TMI Blog1958 (9) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... n of interest when she attained the age of 18 years. She was then to receive the income during her lifetime and after her the corpus was to go to persons with whom we are not concerned. Therefore, the significant feature of this trust deed is that Chandrika was not to receive any income, any interest, any benefit whatsoever from this trust deed during her minority. When, therefore, the assessee received ₹ 410 as a trustee from the trust fund in the year of account, the minor had no right to this income. She had no beneficial interest in this income and could not enjoy this income. The assessee received this amount for the specific purpose of adding it on to the corpus of the trust. On these facts the question is whether section 16(3)(b) is attracted. Before we look at section 16(3)(b) we may look at the scheme of section 16(3) itself as a whole. This sub-section deals with notional income. But as far as clause (a) is concerned, it is clear that the income is notional in the sense that there is actual income but that actual income is received by the wife or the minor child of the assessee and the law considers that the income received by the wife or the child is the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the benefit of the minor child, and once that condition is satisfied you have not to look further and the income derived by the trustees from this transfer of assets constitutes part of the total income of the settlor. This raises a very important question. If we were to accept Mr. Joshi's contention, the result would be that however remote the benefit that the minor might derive under the trust deed, however long his interest may be postponed, as soon as there is a transfer by the settlor under which the minor derives some benefit, the interest received from the trust property must be added on to the total income of the assessee. Mr. Joshi realises that such an extreme position would be untenable and therefore he is prepared to make certain qualifications, and the qualification he is prepared to make is that there must be no intermediary beneficiaries before the minor gets the benefit under the trust deed. If there are intermediary beneficiaries, then section 16(3)(b) would not be attracted. He further contends that if you have a trust deed for the benefit of the minor alone, then there can be no question as to the application of section 16(3). It is difficult to understand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his father and under the relevant provision the trustees are to hold certain trust funds upon trust to pay the net interest and income thereof to the settlor's son Manilal for the maintenance of himself and his wife and for the maintenance, education and benefit of all his children till his death. The view taken by the Tribunal is that under this provision Manilal is the sole beneficiary and the amount is received by him for his own benefit, that he is not accountable to anyone in respect of this amount, and he can do what he likes with this amount. Before we come to the interesting argument advanced by Mr. Joshi, let us set at rest this particular question on which the decision of the Tribunal is based. It is perfectly clear that when you have a trust created to pay an amount to X for the maintenance of himself, his wife and for the maintenance, education and benefit of his children, the amount received by X is an amount impressed with a trust. A trust is created in favour of his wife and children and he is accountable for that amount as a trusteed The proposition is clearly stated in Lewin on Trusts at page 85, 15th edition. Lewin distinguishes between the motive of a gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joshi says that the trustees of the trust deed are entitled to receive this amount on behalf of Manilal and tax can be levied upon and recovered from the trustees under this section. But, says Mr. Joshi, under sub-section (2) the option is given to the Department to recover it from the person on whose behalf the trustees have received the amount and sub-section (2) provides : Nothing contained in sub-section (1) shall prevent either the direct assessment of the persons on whose behalf income, profits or gains therein referred to are receivable, or the recovery from such person of the tax payable in respect of such income, profits or gains. Therefore, Mr. Joshi contends that in this case the Department has preferred to have a direct assessment of the person on whose behalf this amount has been received. The argument sounds very plausible, but when one examines it, it is clear that although it is perfectly competent to the Department to go against Manilal, Manilal in his turn is equally competent to contend that he is a trustee and if he is to be taxed he can only be taxed as a trustee under section 41(1). Under the proviso it is provided that where the individual shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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