9911796707
TMI Blog2002 (2) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... nda Rath, a Government servant, had taken a loan from the housing building fund of the Government and constructed a house. He had four minor children-three daughters and a son. On a desire that his minor children or his wife should not dispose of the property in question at any time but enjoy the same as beneficiaries, he created a trust in accordance with law. It was incorporated in the trust deed (settled by him) that every minor child after attaining the age of majority would get the benefit of 25 per cent. share from the accumulated rent, the benefit for which is deferred. The house in question at that relevant time was fetching a yearly rental income of Rs. 1,000. These facts are not disputed. The assessee, Shri Abhayananda Rath, had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment as a regular assessment of the applicant accepting the status of an association of persons and the total income declared. Aggrieved by the said orders which related to the years 1984-85 and 1985-86, the Revenue went up in appeal before the Income-tax Appellate Tribunal, Cuttack Bench, Cuttack (in short "the Tribunal"). Being of the view that the income was set aside and deferred and the beneficiaries being minors have no right to enjoy the same, the Tribunal upheld the view taken by the Deputy Commissioner of Income-tax (Appeals) and consequently dismissed the appeals. Dissatisfied with the said order, the Revenue moved the Tribunal under section 256(1) of the Income-tax Act, 1961 (in short, "the Act"), seeking a reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in section 64(1)(vii) of the Act (as it stood at the relevant time) which reads thus: "64. Income of individual to include income of spouse, minor child, etc.-(1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly-... (vii) to any person or association of persons from assets transferred directly or indirectly 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 or her spouse or minor child (not being a married daughter) or both." The question, which needs to be considered is whether the income from the trust property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... child (not being a married daughter) or both. Under the trust deed, in that case, the income therefrom was to be accumulated until the attainment of majority by the assessee's sons and the cumulative income was then to be divided in three equal shares and one such share was to be paid to each son. Payment, therefore, was to be made after the sons attained majority. Considering the statutory provision of section 64(1)(v) of the Act, the apex court observed that inasmuch as the deferment of the benefit is beyond the period of minority of the assessee's sons, since the assets are to be received by them when they attain majority, the provisions of section 64(1)(v) have no application. This proposition of law squarely applies to the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for computing the total income of an individual under section 64(1)(vii) of the Act, the benefit should accrue to the beneficiary during the period of his/her minority. If the benefits/assets are to be received by the beneficiaries when they attain majority, the said provision will not be attracted. It was then contended by learned counsel for the Revenue that the trust has been created by the assessee for the purpose of avoidance of tax. What, in substance, is contended is that for the purpose of evading tax, the trust was brought into existence. This contention cannot be accepted. "Evading payment of tax" is quite different from "tax planning". A person may plan his finances in such a manner, strictly within the four comers of the taxin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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