9911796707
TMI Blog1962 (10) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... nt deducted in the computation of her total income. The Income-tax Officer disallowed the claim in the view that the expenses incurred by the assessee amounted merely to application of income after its receipt by her. The assessee made a similar claim in a sum of ₹ 32,456 in the assessment year 1955-56 but that again was disallowed by the Income-tax officer. These decisions by the department became final in regard to the two assessment years 1954-55 and 1955-56. In the assessment year 1957-58 the assessee again claimed to deduct a sum of ₹ 13,500 as having been incurred by way of maintenance expenses for her daughters. Her claim was that out of the total maintenance expenses of ₹ 18,000 incurred for the maintenance of herself and the three daughters, the three fourths share of the daughters, namely ₹ 13,500 was properly deductible from and out of the assessable income in her hands as the expenses incurred for the daughters were either charged upon the estate or should be treated as performance of an obligation in the nature of a trust. The Income-tax Officer repelled her claim and she preferred an appeal to the Appellate Assistant commissioner. The App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms of the will of the deceased, Duraiswamy, dated May 4, 1949. We shall now set out the relevant portions of the will : I appoint my wife, Jayalakshmi Ammal, as executrix to carry out the provisions of the will. In case she predeceases me or dies before my daughters attain majority, my wifes brother, T. Govindarajan, shall be executor and trustees to carry out the provisions of the will..... I give and bequeath to my wife for her life the income from the corpus of my estates. She shall be entitled to the income from the investments and the dividends from the shares. She shall be entitled to enjoy my immovable properties or the rents thereof, but shall not be entitled to expend out of capital except for the purposes mentioned hereunder. She shall however be entitled to utilise the income at her absolute discretion subject to the provisions for maintenance and education of may daughters. My wife shall maintain my daughters according to the scale of living to which they are accustomed and shall educate them suitably. The expenses of maintenance and education of my daughters shall be met from and out of the income of my estate. My daughters shall be married at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed as the individual personal income of the trustee. The question that is usually posed to determine whether the amount disbursed by the assessee is his income or not is : Whether it is an application of income or diversion of income ; or Whether it is disposal or divestment . In our opinion the true test in each case would be : Whose income is it, that of the assessee or that of some other persona having claim against the assessee. There are several decisions on the subject involving the question whether a particular expenses is merely an application of income by the assessee or a diversion of the income. It may not be profitable to refer to these cases as the questions is really one of fact. We may, however, point out that the Supreme Court has exhaustively considered the matter in the decisions in Commissioner of Income-tax v. Sitaldas Tirathdas That was a case in which the assessee became liable to pay maintenance allowance and marriage expenses for his daughters under a compromise decree of court. No charge was created on any of his properties. He claimed that in computing his total income for purposes of income-tax, the amounts paid by him as maintenance to his wife a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation annexed to the ownership of property. It is very difficult to define a trust; and we may in this connection refer to the following observation in Hanbury on Modern Equity, page 118 : Few feats are more frustrating than definition. This is true of trusts as of the other things. The borderline between a gift with a motive and a trust in the form of a gifts is thin but not imperceptible. In cases where a gift or bequest is made to a person, for the maintenance of himself and his family , or towards the support and maintenance of himself and his children . no trust is inferred in the view that the settlor or the testator has not imposed a trust but has only made a gift to enable the settle or the legatee to do certain things. Lewin in his book on Trusts, 15th edition, page 85, refers to the following instances as creating a trust : Instances of the creation of a trust are, where property is given that she may dispose thereof for the benefit of herself and our children, or at her sole and entire disposal for the maintenance of herself and her children, or for her own use and benefit, and for the maintenance and education of my dear children , or at the dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... father had created a trust in respect of some shares and a cash sum of ₹ 30,000 for the benefit of his four sons including the assessee. The trustees were the Central Bank Executor and Trustees co., the assessee himself and his wife and brother. The said trustees were to hold the trust funds upon trust to pay the net interest and income thereof to the assessee for the maintenance of himself and his wife and for the maintenance, education and benefit of all his children till his death. In the relevant account year, the assessee obtained an income of ₹ 14,170 from the trust funds. The view of the taxing authorities and the Income-tax Appellate Tribunal was that under the aforesaid provision of the trust deed the assessee was the sole beneficiary and that the amount was received by him for his own benefit and he was not accountable to anyone in respect of the amount and therefore the amount should be assessed as part of his total income. The Tribunal stated a case under section 66(1) of the Act to the High Court of Bombay. The High Court answered the question in favour of the assessee. On a certificate granted by the High court the supreme court heard an appeal from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
