TMI Blog1997 (4) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... ide his letter dated 5-1-1989 stated that he has made unequivocal declaration on 19-10-1964 by which he has thrown 1/6th interest in the trusts, namely, M/s. Shreemant Danvir Sir Hukumchand Trust (hereinafter referred to as 'Sir Hukumchand Trust') and Smt. Shoubhagya Danshila Lady Kanchanbai Trust (hereinafter referred to as 'Lady Kanchanbai Trust') in the common hotch-potch of his HUF w.e.f. 31-10-1959. In support thereof, copies of documents executed on 19-10-1964 were filed. It was contended before the Assessing Officer that the effect of the said declaration has never been considered from the angle of disposition of beneficiary interest in favour of HUF. The tax authorities and Courts have interpreted the declaration in the context of intention of the Settler of the trust and have considered that the declaration did not change the intention of the Settler. it was contended that the declaration has not been considered with a view whether the beneficiary could dispose of his share in the manner he liked. It was further stated therein that as per section 58 of the Indian Trust Act, the beneficiary is competent to transfer or dispose of his interest subject to law for the time bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacity stands upheld. (iii) Shri Jambukumar Singh Kasliwal is one of the beneficiaries of the two trusts along with the assessee and the decision of the Tribunal in the case of Jambukumar Singh Kasliwal for the assessment years 1981-82 to 1983-84 is also applicable, the facts being identical. 4. Interpreting clause (4) of the trust deed, the CWT(Appeals) further held that the assessee did not have absolute right in the beneficial interest and was, therefore, not competent to dispose of the same in the manner he liked at least till the due date of distribution of corpus. Feeling aggrieved, the assessee is before us. 5. Shri P.M. Choudhary, the ld. advocate for the assessee, submitted that during the course of assessment proceedings, the assessee had raised a plea that even after the decision of the Supreme Court reported in Maharaja Bahadur Singh's case the beneficial interest in the two trusts could not be brought to tax in the hands of the individual. The assessee had right to throw his beneficial interest in the two trusts in the common hotch-potch of the HUF and accordingly after 19-10-1964 i.e., the date of declaration, the beneficial interest in the two trusts became t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he character of HUF property. In support of this contention, he relied on the decision of Bombay High Court in CIT v. Gopaldas T. Agrawal [1979] 116 ITR 613. He pointed out that there is no contrary decision to that of the Bombay High Court. Referring to the decision of M. P. High Court in CIT v. Vrajlal Manilal Co. [1981] 127 ITR 512, Shri Choudhary argued that the Tribunal and the income-tax authorities are bound by ruling of other High Courts also when there is no contrary decision of the jurisdictional High Court. He, therefore, argued that the revenue authorities were bound by the decision of Bombay High Court and could not take a view contrary to that taken by the Bombay High Court. 6. Shri Choudhary further argued that the principle regarding co-parcener right to throw his individual property to the HUF hotch-potch is well settled. In this connection, he referred to the following decisions : (i) Addl. CIT v. Vidhya Sagar Hasija [1979] 117 ITR 249 (MP); (ii) Autoways (India) v. CIT [1976] 102 ITR 761 (Ori.); and, (iii) CIT v. Ashok Kumar Jain [1993] 204 ITR 16 (Pat.). 7. On the strength of the above decisions, Shri Choudhary argued that the assessee had a right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of their respective shares of properties. Originally the income from those properties was returned by them for the purpose of their income-tax assessments in their individual status, but subsequently they began to assert that properties were received by them as the Kartas of their Hindu Undivided Families and that, therefore, the income was liable to be assessed in that status. 10.1 Their lordships further noted at page 349 of 162 ITR that the assessees filed a declaration dated 19-10-1994, that on and from Diwali, 1959, the income accruing to them as beneficiary from the two trusts deeds should be regarded as income belonging to their HUFs. 11. At this stage, it may be noted that the Apex Court was concerned with the assessment in the case of Maharaja Bahadur Singh's case for the assessment year 1962-63, Maharaja Bahadur Singh for the assessment year 1961-62 and Jambukumar Singh for the assessment years 1961-62 and 1962-63. While considering the effect of declaration dated 19-10-1964 vis-a-vis the above assessment years, the Tribunal had opined that the declaration dated 19-10-1964 cannot have retrospective effect as to what the intention of the assessee or the Settler ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o