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TMI Blog2015 (11) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... al) : 2. The brother-in-law of the appellant, namely, Shri Ram Niwas Agarwal had created two trusts for the benefit of two minor children of the appellant, Kapoor Chand. One trust known as Priti Life Trust was for the benefit of Km. Priti who was aged about 7 years and the other trust was created in the name of Anuj Family Trust for the benefit of master Anuj, minor son of the appellant, Kapoor Chand. Both these trustees became partners in the partnership firm. The said partnership firm earned profits in the year 1980- 81 with which we are concerned in the present appeal and share of the two trusts was given to them. 3. Since these trusts were for the benefit of two minor children of the appellant, invoking the provisions of section 64(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated October 24, 2003, affirming the order of the Tribunal. Undeterred, the appellant approached this court by filing special leave petition and leave was granted. This is how the present appeal has come up for final hearing. 6. Before we take note of the contention advanced by the learned counsel for the appellant challenging the correctness of the impugned judgment, it would be apposite to reproduce the relevant provisions of the Act. Section 64(1)(iii) as well as Explanation 2A thereof read as under : "64. (1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly- . . . (iii) to a minor child of such individual from the admission of the minor to the benefits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that the income that had been earned by the trustees was not available to the two minor children till attaining the age of majority. As pointed out above, this was one of the conditions contained in the trust deeds that the income so generated by the trust, shall not be given to or spent for the benefit of the minor children till they attain majority and the money was to be handed over to them only on attaining the majority which would mean that the income was available to these persons when they cease to be the minors. This very question came up before this court in almost identical circumstances in the case of CIT v. M. R. Doshi [1995] 211 ITR 1 (SC). The court, after taking note of some judgments of High Courts including the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s minor, his income cannot be treated as income of a "minor child" and taxed at the hands of individual. These reasons can be summarised as below : "(i) The benefit which may be immediate or deferred must still be a benefit of the minor child. In view of the fact that the said expression is still retained in the relevant provisions it is not possible to accept the argument that the 'deferment' can be beyond the minority of the child. If the enjoyment of the benefit is postponed beyond the mino rity of the child it cannot be fairly regarded and accepted as a benefit even deferred for the minor child. (ii) In order to attract the provision, the minor child must have a direct benefit of the interest in the income and the assets trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the firm to the benefits of which the minor is admitted. With a view to countering a device for circum venting this provision through interpolation of a trust, it is proposed to provide that where a minor child of an individual is a beneficiary under a trust and the trustee joins in any partnership business with any person, the income arising to the trust, to the extent it is for the benefit of the minor child, will be included in the total income of that parent who has the higher income." 12. We are afraid the aforesaid explanation does not help the Department. The provision that is contained in Explanation 2A is only to take care of the income even when a trust is created. It does not go further and make any provision to the effect tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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