TMI Blog1981 (7) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... , who was a major and married. In the course of the assessment proceedings for the assessment year, 1971-72, the assessee claimed before the ITO that the trust having been created before March 1, 1970, bona fide exclusively for the benefit of the relatives of the settlors who were dependent upon them for their support and maintenance, fell Within the purview of cl. (iii) of the proviso to s. 164(1) of the Act. The ITO rejected this claim, computed the total income of the assessee at Rs. 14,749 and determined the tax at 65% under s. 164(1) of the Act. In the appeal preferred by the assessee, the AAC upheld the view taken by the ITO and confirmed the assessment framed by him. The assessee, thereafter, went in further appeal before the Income-tax Appellate Tribunal, Ahmedabad Bench " A " (hereinafter referred to as " the Tribunal "). It was not disputed before the Tribunal that the trust under which the income was receivable was created before March 1, 1970. It was also not disputed that it was a non-testamentary trust. The controversy before the Tribunal centered round the question whether the trust was created by the settlors bona fide exclusively for the benefit of their relativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to 'as relevant income', 'part of relevant income' and 'beneficiaries', respectively), tax shall be charged (i) as if the relevant income or part of relevant income were the total income of an association of persons, or (ii) at the rate of sixty-five per cent., whichever course would be more beneficial to the revenue Provided that in a case where (i) none of the beneficiaries has any other income chargeable under this Act; or (ii) the relevant income or part of relevant income is receivable under a trust declared by will; or (iii) the relevant income or part of relevant income is receivable under a trust created before the 1st day of March, 1970, by a non-testamentary instrument and the Income-tax Officer is satisfied, having regard to all the circumstances existing at the relevant time, that the trust was created, bona fide, exclusively for the benefit of the relatives of the settlor, or where the settlor is a Hindu undivided family, exclusively for the benefit of the members of such family, in circumstances where such relatives or mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted should be mainly dependent on the settlor for their support and maintenance. Unless all the three conditions are satisfied, the assessee's case would not fall under cl. (iii) of the proviso to s. 164(1) of the Act. As pointed out above, it is not in dispute that the trust is a non-testamentary trust created before March 1, 1970. The trust was created on January 27, 1951, by Gunvantlal Jivanlal and his wife, Bai Jasud. The first condition is, therefore, satisfied. So far as the second condition is concerned, it appears that the settlors, namely, Gunvantlal Jivanlal and his wife, Bai Jasud , their minor sons and major married daughter, are the beneficiaries. It, therefore, prima facie appears that the trust is not exclusively for the benefit of the settlors' relatives. Minor sons and daughter would fall within the definition of " relative as defined in s. 2(41) of the Act. Section 2(41) of the Act, which defines relative ", reads as under : " 2. (41) 'relative', in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual. It was sought to be argued by learned counsel for the assessee that the word " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and maintenance irrespective of the fact that the minor sons had independent income of their own from which they could have maintained themselves. The argument was that if the trust was created for the benefit of relatives whom the settlor, under the personal law applicable to him, was under a legal obligation to maintain and support, such trust would be covered by cl. (iii) of the proviso to s. 164(1) of the Act without anything more. We are unable to see any force in this argument. This argument shuts its eyes to the essential precondition embodied in cl. (iii), namely, that the trust is created for the benefit of relatives who were on the date of the creation of the trust " mainly dependent " on the settlor for their support. Clause (iii) in terms provides that the ITO has to form his satisfaction with reference " to all the circumstances existing at the relevant time ". The relevant time must of necessity mean the time of the creation of the trust. The circumstances which he has to take into account are the circumstances as obtaining on that day. And in taking into account these circumstances he has to be satisfied that " the trust was created for the benefit of relatives (or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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