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Issues Involved
1. Interpretation of "deferred benefit" under Section 64(v) of the Income-tax Act, 1961. 2. Inclusion of trust income in the total income of the assessee. 3. Contingent vs. vested interest of minor beneficiaries. Detailed Analysis 1. Interpretation of "deferred benefit" under Section 64(v) of the Income-tax Act, 1961 The primary issue revolves around the interpretation of the phrase "deferred benefit" in Section 64(v) of the Income-tax Act, 1961. The court examined whether "deferred benefit" means a benefit deferred to a year subsequent to the accounting year but not beyond the minority of the child, or if it includes benefits deferred even beyond the minority. The court noted that the amendment to Section 64(v), which added the words "immediate or deferred," was intended to address the issue highlighted in the case of Manilal Dhanji [1959] 35 ITR 467 (Bom). The court held that the expression "deferred benefit" should be construed as a benefit deferred to a year subsequent to the accounting year, as long as it is not deferred beyond the minority of the child. The court emphasized that the legislative intent was to include income that accrues for the benefit of a minor child during their minority, even if the benefit is deferred to a later year, but not beyond the child's minority. 2. Inclusion of trust income in the total income of the assessee The court considered whether the income accruing to the trusts should be included in the total income of the assessee under Section 64(v). The Income-tax Officer had included the income of Rs. 30,808 from the three trusts in the assessee's total income, which was upheld by the Appellate Assistant Commissioner and the Tribunal. The Tribunal had interpreted "deferred benefit" to mean a benefit deferred to any time, including beyond the minority of the child. However, the court disagreed with this interpretation, stating that the benefit must be available during the minority of the child. The court concluded that the income from the trusts, which was to be accumulated and added to the corpus until the beneficiaries attained majority, could not be included in the assessee's total income under Section 64(v). 3. Contingent vs. vested interest of minor beneficiaries The court also examined whether the interest created in favor of the minor beneficiaries under the trust deeds was contingent or vested. The court referred to the provisions of Section 21 of the Transfer of Property Act and Section 120 of the Indian Succession Act, which define contingent and vested interests. The court observed that the trust deeds provided that the income was to be accumulated and added to the corpus until the beneficiaries attained majority. The court held that the interest created in favor of the minor beneficiaries was contingent upon their attaining majority. Since the interest was contingent and not vested, the income could not be included in the assessee's total income under Section 64(v). Conclusion The court answered the question in the negative, in favor of the assessee, holding that the income accruing to the trusts was not includible in the total income of the assessee under Section 64(v) of the Income-tax Act, 1961. The court emphasized that the benefit must be available during the minority of the child and that the interest created in favor of the minor beneficiaries was contingent, not vested.
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