9911796707
TMI Blog1986 (7) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... l year. According to the ITO in light of the above provision of the deed of trust the beneficiaries for each particular period i.e. for each accounting period were not known to the settler on the date of settlement. Therefore he inferred that the identity of beneficiaries were neither known nor specified. As a consequence Expln. (1) to s. 164 was clearly applicable. He therefore held that the interest income determined by him at Rs. 2,200 was exigible to tax at maximum marginal rate. 2. The matter was carried in appeal before the AAC who observed that while the shares were determinate on every 31st March, the same were not determinate when the instrument of trust was made i.e. on 21st Feb., 1981. The shares were dependent upon the event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough media of discretionary trust. Thus the said Explanation would applicable in a case where discretion was given to the trustee to decide either the allocation of income every year or right to beneficiary to exercise option to receive income. Neither of the said conditions applied in the instant case and therefore authorities below were not justified in assessing the income of the trust at maximum marginal rate. The ld. Department representative on the other hand relying on the said Explanation as well as the orders of the authorities below contended that as the beneficiaries were not determinate in accordance with the provisions of the deed of trust the income was assessable at maximum marginal rate. 4. We have considered the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the deed of trust and the beneficiaries were identifiable as such on the date of such deed the trust would be treated as a discretionary trust. In other words in order to get out of the mischief of the said Explanation two conditions must co-exist. In the first place the shares of the beneficiaries must clearly be specified and secondly the beneficiaries must be identifiable, in accordance with the deed of the trust. Therefore for this purpose it is necessary to set out the relevant clause which reads as follows: "4A. Until the vesting Day: (1) The trustees shall receive the annual or other income of the trust fund and all other income arising under this deed and in the first place reimburse or pay and discharge all the costs and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court-of-wards, the administrator-general, the official trustee, receiver, manager, trustee or mutawalli appointed under a wakf deed in liable as a representative assessee or any part thereof shall be regarded as not being specifically receivable on behalf or for the benefit of any one person unless the person on whose behalf or for whose benefit such income or such part thereof is receivable during the previous year is expressly stated in the order of the Court or the instrument of trust or wakf deed as the case may be, and is identifiable as such on the date of such order, instrument or deed. For this purpose, it is not necessary that the beneficiary in the relevant previous year should be actually named in the order of the Court or th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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