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TMI Blog1954 (3) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be divided equally between Sam and Aimai who are the son and daughter of Minocher and Mehra. Discretion is also given to the trustees to apply out of the corpus a sum of ₹ 10,000 for the marriage expenses of Aimai and a sum of ₹ 5,000 for the marriage expenses of Sam, and they have also been given the discretion to pay out of the corpus or the accumulated income any amount necessary for the higher education of Sam or Aimai or for any extraordinary expenditure such as illness of Minocher or Mehra or of their children Sam or Aimai, and the deed provides that after the death of the survivor of Minocher and Mehra the trust premises and such accumulated income as the trustees may have shall be equally divided between Sam and Aimai for their absolute use and benefit. Turning to the proviso in question, the main Section 41(1) makes the income of a beneficiary taxable in the hands of the trustee to the same amount and in the like manner as the beneficiary himself would have been taxed. But the first proviso imposes a heavier liability upon the income received from a trust under the circumstances mentioned in that proviso, and the circumstances are that if the income is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the shares of the beneficiaries are determined and known. It is obvious even on a casual consideration of the trust deed that the shares of the beneficiaries are not determined and known. It is left to the discretion of the trustees to give such part of the income to Minocher, and his wife Mehra for their maintenance and to accumulate such part of the income as they think proper for the benefit of Sam and Aimai. Indeed, Mr. Palkhivala has not attempted to contend that the second part of the proviso has not been satisfied, but his contention is that on a true construction of the first proviso to Section 41(1) "or" must be read as "and" and according to him the scheme of the proviso is that the taxing department is entitled to tax at the maximum rate only when the beneficiary is not a named beneficiary and the shares are not determined. In our opinion it is not possible to place the construction suggested by Mr. Palkhivala upon the first proviso. In the first place, the Legislature has clearly distinguished between "any one person" in the first part of the proviso and "persons" in the second part of the proviso. If the intention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Leonard Stone, Chief Justice, says: "In the first place in spite of the use of the word 'or' in that proviso it is my opinion that 'or' in this context must be read conjunctively. There can be no point in having the two alternatives unless read as conjunctive ancillary to income, profits or gains not being specifically receivable on behalf of any one person." With very great respect, the two alternatives are essential and they have been put in the proviso for the reasons that we have already pointed out. Further on the learned Chief Justice says: "So that it has to be determined not only what is the quantum of the share but also who is the beneficiary who is entitled to it, and the test must in my opinion be whether both the shares and the beneficiaries who are to take the same are not indefinite or unknown." The test really is to be applied according to whether there is one beneficiary or more than one beneficiary and the test in the two cases must be different and the two different tests are laid down in the first proviso. Turning to the judgment of Mr. Justice Kania, again, with very great respect, the learned Judge has disposed of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he maintenance and other expenses of her children such sums as she may from time to time require. In the accounting year the trustees paid a certain sum to Kokila for her maintenance and the maintenance of her sons, and the question was whether this sum was liable to tax in the hands of the trustees at the maximum rate. The judgment then sets out the proviso and we came to the conclusion that as far as the amount was concerned it was clear that the share of Kokila in the residue of the income was not determined and that being so the trustees could not receive and did not receive any determinate share on her behalf from the residue of the estate. With regard to the balance of the income the position was that the balance was distributable when the younger son attained majority and the shares which the beneficiaries would get at that period was indeterminate because it would depend upon whether Kokila survived the period of distribution or not. We therefore held that with regard to the balance also as it could not be stated as to what specific shares any of the three beneficiaries would get, the proviso applied. Therefore in that particular case we applied the first part of the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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