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2014 (5) TMI 286 - SC - Wealth-taxComputation of taxable income and taxable wealth of discretionary trust - estate of the deceased Settlor - legal position about the discretionary trust - assessment years 1964-65 to 1970-71 and assessment years 1970-71 to 1982-83 - Held that:- A discretionary trust is one which gives a beneficiary no right to any part of the income of the trust property, but vests in the trustees a discretionary power to pay him, or apply for his benefit, such part of the income as they think fit. The trustees must exercise their discretion as and when the income becomes available, but if they fail to distribute in due time, the power is not extinguished so that they can distribute later. They have no power to bind themselves for the future. The beneficiary thus has no more than a hope that the discretion will be exercised in his favour. Having regard to the above legal position about the discretionary trust which is also applied by by this Court in the earlier judgment [1993 (4) TMI 1 - SUPREME Court] and the fact that the income has been retained and not disbursed to the beneficiaries, the view taken by the High Court cannot be said to be legally flawed. Merely because the Settlor and after his death, his son did not exercise their power to appoint the discretion exercisers, the character of the subject trusts does not get altered. In view of the facts noted above, in our opinion, the two U.K. trusts continued to be 'discretionary trust' for the subject assessment years. The above position with regard to the discretionary trust is equally applicable to the controversy in appeals under the Wealth Tax Act. The High Court has taken a correct view that the value of the assets cannot be assessed on the estate of the deceased Settlor. - Decided against the revenue.
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