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TMI Blog1968 (8) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of Arvind Kalyan Trust. By that trust deed, the assessee's father settled certain shares on the trust set out in clauses 7 and 8 of the trust deed which, according to their English translation, run as follows : " 7A. For a period of 30 years from this day that is to say till the period of distribution the trustees shall pay out of the net amount remaining from the interest or other income of the trust fund after deducting thereout the expenses incurred for management of the trust, payment of taxes, etc., such sum as the trustees shall think fit to Arvind and, if during that period Arvind is married, to Arvind and his wife and the children of Arvind and the grand-sons and grand-daughters (in the male line) of Arvind or any one or more of them and if after doing so any saving remains from the income---such saving is to be added to the trust funds as capital, but the trustees shall have to pay Rs. 250 at least every year to Arvind and if Arvind is married in the meantime, to Arvind and his wife each, and if after doing so there is any saving out of the income in every year, such saving is to be added to the trust funds as capital. If in any circumstances, the net income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Niranjan) and if none of them is alive then all the property of this trust and its accumulated income should be handed over as donation, on such conditions as the trustees think fit, to the Gujarat University or other public educational institution or any institution giving medical assistance to public or any institution doing work for improvement of public health. 8. If at any time before the expiry of 30 years from this day, the trustees feel that this trust should be wound up and such properties as may form part of the trust fund should be distributed, then the trustees are hereby authorised to distribute such property of the trust and any income thereof accumulated as capital (which is hereinafter described as trust property) amongst Arvind, wife of Arvind, and such child or children and grand-sons and grand daughters of Arvind in the male line) of Arvind as may then be alive or amongst one or more of them in such proportion as the trustees may think fit, but if at that time none out of Arvind, his wife, and his children or grand-sons and grand-daughters (in the male line) is alive, the trust property should be distributed amongst Niranjan and Niranjan's wife and Manan and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Assistant Commissioner. The Appellate Assistant Commissioner disagreed with the view taken by the Income-tax Officer and held that the only income receivable by the trustees for the benefit of the assessee was the minimum amount of Rs. 650 and that was, therefore, the only amount in respect of which the assessee could be directly assessed under section 166 which could be included in the total income of the assessee for the purpose of his assessment. This decision of the Appellate Assistant Commissioner was challenged in appeal by the Income-tax Officer but the appeal was unsuccessful and the Tribunal, agreeing with the view taken by the Appellate Assistant Commissioner, rejected the appeal. Hence the present reference at the instance of the Commissioner. Before we examine the terms of the trust deeds it would be convenient at this stage to refer to the provisions of the Act bearing on the determination of the controversy between the parties. Section 160 defines " representative assessee " and enumerates four categories of representative assessees who are assessable in respect of income which does not beneficiary belong to them but belongs beneficially to another Clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome to which he is beneficially entitled Such income having accrued to him would form part of his total income and would be clearly assessable in his hands and this right of the revenue to make direct assessment on him in respect of such income stands unimpaired by the provision enabling assessment of such income in the hands of the representative assessee in a representative capacity. Section 166 makes this clear by providing that nothing in the earlier sections of that Chapter shall prevent direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable. If, therefore, any portion of the income is receivable or is received by the representative assessee specifically for the benefit of a particular beneficiary so that such income can be said to accrue to the beneficiary, the revenue has an option either to assess the representative assessee in his representative capacity under section 161 or to make direct assessment on the beneficiary in respect of such income by virtue of the right expressly preserved under section 166. Now, where income is not receivable or received by the representative assessee specifically for the benefit of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an association of persons. But even here, when " such income ", that is income which falls within the main part of section 164 or any part of " such income " is paid by the representative assessee to the beneficiary, the beneficiary can always be assessed directly in respect of such amount since such amount would, on receipt, by the beneficiary, form part of his total income and would be assessable in the hands of the beneficiary. Here too, section 166 operates to make it clear that the provision enacted in section 164 for assessment of " such income " in the hands of the representative assessee as an association of persons shall not prevent direct assessment of the beneficiary in respect of any part of " such income " received by him. The revenue has thus two modes of assessment available in respect of the amount actually received by the beneficiary out of " such income " : one is to assess it as part of " such income " in the hands of the representative assessee in a representative capacity under section 164 and the other is to assess it directly in the hands of the beneficiary by including it in the total income of the beneficiary. Now, the minimum amounts aggregating to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the trust funds until the expiration of the period of distribution is provided in clause 7A. That clause provides that until the expiration of the period of thirty years, that is, during the period up to distribution, the trustees shall, out of the net income of the trust funds, pay to the assessee or if, in the meantime the assessee gets married, then pay to the assessee, his wife, his children and grand-children or such one or more of them, as they in their discretion think fit, such amount as they think proper, subject to a minimum of Rs. 250 per year to be paid to the assessee and if the assessee gets married, then subject also to a minimum of Rs. 250 per year to the assessee and his wife, and the balance of the income shall be added to the trust funds as capital. It is also provided by clause 7A that if, prior to the expiration of the period of thirty years, the assessee dies unmarried or in case of his marriage, both he and his wife die, the income every year shall be added to the trust funds until the expiration of the period of thirty years. Clause 7B then proceeds to state as to what shall happen when the date of distribution arrives on the expiration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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