9911796707
TMI Blog1944 (9) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... lause 3, which contains a definition of the trust premises, is in these terms :- "In consideration of the premises the trustees hereby covenant with the settlor that they the trustees shall stand possessed of the said land hereditaments and premises described in the Schedule hereunder written and hereinbefore expressed to be hereby granted conveyed transferred and assure and the net sale proceeds thereof if and when sold and the investments for the time being representing the same (all which said premises the net sale proceeds and the investments are hereinafter for brevitys sake called the trust premises) and the income thereof....." Then the paragraph goes on to set out the different trusts. Clause 5 is the clause which deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenants in common absolutely in equal shares." What is to be divided is the trust premises and nothing is stated about any distribution or the destination of the accumulations already directed to be made of the surplus income under clause 5. The only other clause which it is necessary to refer is clause 8 : "Provided always and it is hereby agreed and declared that in the event of all the sons of the settlor dying without leaving any widow them or him surviving before the said youngest son of the settlor attains the age of 21 years the trustees shall give and divide the trust premises and the accrued income thereof among such person or persons and in such manner or proportions as the settlor shall be will or deed appoint and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide for the taxation of income which arises under trusts. Sub-section (1) directs that tax shall be levied up on and recoverable from Courts of Wards, Administrators-General, Official Trustees, or any receiver or manager or any trustee or trustees, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable and all the provisions of the Act shall apply accordingly. That is a benefit to the tax-payers because except for it tax would have been leviable on the income in the hands of the trustees at the maximum rate but you have to ascertain the beneficiary, and the tax leviable is at the rate payable by the beneficiary as if this trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho 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. Now applying that test in this case to the sum of ₹ 2,071 the answer must be that as there has been no irrevocable appointment under clause 8 it cannot be predicted what the ultimate destination of this accrued income might be because in the unlikely event of all the sons being killed in some common accident the accrued income which for the present purpose is the sum of ₹ 2,071 might have gone either as income undisposed of by the father or as it might be appointed by him. In any event the matter is uncertain. That being so in my opinion it comes within the proviso and tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in the trust deed. The power of appointment reserved by the settlor does not inure for the benefit of any heir, if the settlor chooses to make the appointment in his favour, till the appointment is made. Therefore, it is clear that whilst under clauses 5,6 and 7 the accumulated income is not disposed of, the same does not become the property of the settlor until the contingency contemplated in clause 8 occurs. On the statement of the case it is clear that in the accounting year the income remained in the hands of the trustees without acquiring the character of accumulated income. it is equally clear that on the facts, so far no steps have been taken to make the contingency contemplated in clause 8 occur, in respect of the income which h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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