TMI Blog2002 (10) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... properties of the Trust and in the first place reimburse or pay and discharge all costs and expenses which may be incurred in or about the administration of this Trust including any Income-tax, Wealth-tax or Other Tax, charge, levy or cess levied upon the Trustees as also including all outgoings, dues, costs of repairs to immovable properties, if forming part of the Trust Fund. (b) The net balance of the Income remaining after providing for the contingencies mentioned in clause (a) above shall be distributed in such proportion and in such manner as the Trustees may in their sole and absolute discretion decide amongst the following beneficiaries:-- (1) Nira K. Shah (2) Rupa K. Shah (3) Smt. Rama K. Shah (4) Nita K. Shah (5) Bindu K. Shah (c) That the trustees shall have absolute discretion not to distribute any balance of the income of the Trust Fund for any year to any of the aforesaid beneficiaries and they shall be entitled to accumulate the same for such period as they may think fit in their absolute discretion: provided that such period shall not exceed 18 years from the date of this Deed. Such accumulations in any year will merge in and from part of the Trust Fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneficiaries referred to as recipients herein these recordings, named herein to be owned, held, possessed, enjoyed, exploited, employed and deployed by them for earning the income for their common enjoyment. Properties distributed and handed Names of the recipients who hold, over to the (beneficiaries) possess, enjoy and exploit property on recipients joint and survivorship principles or on joint tenancy. ----------------------------------- ------------------------------------------- Rs. 3,000 fixed capital and 60 per 1. Rama Kanubhai Shah Bindu Kanubhai cent share in profit and loss of Shah BOI M/s. Nirav Knitwear Co. (2) It is further hereby resolved that the beneficiaries who are the recipients of the above properties shall hold the properties stated above, in joint ownership and under joint tenancy under the express provisions hereinafter made under this resolution till such time, they, by an unanimous resolution otherwise decided to hold the properties in severally to the exclusion of other or others and desire to own, hold, possess, enjoy, employ exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heirs or to such of the persons be might have directed by a will or otherwise. (iv) Further the recipients shall hold such part or portion of the income of fund as shall not have been covered by the above resolution to be accumulated by way of compound interest and reinvesting the income or interest thereof and adding the same to the fund to be treated as one fund for all purpose. (v) The recipients may at any time and from time to time by passing an unanimous resolution. (a) Distribute and transfer the whole or any part or parts of fund of properties amongst themselves, in such proportion as they deem fit which proportion shall not necessarily be equal. (b) Notwithstanding the above, the recipients may by passing on irrevocable resolution determine the individual share among themselves in to or to the exclusion of one or more of themselves in the properties of the fund and to allot allocate or with intent to distribute and divide the fund or properties in such determinate and known share which share shall not necessarily be equal and in such an event the distribution and division of the fund or properties at any time thereafter and whenever the recipients decide to hold ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly the entire corpus is not distributed. 3. In the matter of distribution of the corpus the trustee have no doubt absolute discretion. They may distribute amongst all or any of the beneficiaries and in such share or shares as they may think fit. But to whomsoever they may decide to allot the share and in whatever proportion they may allot, the allotment has to be absolute. After the allotment the recipients should be free to deal the corpus allotted to them freely in the manner thought fit by them. In the instant case not only the beneficiaries are grouped together but their holding and enjoyment is sought to be regulated by the principles of Joint Survivorship or Joint Tenancy. Besides, they are supposed to employ their share of corpus for earning the income for their common enjoyment. The imposition of such conditions and constitution of the so called bodies of individuals for achieving the desired objective is beyond the scope of their power and authority. 6. What remains to be examined now is the provision contained in sub-clause (d). It empowers the trustees in their absolute discretion to utilise the corpus of the trust fund for (a) health (b) marriage expenses (c) edu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settlement or such other earlier period as may be decided upon by the trustees for the time being. By sub-clause (f) it is stipulated that on the expiry of the period of distribution the trustees shall distribute the entire corpus of the trust fund amongst all or any of the beneficiaries in such share or shares as they in their absolute discretion shall think fit. In this instant case the period of 18 years since the execution of the deed of settlement is not yet over. The trustees have no doubt discretion to advance the period of distribution of the corpus but they have not taken any decision advancing the period of distribution. Their decision to distribute a part of the corpus cannot be termed as decision advancing the period of distribution of corpus within the meaning of sub-clause (e). 4. Keeping in view of the above noted facts and circumstances the appellant was also not justified in giving up partner's share to the Body of Individuals because income given to the Body of Individuals is also against the terms and conditions of the trust. Under such circumstances I would uphold the decision of the ITO." 8. The ld. counsel of the assessee brought to our notice Legal Maxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movable property. Section 9 of Transfer of Property Act which states "a transfer of property be made without writing in every case in which a writing is not necessary". 11. In beneficiaries case, the claim of the assessee is that a BOI was constituted by the part distribution and therefore, it cannot be taxed at maximum marginal rate which is applicable only in a case of AOP. It is submitted that the issue stands covered by the decision of Appellate Tribunal in the case of S.C. [IT Appeal No. 1744 (Ahd.) of 1986 dated 216-1988] considering the decision of Gujarat High Court in the case of CIT v. Harivadan Tribhovandas [1977] 106 ITR 494 and of Bombay High Court in the case of CIT v. Associated Cement Steel Agencies [1984] 147 ITR 776. 12. The ld. Departmental Representative submitted that as per clause (e) power was to distribute whole on expiry of distribution which is 18 years or such lesser period as decided by majority of trustees (clause e). On expiry of such period of distribution whether 18 years or lesser the entire corpus is to be distributed to all or any of the beneficiaries. No power is given to the trustees to distribute a part. Clause (d) claimed as advancement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of law, as he pleases (n). In these cases, the rule of the civil law applies; non debet cui plus licet quod minus est non licere (o): or, as it is usually expressed in our books, cui licet quod majus non debel quod minus est non licere (p). 