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TMI Blog1984 (12) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 1,80,000 should be considered as the income of the three beneficiaries of the assessee-trust to be shared equally amongst themselves and that the balance income of the assessee-trust should be allocated to Jhaverbhai Patel Charitable Trust No. II. 3. The facts of the case leading to the dispute in these appeals can be briefly stated as follows : The assessee-trust was created by a deed of the trust dated 27-4-1964 by Mrs. Surajben Javerbhai Patel for the benefit of her three grand-daughters, Kumari Nina, Kumari Varsha and Kumari Bharati, by setting aside a sum of Rs. 1 lakh. The three beneficiaries have equal shares in the income and corpus of the trust. As per clauses 4(b) and (c) of the trust deed which are reproduced by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trustees were directed to divide the net income equally amongst the beneficiaries. Under section 144B of the Income-tax Act, 1961 (' the Act ') also the IAC, before whom also the assessee had raised objections, agreed with the ITO that he did not accept that the trustees or the beneficiaries can among themselves come to an agreement to give to the beneficiaries any other thing in lieu of the benefits laid down in the trust deed. He argued that the deeds of covenant resulted in the beneficiaries drawing more benefit than contemplated under the trust deed. For this purpose, he has pointed out the figures of income for the assessment year 1978-79. The IAC also referred to clause 2 of the deed of covenant dated 15-3-1976 and argued that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Jhaverbhai Patel Charitable Trust No. II, which, in effect, became a fourth beneficiary of the trust. It was pointed out that by the deed of assignment, the three beneficiaries diverted the right to receive a share in the income in excess of Rs. 1,80,000 to the aforesaid charitable trust before they were received by them as income. Even their right in the corpus which produced the said income, was also transferred by the separate deeds of gift. Regarding the power of the beneficiaries to do so, reliance was placed on section 11 and section 58 of the Indian Trusts Act, 1882, which read as follows : " The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time or its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and so they no longer belonged to them. Reliance was placed on the case of Smt. Kasturbai Walchand Trust for the proposition that a beneficiary can surrender her interest under the trust in terms of section 58 and that such a transfer is valid ; and that if such a valid transfer takes place, the income so transferred could no longer be assessed in the hands of the beneficiary. It was further urged before the Commissioner (Appeals) that the facts of this case were similar to the case of Smt. Kasturbai Walchand Trust and the distinction drawn by the assessing officer was without a distinction, because there was no material difference between surrendering the interest of the beneficiaries as happened in the case of Smt. Kasturbai Walcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mt. Kasturbai Walchand Trust . In this connection, he referred to the direction of the IAC under section 144B and pointed out that the corpus, from which the income arose, was not transferred by the same deed to the said transferee and so the income should continue to be regarded as belonging to the transferor, which in this case, are the beneficiaries. He referred to the decision in the cases of CIT v. Sitaldas Tirathdas [1961] 41 ITR 367 (SC) and Provat Kumar Mitter v. CIT [1961] 41 ITR 624 (SC) in this connection. The proposition canvassed by him was that, as held in these cases, the beneficiaries in the case before us merely applied their income towards charity after it accrued to them as their income. Hence, he urged that the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o another party, but there was no change in the shareholders' register of the company. That was a case of transfer of the income without the transfer of the asset, which produced that income. Hence, the facts of that case were squarely hit by section 16(1)(c) of the Indian Income-tax Act, 1922 corresponding to section 60 of the 1961 Act. The facts of the present case are different. Here, there is no restriction for transferring the rights under the trust by the beneficiaries to any party they like subject to section 58 as held by the Supreme Court in the case of Smt. Kasturbai Walchand Trust. Apart from the above, the beneficiaries have also transferred their interest in the corpus of the trust by separate deeds of assignment of the same da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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