Law:

Section:

I. Section 64 of the Income-tax Act, 1961 [Corresponding to section 16(3) of the Indian Income-tax Act, 1922 - Transfer of assets - For benefit of spouse or minor children - By a deed of settlement in 1947 'W' settled certain shares on trust - As per terms of deed, net dividends, interest and income of trust were payable to assessee during his lifetime and, after his death said income was to be paid equally to his daughter and son during their lifetime and only after their death, to their respective children in equal shares - In 1957 in order to accelerate respective life estates of his next succeeding life tenants being his daughter and son, assessee, by a deed, surrendered, released and yielded up his life interest in said trust -Whether whatever came to daughter and son of assessee in consequence of deed of 1957 was result of provisions made in their favour as beneficiaries under original deed of settlement, and assessee executed deed of 1957 only to accelerate their interest - Held, yes - Whether, therefore, it would be impossible to construe subsequent deed to mean that it was a deed of transfer of life estate of assessee in favour of his minor children within meaning of section 16(3)(a)(iii) of 1922 Act - Held, yes FACTS By a deed of settlement, dated 30-1-1947, one 'W' settled certain shares of a company on trust. As per terms of the deed, the net dividends, interest and income of the trust were in the first instance payable to the settlor's son, the assessee, for the period of his life, and after his death, the same were to be divided in equal half between the assessee's daughter, D, and the assessee's son, M, for the period of their respective lives, and on their death, to their respective children. During the assessment year 1958-59, in order to accelerate the respective life estates of his next succeeding life tenants being his daughter and his son, the assessee, by or deed dated 30-3-1957, surrendered, released and yielded up all the interest in the trust fund including the interest, dividends and incomes thereof. For the assessment years 1958-59 and 1959-60, the ITO considered the dividends in respect of the trust investments and shares to be…

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