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TMI Blog1995 (3) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... d appointed Sri K. Saradhy as a trustee. The beneficiaries of the trust are the children of the said Saradhy. The trust was created with a corpus of Rs. 10,000 with a provision that all further additions to the trust and all income arising thereof would also constitute the corpus. Some 11 persons made cash gifts of Rs. 2,29,000. The trustee accepted the amounts and treated them as part and parcel of the trust property and, accordingly, invested them. For the assessment year 1980-81 in so far as the Sowmya Family Trust is concerned and for the assessment year 1981-82 in respect of the other two trusts, the Income-tax Officer accepted the returns filed showing an income of Rs. 16,370. However, the Commissioner of Income-tax took the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in any other provision of this Act, tax shall be charged on such income at the maximum marginal rate. Explanation.--For the purposes of this section,-- .. . . . . (ii) 'oral trust' shall have the meaning assigned to it in Explanation 2 below sub-section (1) of section 160." From a perusal of the above provisions, it is evident that where a trustee receives or is entitled to receive any income on behalf or for the benefit of any person under an oral trust, then, notwithstanding anything contained in any other provision of this Act, tax shall be chargeable on the income of the trust at the maximum rate. For the purpose of this section "oral trust" shall have the same meaning as contained in Explanation (2) below sub-section (1) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of a fresh oral trust. We can usefully rely upon the observation of the Supreme Court in this context in Sardar Bahadur S. Indra Singh Trust v. CIT [1971] 82 ITR 561. There, donations were made to an existing trust by one Ajaib Singh. Those donations were accepted by the trustees. The Calcutta High Court in CIT v. Sardar Bahadur Sardar Indra Singh Trust [1971] 82 ITR 567 took the view that the acceptance of the gift was not authorised and, therefore, the gifts did not have effect of augmenting the assessee-trust. Disagreeing with the opinion expressed by the High Court, the Supreme Court observed as follows (at page 565) : " It is somewhat difficult to follow the reasoning adopted by the learned judges of the High Court. Either the gif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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