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TMI Blog1987 (9) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Rs. (a) To Kailash Benefit Trust 10,000 (b) To S.C. Bafna Family Trust 10,000 (c) To P.S. Bafna Family Trust 10,000 (d) To Vimla Rani Bafna Family Trust 10,000 (e) To Sundeep Bafna Benefit Trust 10,000 (f) To Sapna Benefit Trust 10,000 (g) To Deobala Benefit Trust 10,000 Apart from the above fixed sums, the residuary asset was also available to these trusts in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; Rs. (a) Kailash Benefit Trust 10,000 (b) S.C. Bafna Family Trust 10,000 (c) P.S. Bafna Family Trust 10,000 (d) Vimla Rani Bafna Family Trust 10,000 (e) Sandeep Bafna Benefit Trust 10,000 (f) Sapna Benefit Trust 10,000 (g) Deobala Benefit Trust 10,000 AND WHEREAS under the clauses 9(a)(vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 10,000 shall all of the amounts vest in Sapna Benefit Trust and therefore shall be made over to Sapna Benefit Trust and that the aforesaid six trusts shall be deemed as either not come into existence or got extinct or cease to exist as the case may be. The Trustees cease to be Trustees of the aforesaid six Trusts which have been deviced in the Will of Late Smt. Taramati Sanchalal Bafna. It is further resolved that Sapna Benefit Trust shall be the only trust declared and accepted under the Will by the executors of the Will. 5. Accordingly, the Trustees filed a return only for the assessee-trust and claimed that the assessee-trust though discretionary is assessable only at the appropriate rate and not at the maximum rate because this is the only trust coming into existence under the Will. Before filing this return, however, the various trusts had actually paid advance tax as if they were separate trusts. 6. The factual aspects were examined by the ITO who noticed that all the trusts were discretionary and that the contention that only one trust came under the Will would not be factually correct. Without prejudice he held that the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive dependent on him for support and maintenance, and such trust is the only trust so declared by him). Accordingly, the ITO assessed the income for the various years at maximum rates. 8. Aggrieved by the decisions of the ITO, the assessee filed an appeal before the AAC who found no reason to interfere with the order of the ITO for the reasons given in the orders now under appeal. The AAC held that the resolutions and that in fact 7 trusts have come into existence in terms of the Will of the deceased. He further noted that the beneficiaries in the different trusts were not the same. The executors would therefore be committing a breach of trust if they go against the express desire of the testatrix, particularly when the minor's interests were also involved. He also rejected the claim that since the trustees had refused to execute all the six discretionary trusts, the conditions of assessing the income of the assessee-trust at appropriate rate are fulfilled. He also took note of the fact that each of the trusts were entitled not merely to the sum of Rs. 10,000 mentioned above, but also to an undetermined part of the residuary assets. Thus, it cannot be said that the Trustees have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone, the assessee should succeed. 10. The second argument of Shri Lakshminarayan was that one has to see the Will as actually executed and not only the executory part. From the facts, it is quite clear that all the six trusts were still-born for want of execution. Therefore, in the eyes of law they should be taken as having never acquired a legal existence. In law, the trust comes into existence only when all the essential conditions of a valid trust are fulfilled. One such condition is that the trust should come in possession of the property in terms of the obligation cast on them. In this case the refusal to take over the properties by the proposed trustees means that the trusts have not come into existence at all. (except assessee-trust). 11. In this connection, Shri Lakshminarayan submitted that the authorities below have made a mountain out of a mole hill in respect of a genuine mistake or misunderstanding between the executors and the accountants of the two firms. The affidavit of Mr. Santosh Dharma Choudhary (page 34 of the compilation) shows clearly how exactly the mistake arose and how the same was set right on 1-4-1982. During the interregnum the executors though they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 7 trusts under the Will each trust having its own set of beneficiaries. The fact that each of the trusts was discretionary does not mean that the executors or trustees could appropriate the corpus of one trust for the benefit of another, particularly when interests of minors are involved. This is not a case of simple breach of trust but an action in excess of the authority vested in executors and trustees in terms of the Will which they are bound to honour. Secondly, Shri Roy submitted that the observations of Underhill on which so much reliance is placed are not applicable because clause (9) of the Will on which reliance is placed particularly clause 9 (vi) comes into operation only after the trustees take over i.e., after the trust actually comes into existence. Thus, more than one trust have clearly come into existence in terms of the Will. 14. Shri Roy then referred to certain submissions made before the AAC. If as alleged, the trustees refused to execute the trust the resolutions would be contradictory to this position. In particular it is to be noted that the executors and trustees are not one and the same. One executor or trustee is not an agent of the other. Actions of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s facts and arguments. We are aware of the principle that a liberal interpretation has to be given to the various provisions. We have also taken note of a similar case which was before the Ahmedabad Bench in ITO v. Rajnikant Gulabdas Sheth Family Trust [1987] 20 ITD 668. In this case initially under the Will two discretionary trusts were created but on 1-5-1979, much prior to the introduction of the Finance (No. 2) Bill 1980 on 18-6-1980, one of them was wound up with the result that during the relevant accounting period there was only one discretionary trust created under the Will and the Tribunal relying on Saroj Aggarwal v. CIT [1985] 156 ITR 497 (SC) and CIT v. J. H. Gotla [1985] 156 ITR 323 (SC) held that where the plain interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the legislature, the Court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of the legislature from the language used. The learned Members also held relying on the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lie in the mouth of anyone to say that the testatrix deceased did not mean what she said or did not say what she meant. The intention of the testatrix is clear, viz., to bring into the existence 7 trusts through her Will. The assessee's case thus clearly goes out of the proviso (ii) to sec. 164 (1). 20. Apart from this legal aspect, we find that even on the factual side, the facts are different from those before the Ahmedabad Bench. In that case, there was no dispute that by 1-5-1979 i.e., before the commencement of the according period for the assessment year in question, one trust was dissolved and its assets were distributed amongst the beneficiaries. In the case before us, the trust was not dissolved nor were the assets distributed amongst the beneficiaries in terms of those trusts. Instead the assets were passed on to the assessee-trust. Secondly, all the book entries, crediting of interest, payment of advance tax cannot be said to be all genuine mistakes. These are acts done in the ordinary course of events. The affidavit of Santosh Dharma Choudhary is a self serving statement and cannot be taken as representing a true state of affairs. The mere fact that Shri Choudhary - th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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