U.K. trusts in his income in the returns filed by him for the assessment years 1964-65 to 1969-70. It is unlikely that he would have so included unless he really received it. The Commission treated those declarations as proof of the settlor s real intention. The Commission also relied upon certain other circumstances including the manner in which the accounts of these trusts were maintained in support of their opinion that all concerned with the trusts, acted on the basis that the trust incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to bring all such income to tax. 12. Insofar as these appeals are concerned, as observed above, 8 appeals relate to income tax assessment years 1984-85 to 1991-92. The copies of the returns and balance sheets relating to above assessment years have been placed on record. It transpires therefrom that there is an endorsement at the bottom of the statement of funds ending on 31st March of each previous year, Net Income for the year retained . 13. Clause 3 of the deeds of settlement executed in U.K. leaves at the discretion of the trustees to disburse benefits to the beneficiaries. The endorsement made in the returns, as noted above, shows that income was retained by the trustees and not disbursed. 14. The Income Tax Appellate Tribunal (for short, 'Tribunal'), while considering clause 3(2) and Clause 4 of the U.K. Trust Deeds referred to the findings of the Settlement Commission and observed that if the trusts were really intended to be discretionary, the trustees had a duty cast on them to ascertain the relative needs and personal circumstances of all the beneficiaries and to allocate the income of the trusts, among them from time to time, according to the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust which is also applied by by this Court in the earlier judgment 1993 Supp. (3) SCC 389 and the fact that the income has been retained and not disbursed to the beneficiaries, the view taken by the High Court cannot be said to be legally flawed. Merely because the Settlor and after his death, his son did not exercise their power to appoint the discretion exercisers, the character of the subject trusts does not get altered. In view of the facts noted above, in our opinion, the two U.K. trusts continued to be 'discretionary trust' for the subject assessment years. 20. The above position with regard to the discretionary trust is equally applicable to the controversy in appeals under the Wealth Tax Act. The High Court has taken a correct view that the value of the assets cannot be assessed on the estate of the deceased Settlor. 21. 16 Civil Appeals arising from substantive assessment under the Income Tax and Wealth Tax, accordingly, have no substance and are dismissed with no order as to costs. 22. Since the Appeals arising from the substantive assessments have no merit and have been dismissed, obviously nothing remains in Civil Appeal No. 2312 of 2007 under the Weal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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