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TMI Blog1977 (11) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to a trust, inter alia, for the benefit of his relations. By the indenture the trustees were, inter alia, directed to carry out the trust as follows: "6. To pay Government revenue, rent, cesses, rates, taxes, charges and other impositions from time to time payable in respect of the said trust properties and the costs and expenses for maintaining necessary establishment for the management of the trust properties and for the repairs of the said trust properties...... 8. To hold the net rents, issues and profits of the said trust funds and premises after meeting the expenses hereinbefore mentioned upon trust following, that is to say: (a) to pay the interest on any principal sums of money due and owing by the settlor for the time being charged on the properties hereby conveyed. (b) to pay Rs. 20 per month to each grandson of the settlor (being the sons of five sons of the settlor) from the date when he attains the age of 6 years until he attains the age of 24 years. (c) to pay to each grand-daughter of the settlor (being daughters of the five sons of the settlor) the sum of Rs. 20 per month from the date when she attains the age of 6 years up to 2 years after her ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue and held that under the trust deed in question the income which the beneficiaries were to receive at a particular time was not known and, therefore, their shares were also indeterminate. The order of the Appellate Assistant Commissioner was reversed. To appreciate the dispute involved in this reference it is necessary to consider section 164(1) of the Income-tax Act, 1961. The material part of the said section is as follows: "(1) Subject to the provisions of sub-sections (2) and (3), where any income in 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 tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of some specified educational institutions and a hostel on the same scale as done by the settlor; (c) payment to charities up to the amounts stated; (d) payment of expenses of pilgrimages of members of the family of the settlor on such scale and at such times as the trustee may determine in his discretion; and, lastly (e) payment of the cost of maintenance and medical attendance and treatment of the settlor, his sons, his grandsons and great grandsons and members of their respective families including their mothers, wives and children including the cost of customary social ceremonies in the scale of expenditure as the trustee may consider proper in his discretion. Specific payments of Rs. 25 each were directed to be given to a daughter and a daughter-in-law, and the son was awarded a monthly payment of Rs. 100 for acting as the trustee. On behalf of the revenue it was contended that under this deed no income, profit or gain was specifically receivable on behalf of any one person and the first part of the proviso to section 41 of the earlier Act would apply. But the court held that individual shares of the persons on whose behalf the income was receivable was indeterminate and, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of the trustees. Dr. D. Pal, learned counsel for the assessee, cited only one decision of this court, viz., Official Trustee of West Bengal v. Commissioner of Income-tax [1954] 26 ITR 410 (Cal). The facts were that by a deed of trust the settlor had transferred certain shares and securities to the official trustees for the benefit of his step-mother and directed the trustee to pay her an allowance of Rs. 12,000 per month and to hold any surplus that might be left as part of the trust fund. On a construction of this deed it was held that the amount of Rs. 1,44,000 was rightly assessed as income received specifically on behalf of the beneficiary but the surplus income could not be said to be receivable on behalf of any one person nor could it be said to be receivable on behalf of a number of persons whose shares were determinate or known and, therefore, was to be assessed at the maximum rate under the proviso to section 41 of the Indian Income-tax Act, 1922. In his judgment Chakravartti C.J. analysed section 41 of the Act as follows: "Complications are provided for in the first proviso or rather some of the complications are provided for there...... It will be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he maximum rate would be applicable on the ground of income not being receivable specifically on behalf of any one person irrespective of whether their individual shares were determinate or indeterminate or known or unknown......The proviso, therefore, isolates and demarcates such portion out of the entirety of the income received by the representative as is not specifically receivable on behalf of any one person and to which alone, therefore, an uncertainty attaches. If, for example, an amount of income is received by a representative in specific shares or amounts on behalf of two persons, the share or amount being specific in the case of each one of them, but a further amount is also received on behalf of no person or persons in particular, then under the first part of the proviso, it is to such further amount alone that the maximum rate will apply." Reading the sections, 164 of the Income-tax Act, 1961, and 41 of the earlier Act, and in view of their interpretation by the authorities it appears to us that the law is well-settled on the point. Under the provisions of the deed in the instant case, no part of the income of the trust has been directed to be left in the hands of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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