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TMI Blog1984 (7) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year is 1972-73. Three persons, Shri Veeriah Reddiar, Shri V. Ramachandran and Shri T. Rama Murthy, jointly filed a return of income derived from business claiming that they received it as trustees appointed under a written instrument. Accordingly, they claimed the benefit of s. 161 of the I.T. Act, 1961 (the " Act for being assessed as representative assessees. This claim was disallowed by the ITO on the ground that no valid trust existed at the relevant time to justify the claim. On appeal, the contention of the assessees was accepted by the AAC to the extent of a sum of Rs. 70,000 which was held to be the sole trust property. In respect of the other assets claimed to be trust properties, the AAC held that no trust was created in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1971, i.e., a day before the instrument was executed. These inventories relate to the assets of four firms, namely, Gouri Mahal, Alleppey, Seematti Stores, Ernakulam, Seematti Stores, Thiruvalla and Seematti Stores, Pathanamthitta. In respect of each inventory, Reddiar acknowledged receipt in identical terms as stated above. The parties to the instrument are Reddiar of the one part, describing himself as founder, and V. Ramachandran and T. Rama Murthy of the other part, describing themselves as trustees. The preamble mentions the names of thirteen persons as beneficiaries under the trust. Four of them are minors. The preamble, after referring to the names of the thirteen beneficiaries, continues: " ...... (hereinafter referred to as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od except by reference to what Reddiar did with them subsequently. What is important to note is that the intention of the beneficiaries in handing over the assets to Reddiar is not discernible from the instrument (annexure A). The beneficiaries are the partners of the four firms, whose assets are listed in the inventories as well as four minors who had been admitted to the benefits of these partnerships. All the beneficiaries, including the minors, as stated in the preamble, together handed over the assets to Reddiar. The last portion of the preamble says that the assets received by Reddiar, as per the inventories, were made over by him to the trustees as " nominees of the respective beneficiaries ". What is thus so far clear is that on M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficiaries themselves, is absent. Without such link, the instrument subsequently executed by Reddiar, whatever be its purported object, cannot create a trust with the assets which did not belong to him. There is a dispute as to the identity of the trust assets. The instrument shows that a sum of Rs. 70,000 forms part of the assets as contributed by the various beneficiaries including the minors. Clause 16 mentions the various amounts against the names of the beneficiaries. These are : Rs. 1. S. P. Seethalakshmi 2,100 2. P. Subbalakshmi 5,600 3. P. Veeriah 5,600 4. P. Santha alias 3,500 P. Veeralakshmi 5. S. Thankammal 2,800 6. R. Veeralakshmi 4,200 7. R. Rajesh Kumar 7,000 8. T. Seethalakshmi 5,600 9. T. Beena 12,600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was contributed by the beneficiaries after the creation of the trust, thereby not falling under the injunction of s. 7(b). He further stated that, in respect of the immovable properties, no conveyance had taken place, but only agreements for sale were executed, and accordingly the ban under s. 5 had not been attracted. The Tribunal has, however, as stated above, categorically held that the trust properties consisted of only the inventory properties, and the sum of Rs. 70,000 did not form part of the trust properties. In the view we shall take as regards the existence of a trust, it is unnecessary to examine whether the Tribunal rightly held that the sum of Rs. 70,000 did not form part of the trust assets. The fundamental question is, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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