1996 (4) TMI 67

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..... revocable trust created by her husband for the benefit of his would-be son-in-law/daughter-in-law cannot be assessed to tax in her hands in terms of section 61 of the Income-tax Act, 1961 ? 2. Whether the impugned interest income is taxable under section 64(v), (vi) of the Income-tax Act, 1961 ?" The husband of the assessee created two trusts for the benefit of the would-be daughter-in-law and would be son-in-law. Clause 19 of the trust deed declared that the trusts shall be irrevocable. However, in clause 22 of the said deed it has been stipulated that if the intended marriage did not take place within a period of 20 years from the date of creation of the trusts, the said trusts would become void and the trust properties would become .....

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..... revocation of the trust funds, it was only in the case of the author of the trusts. It, therefore, concluded that the income arising from the transferred assets cannot be assessed to tax in the hands of the assessee. In so far as the question of the nature of the trusts whether it is revocable or irrevocable is concerned, the arguments advanced by learned senior standing counsel for the Department, as well as by learned counsel appearing for the assessee are similar and identical to the arguments advanced in Tax Cases Nos. 831 and 832 of 1984 (CIT v. M. K. Chandrakanth [1997] 225 ITR 101). In Tax Cases Nos. 831 and 832 of 1984, for the reasons stated therein, we held that the abovesaid two trusts are not revocable trusts but irrevocable t .....

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..... ation of the trusts during the assessment years under consideration. We have already held that clause 22 of the abovesaid two trusts would not come into operation during the assessment years under consideration, but the said clause would come into force only after 20 years as stated therein. In view of the abovesaid factual position, the contribution made by the mother of the minor children to the trusts would be considered as gifts made by her to the trusts with no power of revocation. Therefore, we consider that the Tribunal was correct in holding that the income arising from the transferred assets in favour of the trusts cannot be assessed to tax in the hands of the assessee. In that view of the matter, we answer the first question ref .....

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