Law:

Section:

I Section 164, read with section 166, of the Income-tax Act, 1961 - Assessment year 1969-70 - Whether provisions of section 164 would not be attracted, if income or any part thereof is specifically receivable by trustees on behalf of or for benefit of any one person - Held, yes - Whether where trustees were to hold corpus of trust for sole beneficiary, and in absence of said beneficiary who had been specified in trust deed, it could not be said that capital accretion to such corpus would merely because it may be income within definition of word "income" under Act, be virtually an income received by trustees specifically on behalf of or for benefit of said sole beneficiary - Held, yes II Section 166 of the Income-tax Act, 1961 - Representative assessees - Direct assessment or recovery not barred - Assessment year 1969-70 - Whether where amounts were received by sole beneficiary from a discretionary trust, said amount could not be taxed in hands of said beneficiary under section 166 - Held, yes FACTS-I The assessee was the sole beneficiary of certain trust. In the said trust there were some sale of shares which resulted in capital gains. It was contended before the ITO, that the capital gains should be assessed in the hands of the trust and not in the hands of the assessee. The ITO, on reading the relevant clauses in the trust deed in question, held that the assessee was entitled to the income from the trust funds for her life. He further found that the trust income could either be given to the assessee or to her mother. The power contained in clause 2(b) of the said trust deed, empowering the trustees to spend a portion of the corpus of the fund for maintenance, support and education of the assessee weighed with the ITO, who also noted that the assessee had shown the income from the trust as her own income under section 166, but she had not taken into account the capital gains on sale of the shares on the ground that the corpus of the trust funds belonged to the trust since she was entitled only to the income of the trust. The ITO, however, was not impressed by the claim made by the assessee that the capital gains should be taxed in the hands of the trust. He,…

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