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TMI Blog2004 (2) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... he day she attains majority. According to clause 12, the Trust gets determined and the assets of the Trust are directed to be transferred to her by the trustee. Clause 13 of the deed reads: "In the event of the beneficiary expiring before the determination of the Trust, the Trustee shall have the powers to transfer the income as well as the Corpus of the Trust to any other Trust of his choice, either private or public, but it shall not be handed over to the Donor or appropriated by the Trustee himself." According to assessee, the provisions of section 161(1) would apply since the beneficiary is known and certain. The Income-tax Officer was of the view that during the minority of Sheetal Sundar there was an element of uncertainly, for, if she did not live up to the age of eighteen, the trustee would have the power of transferring the income as well as the corpus of the Trust to any other Trust of his choice and, therefore, the provisions of section 164(1) would apply. He accordingly made a "protective assessment" and brought the income to charge under section 164(1). 4. There were appeals, by the assessee, which were disposed of by the Dy. Commissioner of Income-tax (Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 966] 61 ITR 66. 7. It is true that the event of the sole beneficiary Sheetal Sundar not living up to the date of majority may empower the trustee to transfer the Trust fund together with accumulated income to some other Trust. But that is only on the happening of an event on which no one can predicate at this point of time. Sheetal Sundar was alive on the last day of the previous years relevant to these assessments. Vide clause 8(r) the trustee could incur any expenditure for the welfare, maintenance, residence, advancement and education of the beneficiary in India and/or abroad by charging the same to the current or savings accounts of the beneficiary in the bank. Therefore, the trustee is empowered to spend on the sole beneficiary Sheetal Sundar for the purposes just mentioned above out of the income of the Trust derived in these years. It is only the surplus that has to be deposited in savings bank account vide clause 6 of the document. 8. Reliance was placed upon the decision of the Bangalore Bench of the Tribunal in the case of B.A. Sindhu. As we find, the facts were different. In the case of the Trust of which B.A. Sindhu was the beneficiary there was a clause similar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eighteen did not alter the situation. Still, the trustee, during the relevant accounting years, would have received the income for the sole benefit of Sheetal Sundar. Consequently, the provisions of section 164(1) would not apply and the Dy. Commissioner (Appeals) rightly set aside the assessments. 11. In the result, the appeals by the revenue fail. They are dismissed. Per R.N. Puri, Accountant Member .- I have given my utmost consideration to the order written by my esteemed brother. I am unable to persuade myself to agree with the views of my learned brother. Hence, I proceed to write a dissenting order, as under: 2. Smt. K.R. Susheelamma created a trust called "Sheetal Sundar Trust" by an indenture executed on 4-2-1979. Shri P.S. Sundaramurthy was appointed as the Managing Trustee. The trust was to determine on the date on which Miss. Sheetal Sundar were to attain majority. Miss. Sheetal Sundar was aged about six months at the time of the Constitution of the trust. The trustee was to accumulate the income of the trust till the date of the determination of the trust. On the determination of the trust, the accumulated income and the other assets of the trust were to be tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s alive, it could be said that the trustee had received income on behalf of Miss. Sheetal Sundar. According to my learned brother, it seems to be of no consequence that Miss. Sheetal Sunder died later, before attaining the age of majority according to me, only then it could be said that the trustee had received the income on behalf of Miss Sheetal Sundar, when there was no contingency on Miss Sheetal Sundar's getting the income. Income is received on behalf of someone, then it is implied that sooner or later, some day, the income received will be handed over to the person on whose behalf it has been received. It may not be immediately given. It may be given after a lapse of time. There may be postponement of the handing over of the income, but there should be no contingency about that person getting the income. In case it is not certain whether the person or his successor is going to get the income, then how can it be said that the income has been received on his behalf. Under the circumstances, it cannot be said that the income was received by the trustee on behalf of any specified person. Hence, my conclusion is that the provision of section 164(1) were applicable. ORDER UNDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t maximum marginal rate. Learned Dy. Commissioner of Income-tax (Appeals) held that since there was only one beneficiary, the first limb of section 164(1) will apply. He further held as under: "It cannot be said that no income was specifically receivable on behalf of or for the benefit of her. Hence the appellant trust is not caught by the mischief of section 164 at all." In appeal before the Tribunal, Hon'ble J.M. agreed with the view of learned DCIT(A). Learned A.M. held that section 164(1) is applicable. Learned J.M. have opined that since on the last day of the relevant previous years the sole beneficiary Ms. Sheetal Sundar was alive, mere fact that under the terms of trust deed income could not be transferred to the beneficiary before she attains age of 18 years, still the trustees have received the income for sole benefit of the beneficiary. Learned A.M. has held t hat when it is not certain whether the beneficiary will at all receive the income or not, it cannot be said that income has been received on behalf of beneficiary. 