Law:

Section:

Section 4 of the Income-tax Act, 1961 - Individual - Assessable as - Assessment years 1965-66 to 1971-72 - Deceased, settler, executed a trust deed on 12-8-1957 by transferring shares for benefit of dependants and khanazads - Settler had an intention of creating another trust for benefit of some of Khanazads that were left out at time of creation of earlier trust - That trust was formed on 12-6-1961 by transferring shares worth Rs. 23.5 lakhs and that amount formed part and parcel of earlier trust-ITO took view that there was no transfer of ownership of funds in 1961 as deceased Nizam had nowhere listed out beneficiaries therefore, he held that corpus of Rs. 23.5 lakhs and income therefrom was to be excluded from wealth-tax and income-tax assessment of trust and should be considered in personal assessment of owner, i.e., deceased - On appeal, the AAC upheld order of ITO - On further appeal, Tribunal observed that deceased wanted to treat a mount pertaining to two trusts as forming part of a single trust so that all beneficiaries would be getting amounts mentioned in lists without any detriment to parties, thus, it held that there was a valid trust created by deceased and that trust formed part of earlier trust - Whether since settler was treating original corpus as well as corpus to be added later on for benefit of remaining khanazads as a single trust, trustees for earlier trust would continue to be trustees for later trust created in June, 1961 - Held, yes - Whether having found that corpus in original trust would not be sufficient to meet payments and that there were some more khanazads who were not included as beneficiaries in original trust, deceased added a corpus of Rs. 23.5 lakhs as a consequence of that original trustees continued to be trustees for that later trust and all terms and condition incorporated in original trust equally applied to later trust - Held, yes - Whether in result, valid trust was created by deceased in June, 1961 - Held, yes - Whether, therefore, income from shares worth Rs. 23.5 lakhs was not to be included in personal assessment of deceased - Settlor of trust (i.e., assessee) - Held, yes FACTS The deceased settlor executed a…

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