3. Authority-having power to do the more: He who has authority to do the more important act shall not be debarred from doing that of less importance, a doctrine founded on common sense, and of general application, not only with reference to the law of real property, but likewise to that of principal and agent, as we shall hereafter see. A man having a power may do less than such power enables him to do; he may, for instance, lease for fourteen years under a power to lease for twenty-one (q); or, if he have a licence or authority to do any number of acts for his own benefit, he may do some of them and need not do all (r). 14. In statutory interpretation also the decision is under the head "over performance" and "greater includes less" the same example of "tender of higher amount by a debtor" are narrated. This rule is stated to be corresponding to rule that when an action is permitted, anything less is included in the permission. 15. On a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no direction by the testator. There is only his wish or recommendation and the wish is that the donee of the power would have absolute discretion and free unfettered choice as to the objects, institutions or persons amongst whom the estate of the testator might be distributed. Powers are never imperative; they leave the act to be done at the will of the party to whom they are given. Trusts are always imperative, and are obligatory upon the conscience of the party instructed. The test is whether what is expressed by the testator is his discretion intended to control the conduct of the person to whom it is addressed or whether it is merely his wish or indication of his mind that the person appointed by him should use his own discretion and act as he thought best. In the former case it is a trust whereas in the latter case it is a power. Powers may be general or limited and general power are such as the donee can exercise in favour of such person or persons as he pleases, including himself. In order to consider whether the testator created a trust or gave power, the will must be construed as a whole and the intention of the testator must be gathered. Where it is a case of power, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such period as they think fit not exceeding 18 years from the date of the deed. Clause (d) gives an absolute discretion to the trustees to utilise the corpus of the trust funds for the five objects of health, education, maintenance, marriage expenses and advancement in life of any of the beneficiaries. The period of distribution is defined in sub-clause (e) of Part-II of the trust deed to mean the period of 18 years from the execution of the deed or such other earlier period as may be decided by the majority of the trustees. Clause (i) obliges the trustees to distribute the entire corpus of the trust on the expiry of the period of distribution in such share or shares as in their absolute discretion they think fit. Clause (d) provides for a situation in case of difference of opinion between the trustees on any question arising in the course of administration of the trust. From the above it is clear that distribution of the income is provided by clause (b) whereas the distribution of the corpus is provided by clauses (d), (e) and (i). If the distribution of corpus is decided to be on the expiry of 18 years or the earlier period as per clause (e) of Part-II of the trust deed, it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efited the beneficiaries was not made clear. No advancement has been shown to have been achieved by the beneficiaries of the trust in transferring the partnership share to the Body of individuals. 24. We may now deal with the contention of the assessee that the Assessing Officer having accepted the claim of the assessee in the earlier year cannot take a contrary view in the subsequent year when the facts and circumstances are the same. Reliance is placed on the judgment of Gujarat High Court in the case of Sayaji Iron Engg. Co. v. CIT [2002] 253 ITR 749. This contention of the assessee, in our opinion, has no force firstly because each year is a separate year and the principle of res judicata and estoppel does not apply to income-tax proceedings; secondly because in the earlier year, there is no discussion on the issue and, therefore, the Assessing Officer did not take any decision of his own and proceeded on the assumption that whatever was claimed by the assessee was correct; thirdly because in view of the Supreme Court decision in the case of Ch. Atchaiah, the right person alone is to be assessed even though the income was declared and assessed in the hands of another person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an "Association of Persons". It is an "association of persons" which is other than a company or a co-operative society. In this larger context, the term "association of persons" may include the combination of individuals and others including BOI individuals, combination of individuals and non-individuals and also combination of non-individuals and other non-individuals. Both these entities namely association of persons and Body of Individuals have been included in clause (v) of section 2(31) of the Income-tax Act with the added words "whether incorporated of not". In Meera Co.'s case, the Supreme Court observed that when clause (v) speaks of "an association of persons" or "body of individuals", this implies that an association of persons is not something distinct and separate from "body of individuals". It has been added to obviate any controversy as to whether only combinations of human beings are to be treated as a unit of assessment. The intention clearly is to hit combination of individuals and individuals, combination of individuals and non-individuals and also combination of non-individuals with non-individuals. These combinations who are engaged together in some enterpri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it does not make any difference that the widow or the minor sons did not start the business and that the business was inherited. But the fact that business has been continued by the widow on her own behalf as well as on behalf of minor sons after buying the interest of the mother goes to show that there is organised activity jointly carried on to produce income and it was a clear case of joint business venture of a few individuals. In the subsequent paragraphs, the Supreme Court observed that "it is well-settled by this Court in the Act of 1922 by a series of judgments that association of persons must be an association which is formed by volition of the parties for the purpose of generation of income and this is the basic test and that a minor can be a member of such a body or association is also well-settled by a number of decisions. Even if we proceed on the basis that volition to start the business is a must, we find from the copy of the resolution dated 31-12-1979 as under:-- "AND WHEREAS the Trustees have as a matter of caution consulted and ascertained the views of the beneficiaries Smt. Ramaben Kanubhai Shah, Nira Kanubhai Shah, Nitu Kanubhai, Bindu Kanubhai and Rupa Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