exercise an absolute and uncontrolled discretion on the death of a beneficiary to apply his share to the maintenance of his widow and his male issue and to accumulate the surplus to the account of the said beneficiary for distribution. On the contrary, the trustees would have been under an obligation to entrust the income falling to the share of the deceased beneficiary to the members of his Hindu undivided family and no discretion would have been permissible in regard to the disposal or otherwise of any part thereof. Secondly, the document would not have provided that if before the time of division and distribution, a beneficiary dies leaving only a widow the said widow would get a half of the share belonging to the deceased beneficiary while the other half would be liable to distribution among the remaining beneficiaries and the heirs of other deceased beneficiaries. These two conditions are sufficient in themselves to lead to the conclusion that it was never intended that the properties should pass to the beneficiaries to be held by them for their respective Hindu undivided families. On the plain terms of the trust deeds, the properties were intend to devolve on the beneficiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to introduce additional evidence in the form of copy of declaration dated 19-10-1964 before the Tribunal and raised the plea that by the said declaration, the assessee threw the income from the two trusts into the hotch-potch of his HUF and that the income should be assessed in the hands of the HUF of the assessee. The Tribunal declined to admit the said additional evidence and observed that the plea raised before the Tribunal was considered by the Hon'ble Supreme Court but was not accepted in 1961-62 and 1962-63 and on the basis of the same declaration it is difficult to accept for the subsequent years that the property was thrown into the common hotch-potch. With utmost respect, we are unable to agree to the above observation. As stated earlier, the Hon'ble Supreme Court in Maharaja Bahadursingh's case have given their verdict on construction of the two trust deeds that the beneficiary interest of the assessee belonged to him in his individual capacity, as it was intended by the Settlers that the beneficiaries should receive the properties in their individual capacity. The issue of throwing of beneficiary interest by the assessee into the common hotch-potch of their respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right in the beneficial interest. The argument of Shri Choudhary is that being a coparcener of the joint Hindu undivided family, the assessee is competent to throw his beneficial interest in the common hotch-potch of the HUF by making an unequivocal declaration. We may agree to the above arguments of Shri Choudhary in view of thejudgment of Bombay High Court in the case of Gopaldas T. Agrawal that a member of the HUF is always competent to impress his separate property with the character of the HUF property but subject to the law for the time being in force as to the circumstances and extent in and to which he may dispose of such interest. For that purpose it has got to be examined how much beneficial interest, the assessee has acquired from the trusts and whether he is competent to make a declaration or not. These facts cannot be ascertained without examining the trust deeds. Section 58 of the Trust Act provides that the beneficiary if competent to contract may transfer his interest under a trust, but subject to the law for the time being in force, as to the circumstances or extent in and to which he may dispose of such interest. The Hon'ble Apex Court has interpreted the trust d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficiary while the other half shall be distributed among the remaining beneficiaries and/or the heirs of the beneficiaries entitled to distribution under this clause PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED that if at the time of the said division and distribution of the trust properties any of the said beneficiaries shall have died without leaving a widow or a son, the share of the said beneficiary shall, subject to such adequate provision being made for the maintenances and education till marriage and marriage expenses of the daughter or daughters of the said beneficiary as the trustees may in their discretion think fit, be distributed among the remaining beneficiaries and/or the heirs of the beneficiaries entitled to distribution under this clause." 17. While interpreting the trust deeds their lordships of the Supreme Court in the assessee's case observed that the interest of the grandsons has been sufficientlv protected by the terms and conditions of the trust deed and in order to safeguard his interest, it is not necessary to conclude that the properties were intended to go to the beneficiary as karta of the HUF. The grandsons themselves were beneficiaries an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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