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TMI Blog1962 (10) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... he settlor, if she should survive the settlor, during the term of her natural life, such amount out of the income of the trust as the trustees may think proper for the use and benefit of herself and her children until the youngest son of the settlor shall attain the age of 18 years. It was further provided that after the death of the settlor and on the youngest son attaining the age of majority, the property shall be held under trust for the absolute use and benefit of the sons of the settlor and the trustees shall divide it among the sons in equal shares subject to adequate provision being made for the maintenance of Champavahoo and maintenance until marriage and marriage expenses of the unmarried daughters of the settlor. The settlor died ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before the income-tax authorities that the amount of ₹ 25,000 which was paid by the trustees to Bai Champavahoo was an income which was diverted at the source by an overriding title, and, therefore, could not be treated as the income of the trust at all. The alternative contention was that there was a charge on the property of the trust in respect of the amount which was payable to Champavahoo, and it was therefore an admissible deduction under section 9(1)(iv). The further contention raised by the assessee was that, at any rate, the said amount of ₹ 25,000 could not be charged at the maximum rate, but it could be charged only at the rate applicable to the said income of ₹ 25,000 under section 41(1). Lastly, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Champavahoo could be regarded as a charge under section 9(1)(iv) of the Income-tax Act is equally futile. No annual charge was created on any part of the buildings and lands appurtenant thereto comprised in the trust property, nor was any such part of the trust property made subject to a charge for the amount which the trustees were directed under the trust deed to pay to Champavahoo for the use and benefit of herself and her children. The amount paid to her was in accordance with the directions contained in the trust deed out of the entire income of the entire trust property which was held by the trustees for the uses, intents and purposes as specified in the deed which included the making of such payment and the discretion left to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 18 years. According to learned counsel, therefore, the Income-tax Officer was right in applying the first proviso to section 41(1). We do not propose to enter into a detailed discussion of the arguments advanced before us with regard to this contention, not do we find it necessary to express a definite opinion with regard to the same, because, in our opinion, the last contention which has been urged on behalf of the assessee is entitled to succeed, namely, that the amount of ₹ 25,000, having been already brought to tax in the hands of Champavahoo, could not be brought to tax again in the hands of the assessee-trustees, and, therefore, will have to be excluded from their assessment. As we have already mentioned, while stating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the beneficiary. The Income-tax Officer who had assessed Champavahoo directly was not the Income-tax Officer who was assessing the trust for the assessment year 1955-56, and, consequently, the assessment made by the Income-tax Officer of Champavahoo did not preclude the Income-tax Officer who was dealing with the assessment of the trustees to assess the entire income in the hands of the trustees. We do not agree with Mr. Joshi in the submission which he has made. Section 41 was a special enabling provision which permitted the assessment in the hands of the trustees but did not preclude the direct assessment in the hands of the beneficiaries. Champavahoo had disclosed in her return that the amount was obtained by her as a beneficiary un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, does not mean that she had no right to receive anything under the trust or that no part of the trust income was receivable on her behalf. There is no doubt, whatsoever, that the settlor intended that a reasonable and proper annual amount out of the trust income should be paid over to Champavahoo for the use and benefit of herself and her children. What was left to the discretion of the trustees was to determine as to what that proper or reasonable amount should be, no doubt, having regard to the needs of Champavahoo and her children from time to time. The trustees under the directions had to act reasonably, and if they failed to do so, Champavahoo could certainly get her claim determined and compel the trustees to pay the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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