9911796707
TMI Blog1989 (9) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case, the case fell within the category specified in clause (i) of the proviso to section 164(1) of the Income-tax Act, 1961 ? (3) Whether, on the facts and in the circumstances of the case, tax was chargeable on the income of the trust for the assessment years 1971-72 and l972-73 as if the relevant income were the total income of an association of persons or at the rate of 65%, whichever course would be more beneficial to the Revenue ?" The assessment years concerned are the assessment years 1971-72 and 19-72-73. The assessee is a trust settled by Mrs. Narmadaben Amratlal Sanghrajka under a trust deed dated December 20, 1968. Clauses 2, 3 and 4 thereof are relevant to the issue before us and read thus " "2. Until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained concerning the trust fund or as near thereto as the circumstances will admit, but so nevertheless that the trustees, may at any time until the date of distribution apply such accumulation or any part thereof as if the same were income from the trust fund arising in the then current year. 3. On the expiration of 25 years from the date hereof or at any time before that as the trustees may, in their absolute discretion, think fit to do so: (that is the date of distribution), the trustees shall divide the trust fund and all the accumulations of the net income and accretions to the trust fund amongst the children of the said Bhupatrai Amratlal Sanghrajka and the wife of the said Bhupatrai Amratlal Sanghrajka and the wife and/or childre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccumulated. The Income-tax Officer held that the wife of Bhupatrai Amratlal Sanghrajka (now referred to as "Mrs. B") was one of the beneficiaries under the trust and that she had income chargeable to tax. Therefore, the trust could not avail of the exception clause to section 164 of the Income-tax Act, 1961, and was liable to tax at the rate of 65% as this was more beneficial to the Revenue. In appeal, the Appellate Assistant Commissioner held that Mrs. B was entitled to a share in the corpus only after the trust came to an end. The only beneficiaries during the previous year concerned were Chhaya and Sangeeta and neither of whom had income chargeable to tax for that year. Therefore, tax was chargeable upon the trust at the rate applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reading of the first question which, in our view, is quite mistaken. He read the first question as posing to us the question (a) Whether Chhaya and Sangeeta are the beneficiaries of the income of the trust ? and (b) Whether Mrs. B is also such beneficiary ? It is plain that the question as it is framed assumes that Chhaya and Sangeeta are beneficiaries of the income of the trust and the question is only whether they are the only beneficiaries or whether they are beneficiaries along with Mrs. B. Indeed, it cannot be otherwise, for, the Income-tax Officer has held that Chhaya and Sangeeta are the beneficiaries of the income of the trust and this has not been brought in question before the Appellate Assistant Commissioner or the Tribunal. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ya and Sangeeta had no income chargeable to tax for these years, the trust was entitled to the benefit of clause (i) of the proviso to sub-section (1) of section 164 and was, therefore, not liable to pay tax on its income at the rate of 65 %. Consequently, the questions are answered thus (1) In relation to the previous years ended on March 31, 1971, and March 31, 1972, the beneficiaries of the income under the trust were only the settlor's grand-daughters, Chhaya and Sangeeta. (2) In the affirmative and in favour of the assessee. (3) Tax is chargeable on the income of the trust for the assessment years 1971-72, and 1972-73 as if it were the income of an association of persons. No order as to costs. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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