9911796707
TMI Blog1981 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... education of the male and female members of the family of the settlors descending in the male line from Seth Keshri Chand Khaitan since deceased including their male and female children already born on the date of these presents, and to be born hereinafter until the trust comes to an end as hereinafter provided. (b) Education in the foregoing clause means and shall mean education of the male and female members of the family of the settlors as stated above in all spheres and of every kind and description, including inter alia, primary, secondary, higher secondary, undergraduate, post graduate, technical, medical, legal, engineering, accountancy, fine arts, pure arts or pure science and mixed arts and science and in the different branches thereof, and research works in any and every field and sphere of education. (c) Without prejudice to the generality of the foregoing clauses, to meet and defray the costs and expenses for text and other necessary books and equipments, school and college tuition fees, tuition fees for private coaching at home or elsewhere, conveyance charges including costs and expenses for sending eligible candidates from amongst the beneficiaries to foreign c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of which the persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as 'relevant income', ' part of relevant income ' and 'beneficiaries ', respectively), tax shall be charged (i) as if the relevant income or part of relevant income were the total income of an association of persons, or (ii) at the rate of sixty-five per cent., whichever course would be more beneficial to the Revenue: Provided that in a case where-' (i) none of the beneficiaries has any other income chargeable under this Act; or (ii) the relevant income or part of relevant income is receivable under a trust declared by will; or (iii) the relevant income or part of relevant income is receivable under a trust created before the 1st day of March, 1970, by a non-testamentary inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther it was created bona fide and for determining that question the ITO was enjoined to consider all the circumstances existing at the relevant time. The ITO in the instant case noted that the income of the trust or any part of the income was not specifically receivable on behalf or for the benefit of any one person and the individual shares of the beneficiaries were indeterminate and unknown. He further observed that it did not appear from the copies of accounts so far filed that the income of the trust or any part of it had; ever been spent since its inception for the declared objects of the trust. Hence, he was not satisfied that the trust was created bona fide exclusively for the benefit of the relatives of the settlors. He, therefore, computed the total income which was Rs. 5,548 being the income from interest on investment and applied 65% as the rate of tax. The assessee went up in appeal before the AAC and the AAC observed that it was argued before him on behalf of the assessee that the beneficiaries of the trust were minor sons and daughters of the settlors and that none of the beneficiaries had any independent income as they were dependent on the settlors. This would ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these facts into consideration we are of the view that the Income-tax Officer was correct in holding that the trust was not created bona fide for the benefit of the relatives of the settlors and since one of the conditions laid down under clause (iii) of the proviso to sub-section (1) of section 164 was not met, the assessee-trust was liable to tax at the maximum rate of 65%. The Appellate Assistant Commissioner, therefore, in our view wrongly held that the assessee trust should be assessed not at the rate of 65% but at the rate applicable to an association of persons. On this point, therefore, the order of the Appellate Assistant Commissioner is reversed while that of the Income-tax Officer is restored. " In those circumstances, the assessee sought the following question to be referred to this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that clause (iii) of the proviso to sub-section (1) of section 164 of the I.T. Act did not apply to the case and that the trust is to be charged tax at the rate of 65 per cent. ? " But the Tribunal has referred, under s. 256(1) of the I.T. Act, 1961, the following question to thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of the creation of the instrument or a document. But the trust is, as we have noticed, for the benefit of the members of the settlors' family. The manner or the mode or the method of such benefit is not particularly described but it is indicated as by way of education, marriage, medical expense, maintenance, to be applied for the benefit. There is no conduct here which indicated that the trustees had applied the fund for any benefit to themselves or in derogation of the trust but there was only the non-application of the fund for the year in question. Now, that may or may not be for very many good reasons. That may be because the minor dependants or the relatives-dependants did, not require the use of the fund for educational purpose or the trustees may or may not have thought that larger accumulation of fund would be a better way of helping for any future use when lump sum money would be required for any of the objectives stipulated in the trust. But, there is no evidence that any trust fund was misutilised by the trustees or by the settlors during all these years. If that is so, merely by the fact that there was no application of the trust fund for the objects of the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would not by itself make the creation of the trust not bona fide. Learned advocate for the Revenue stressed a point that in this case, the question referred to this court by the Tribunal assumed that the trust was not created bona fide and he further urged that whether the instrument was bona fide or not was a matter of intention and the intention was a finding, of fact and, as such, there being no question challenging that finding of fact as perverse or based on no evidence, the assessee was not entitled to agitate this question. We are, however, unable to accept this position. There is no dispute as to the facts in this case. The fact that, there was no application of fund for any of the years, since its inception, is not disputed. That what was the object of the trust is also not disputed. It was also not disputed that the trust was created at the relevant date, that is, before 1st March, 1970. The trust has not been held to be a sham or a colourable document. Therefore, there was hardly any scope for challenging any finding of facts merely because, the Tribunal had arrived at a conclusion that in order to prove bonafide it was, required to consider the subsequent conduct an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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