3. Learned D.R. Sri A. Lahari submitted that when the assessee himself treats the income as not receivable on behalf of beneficiary before the age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible." 3.2 Relying on the decision of Hon'ble Madhya Pradesh High Court in the case of CIT v. Karelal Kundanlal Trust [1984] 148 ITR 412, it was submitted that either the assessment should be made on the representative assessee, i.e., a trustee, or directly on the beneficiary, but it is clear that it would only be with regard to the income to which the beneficiary is entitled and the liability will only be to that extent. Reliance was also placed on the decision of Income Tax Appellate Tribunal, Hyderabad in Sitaratnam Family Trust v. ITO [1987] 22 ITD 117 Would-be Wife of T. Senthil Kumaran v. ITO [1991] 37 ITD 265 (Mad.) for the proposition that the change of beneficiary in subsequent year before date of distribution does not affect the characteristic of trust as a specific trust, following passage of the decision of Hyderabad Tribunal was relied upon. "It is not at all relevant whether the beneficiaries may change in subsequent years before the date of distribution depending upon contingencies which may come to pass in future. So long as it is possible to say on the relevant valuation date that the beneficiaries are known and their shares are determinate, the possibility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, having regard to all the circumstances existing at the relevant time, that the trust was created bona fide exclusively for the benefit of the relatives of the settler, or where the settler is a Hindu undivided family, exclusively for the benefit of the members of such family, in circumstances where such relatives or members were mainly dependent on the settler for their support and maintenance; or the relevant income is receivable by the trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession, tax shall be charged on the relevant income or part of relevant income as if it were the total income of an association of persons. Explanation 1. For the purposes of this section,- (i) any income in respect of which the persons mentioned in clause (iii) and clause (iv) of sub-section (1) of section 160 are liable as representative assessee or any part thereof shall be deemed as being not specifically receivable on behalf or for the benefit of any one person unless the person on whose beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty Act runs thus: "Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer. A vested interest is not defeated by the death of the transferee before he obtains possession. Explanation.- An intention that an interest shall not be vested is not lo be inferred merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person, or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular event shall happen the interest shall pass to another person." Where, on a transfer of property, an interest therein is created in favour or a person to take effect only on the happening of a specified uncertain event, or if a specified uncertain event shall not happen, such person thereby acquires a contingent interest in the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertinent to note that the decision of Hon'ble Bombay High Court in Yogindra Prasad N. Mafatlal's case has been approved by Hon'ble Supreme Court in CIT v. M.R. Doshi [1995] 211 ITR 1. This case instead of supporting the case of assessee, on the contrary supports the case of revenue. In the present case also since the beneficiary is minor during the year and was to receive the income only after attaining majority it can be held that the income is not specifically receivable on behalf of the minor during the year. The interest of beneficiary is not only deferred but is also contingent. Accordingly the said decision do not help the case of assessee. 4.5 The decision of Karelal Kundanlal Trust is not dealing with the provision of section 164(1) of the Act. In the said case the share of each of three beneficiaries were specific. Accordingly Hon'ble Madhya Pradesh High Court held that income of the Trust is to be taxed in the hands of Trustee in the representative capacity under section 161 and not as an Association of Persons (AOP). This decision is on different facts and also do not answer the question before us. Accordingly the same do not help the case of assessee. The decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits of the said land and sale price thereof. The trustees were directed to spend a sum not exceeding Rs. 10,000 for the marriage expenses of the settler's daughter, D and to set apart a sum of Rs. 15,000 for the construction of a building on the land settled for her benefit by a deed dated July 17, 1941. The trustees were also directed to construct a building on a part of the plot of land settled or the benefit of the settler's daughter, S, at a cost of about Rs. 20,000 and to spend a sum not exceeding Rs. 10,000 for the marriage expenses of the said S. The trustees were directed further to spend a similar amount of Rs. 10,000 for the marriage and Rs. 20,000 for construction of house for the third daughter, J, and to provide for the marriage expenses and maintenance of another daughter, Asoka. If the total sale proceeds exceeded or fell below the sum of Rs. 80,000 the trustees were to reduce or enhance the amounts for marriage or for construction of house as the case may be. The funds in the hands of trustees were directed to be invested. Term No. 10 provided that "should any fund be left with the trustees after providing for all the daughters of the settler and meeting their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years in question and as it did not, the shares of the daughters in the income was not determinate and the Tribunal was right in holding that the first proviso to section 41(1) was applicable." 4.7. The first proviso to section 41(1) of the 1922 Act is analogous to section 164 of the Act. In the present case before me it is seen that the interest of beneficiary is contingent upon her attaining majority. Though she was alive during the relevant financial year but since she has not attained majority the interest of the beneficiary can be considered as contingent and not vested. Relying on the aforesaid decision it can be held that the interest is not specifically receivable on behalf of or for the benefit of the said minor Ms. Sheetal Sundar. Accordingly section 164(1) is applicable. Though the beneficiary Ms. Sheetal Sundar was alive during the relevant financial years but since her interest was contingent and since no eventualities are provided as the accrual of income during the contingency to any other person, it can be held that the income in respect of which the trustees are liable is not specifically receivable on behalf of or for the benefit of any person. Thus secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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