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TMI Blog1975 (11) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ct ? " The short facts necessary for the purpose of disposing of this reference are that the settlor created two trusts by entrusting certain shares to trustees, in respect of which the trustees executed two declarations of trust, which are almost in identical terms, and are both dated the 30th of March, 1960. Under the said declarations of trust, one of which related to the settlor's minor daughter, Bharati, and the other to the settlor's minor daughter, Arti, the trustees declared that they held the said shares upon trust to utilize the net income of the trust estate and all accumulations of income and profits or the corpus for providing food, clothing, residence, education, medical attendance and treatment and marriage expenses till e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore be taken to be discharging the assessee's liability as his agents, and there was no transfer to the beneficiaries in praesenti. The Tribunal was of the opinion that if the assessee had retained those shares with himself and maintained his daughters, he would have been accountable to the wealth-tax authorities for paying tax in respect of them, and he could not by the device of transferring the shares to trustees, evade his liability for payment of wealth-tax thereon. It is from that order of the Tribunal that the present reference arises. Section 4(1)(a)(iii) of the Wealth-tax Act, 1957, was, at the material time, in the following terms : " 4. (1) In computing the net wealth of an individual, there shall be included, as belonging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the volunteers, and that where an incomplete trust in favour of a third person is declared between a disposing party and another for valuable consideration, performance of the trust can be enforced at the suit of the other party to the declaration, but not at the suit of the third person. Similar observations are to be found in Keeton on the Law of Trusts, 9th edition, pages 84, 85 and 87, where it is clarified that a trust is completely constituted, (1) if the property is conveyed to trustees, or (2) if the settlor declares himself a trustee of it in which case no transfer of the trust property by the settlor would be necessary. These statements of the law in Halsbury as well as in Keeton show that the question of consideration whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses upon the assessee as the father of his minor daughters, and he cannot, by any voluntary and unilateral act of his own, get rid of that legal obligation. Nor, in my opinion, can the minors, who are in law incompetent to contract, give up any such right so as to relieve the father of that legal obligation. Reliance was sought to be placed by Mr. Mehta in support of his contention on this point on the decision of the Kerala High Court in the case of S. Viswasom v. Commissioner of Income-tax [1963] 50 ITR 503 (Ker) in which the parties were Christians, and a settlement of properties was made by a father in favour of minor children in order to fulfil his legal duty to maintain and educate them, and it was held that such a transaction had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate accounts of the income from the trust properties and debited the educational expenses of his minor children in those separate accounts, and a similar question arose in regard to section 16(3)(a)(iv) of the Indian Income-tax Act, 1922. The Madras High Court proceeded to decide the question which was referred to it on the basis that the document was executed for the purpose of providing the educational expenses and maintenance of the minor children. After referring to the two Kerala High Court cases discussed above, the Madras High Court held that they were unable to hold that by executing the trust document, the assessee was relieved of his obligation to maintain his minor children which was a statutory obligation under the Hindu A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the said case that, at best, the settlement amounts only to a provision made by the settlor for the maintenance of his minor children. It was lastly contended by Mr. Mehta that, at any rate, in view of the provisions of section 23(2)(d) of the Hindu Adoptions and Maintenance Act, 1956, the right of each of the minor daughters to claim maintenance from the settlor stood reduced to the extent of the benefit to which each of them was entitled under their respective trust deeds. I am afraid, that contention ignores the basic concept of consideration, in so far as the effect or the result of the creation of the trust by reason of the operation of law, viz., the reduction in the quantum of maintenance that the minor daughters would b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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