9911796707
TMI Blog1982 (9) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... original assessment of the assessee for the year 1970-71. the income accruing to the trust was not taken note of. After completion of the original assessment, the ITO reopened the assessments of the assessee under s. 147(b) of the I.T. Act, 1961, hereinafter referred to as the Act and included the proportionate share income of the trust as the income of the assessee on the ground that the trusts created by the assessee and his wife are invalid. On appeal by the assessee, the AAC held that the reopening of the assessments is based on a mere change of opinion and as such invalid in law, that the trusts in favour of the prospective daughters-in-law of the assessee are not invalid as the transfer in favour of the trust did not violate the rule against perpetuities. On a further appeal by the Revenue, the Tribunal held that the re-opening of the assessment under s. 147(b) is proper and justified, that the trusts created by the assessee and his wife are valid, and that they did not offend the rule against perpetuities. Aggrieved by the order of the Tribunal in so far as it held that the trust deeds are valid in law and that they did not offend the rule against perpetuities, the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the accretions thereto shall be held and administered for the benefit of the beneficiary. Under cl. 2, the assessee and his wife are constituted trustees for the trust. Clauses 4 and 6 provided that the income from the trust property after meeting all the expenses, shall be added to and form part of the trust property and the trustees shall hand over the trust property to the beneficiary absolutely within one year from the date of marriage of the assessee's son, Dileep Kumar. Clause 9 says that in the event of Dileep Kumar not marrying before the age of 21, the trustees shall hand over the trust property to the said Dileep Kumar for holding and administering it as sole trustee in accordance with the terms and conditions in the trust deed, provided that in the event the said Dileep Kumar dying before marrying or before handing over the trust property to the beneficiary, the founder and his wife or the survivor of them shall resume functioning as trustees. Clause II provides that if Dileep Kumar dies unmarried and if Pradip Kumar, the first son of the assessee is unmarried, the trustees will hold and administer the trust properties as if the words " Pradip Kumar " were substituted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n offended in this case as contended by the Revenue. Both the AAC and the Tribunal are, therefore, right in holding that the trust deed does not offend the rule against perpetuity. Coming to the contention of the Revenue that the purpose of the trust and also the beneficiary are vague and indeterminate, we find that the intention of the testator cannot be said to be uncertain. The object of creating the trust is to benefit the prospective wife of Dileep Kumar and if that clause fails, the benefit will have to go to the prospective wife of Pradip Kumar and if that object also fails, it will go to public charitable purposes. The properties which Were originally those of the assessee are vested with the trustees for administering the same for the benefit of the beneficiaries. It is no doubt true that it is not possible to say at the stage of the execution of the trust deed as to who is the actual person to be benefited by the trust. But so long as the trust deed gives the description of the person who is to be benefited, the beneficiary cannot be said to be uncertain merely because the actual beneficiary cannot be known until the marriage of Dileep Kumar or Pradeep Kumar takes place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y born or to be born and this could not be done by a gift and that what cannot be done by a gift cannot be done by the intervention of a trust. In Allahabad Bank Ltd. v. CIT [1953] 24 ITR 519, the Supreme Court, while dealing with a trust created for payment of pensions to retired employees, held that as there is uncertainty as regards the beneficiaries in the trust deed, no legal and effective trust could be taken to have boon created. The reason for holding the trust to be illegal and ineffective is that there was uncertainty as regards the persons entitled to claim the benefit under the trust as it depends on the discretion of the, trustee, and there was also the absence of any obligation to grant any pension with the result that no legal and effective trust can be said to have been created as the trust deed does not create any obligation on the trustees to grant any pension to any of the employees. The Revenue also refers to the decision in Shadi Ram v. Ram Kishen, AIR 1948 East Punjab 49, in support of its contention that the ultimate charitable purpose is vague and indefinite and, therefore, the trust deed should be taken to be invalid. In that case, the object of the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of the trust. However, in this case, the initial object of the trust deed is to benefit the would be daughter-in-law through the second son, Dileep Kumar, and if that clause fails for the reason that Dileep Kumar does not marry during his lifetime, the second beneficiary is the prospective daughter-in-law of the author's first son and only if these clauses fail, the question will arise whether the ultimate object mentioned is vague and indefinite. But the trust deed cannot be said to be invalid, so far as the above beneficiaries are concerned. Therefore, without expressing any opinion as to whether the clause stating that the ultimate benefit of the trust will go to a charitable purpose in the event of the beneficiaries referred to earlier not coming into existence will make the trust deed invalid for want of uncertainty, we hold that the trust deed is valid so far as the other beneficiaries are concerned in view of the fact that if the earlier clauses in the trust deed come into operation, there is no room for the properties being utilised for the benefit of charitable purposes. The learned counsel for the assessee would refer to the first illustration in s. 13 of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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