TMI Blog1983 (7) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer had not exercised the option to include the income from the trust in the hands of the beneficiaries ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that if shares of the beneficiaries were not specified in the trust deed, they would be held as indeterminate and the provisions of s. 164(1) of the Act were attracted ?" The facts giving rise to this reference briefly stated are as follows: Rai Saheb Seth Ghisalal Modi Family Trust, Indore, of which the assessees are the trustees, was originally created by a trust deed dated May 28, 1969 by Smt. Krishnabai, wife of Ghisalal, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the order of the Tribunal. This application was rejected by the Tribunal. The assessee then submitted an application to this court for a direction to the Tribunal to refer questions of law arising out of the order of the Tribunal. This application was allowed by this court and as directed by this court the Tribunal has referred the aforesaid questions of law for the opinion of this court. As regards question No. 1, it was contended by the learned counsel for the assessee that the trust was invalid because the property settled by one of its authors, via., Shri Ramkaran, was ancestral property in the hands of Ramkaran qua his son, Girdhari Lal, and, as such, he had no power to create a trust with respect to his share in the property. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally on the ground that the ITO specifically stated that they were subject to rectification on completion of the assessment in the case of the trust. The learned counsel for the assessee, relying upon the decisions in CIT v. Murlidhar Jhawar and Purna Ginning and Pressing Factory [1966] 60 ITR 95 (SC) and Girdhari Lal Laxman Prasad v. CIT [1968] 70 ITR 853 (All), contended that the Tribunal was not justified in holding that the ITO did not exercise his option merely because in the assessment order he stated that the orders were subject to rectification. The contention of the learned counsel for the assessee is well founded. In CIT v. Murlidhar Jhawar and Purna Ginning and Pressing Factory [1966] 60 ITR 95 (SC), the ITO assessed the thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied the trust, was liable to be assessed under s. 164(1) of the Act. In spite of this, the ITO assessed the beneficiaries individually by including their share of income in the trust. The assessments were not provisional properly so-called. From the mere fact that the ITO stated in the assessment orders that they were subject to rectification, it cannot be held that he did not exercise his option. In Girdhari Lal Laxman Prasad v. CIT [1968] 70 ITR 853 (All), the ITO completed the assessment of two of the partners of the assessee, firm which consisted of three partners taking their shares in accordance with their returns subject to the same being rectified later when the correct share was determined in the assessment of the assessee-firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as was necessary for meeting the essential requirements of the beneficiaries and for their overall advancement only. On a bare reading of the trust deed it is clear that the shares of the beneficiaries in the income of the trust are not determinate and the trustees were authorised to spend only so much income of the trust as was necessary for meeting the essential requirements of the beneficiaries, which from the nature of things were bound to be unequal and for their overall advancement. The trustees were not required to spend equally on the beneficiaries but according to their needs. In the circumstances, the Tribunal did not commit any error in holding that the shares of the beneficiaries in the trust were not specified and were indete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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