Law:

Section:

Section 2(24) of the Income-tax Act, 1961 - Income - Properties held under trust vested in the state by law and trustee continued to receive perpetual annuity equal to income from trust properties from the state as compensation-Trustee relinquished remuneration receivable for pooja path, etc., of beneficiary deities-Whether annuity received was income in nature-Held, on facts, yes-Whether remuneration receivable by trustee was his income-Held, on facts, yes, as it was merely diversion of income after it accrued to him Facts Maharaja of Darbhanga created a public religious trust on 16-03-1949 in favour of certain deities endowing certain properties with himself as the sole trustee. The trust deed provided for trustee's remuneration at the rate of fifteen per cent of the income from the trust properties. On 5-10-1950, the assessee executed a deed of relinquishment stipulating that as the net income from trust properties was not sufficient for puja path, bhog of the deities and for proper repair of the temples and as he was anxious to maintain the deities and the temple property, his remuneration should be distributed proportionately amongst the beneficiary deities. On 3-11-1959 the trust properties vested in the State by virtue of the Bihar Land Reforms Act, 1950. Section 24(3) of the said Act provided that in the case of a charitable or religious trust, without any reservation of pecuniary benefit to any individual, the compensation payable for such vesting would be a perpetual annuity equal to the net income of the trust estate. Accordingly, the net income of the trust estate continued to be paid to the assessee as the sole trustee. The ITO sought to assess the remuneration in the hands of the assessee, being the trustee, in the assessment years 1959-60, 1960-61 and 1961-62. The assessee contended that the same was not assessable in his hands on the grounds, viz., ( i) that he had relinquished his right to receive remuneration by the deed dated 5-10-1950; and (ii) that, after vesting of the properties in the State, only net income was being received which did not admit of further deduction towards trustee's remuneration. Relying on the Tribunal's decision for…

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