9911796707
TMI Blog1989 (6) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... lows: (i) For the first eight years the income is to be accumulated. (ii) For the next 10 years the income is to be paid to Brinda an if Brinda is not alive to be paid to Anand. If none of them is alive income is to be accumulated. (iii) At the end of this further period of 10 years the trust fund with all accumulations thereof to be distributed among Brinda and her children in such proportion as the trustees in their sole discretion think fit and if only one of them is alive to pay and deliver it to such one person. If Brinda or her children are not alive it has to be paid and delivered to Anand and his children in such proportion as the trustees in their sole discretion may decide and if there is only one such beneficiary then th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the distribution was to be done at the discretion of the trustees. He rejected the assessee's claim of exemption under s. 5(1A) on the ground that this was a discretionary trust and Explanation to s. 21(4) prohibited such an exemption. He also held that since the number of remainderment was indeterminate and their shares unknown the value of the assets were to be taxed in the hands of the trust. 4. The AAC, applying the decision of the Supreme Court in the case of CWT vs. TRUSTEES OF H.E.H. NIZAM'S FAMILY TRUST 1977 CTR (SC) 306 : (1977) 108 ITR 555 (SC), from which he quoted, allowed the assessee's claim of deduction of Rs. 15,000 aforesaid. He, however, upheld the WTO's order that the assessee was not entitled to the exemption unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the discretion of the trustees. This is clear from the language of s.21(4) which provides that the shares of the beneficiaries are indeterminate or unknown. These shares may be either in income or in the corpus or in both. We, however, do not accept the contention of the learned departmental representative that because of the overriding effect of cl. 10 summarised at point (vi) above the trust is discretionary. Because, that clause does not deal with the share of the beneficiary but only with ad hoc payments out of corpus on account of special circumstances. 7. An alternative argument of Mr. Talati was based on the decision of the Madras High Court in the case of HARESH ANITHA TRUST vs. CWT (1988) 69 CTR (Mad) 86 : (1988) 173 ITR 103 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax would be liable to pay tax and that too at the rate of 3% only because it is a discretionary trust. We fail to understand the logic of the resulting differential treatment to a trust which could be taxed at the rate of 3% even if its wealth is not taxable otherwise just because it is a discretionary trust. However, the question remains whether the total value of the two interests i.e., interest in the income for 10 years and remaindermen's interest would exceed the basic exemption or not. This will have to be ascertained. The matter is, therefore, restored to the WTO to do so and if it does not so exceed s. 21(1) has to be applied. Otherwise s. 21(4) would have to be applied. 9. The learned departmental representative submitted that s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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