Law:

Section:

Section 256 of the Income-tax Act, 1961 - High Court - Reference to - Assessment year 1970-71 - Assessee trust was created by trust deed dated 20-5-1943 for benefit of family members of settlor - Certain shares of company 'C' were donated by company 'U' to assessee - Subsequently, some shares of other companies were received by way of dividend from company 'C' - In 1964 another trust 'J' was created and assessee transferred all shares of company 'C' to that trust after obtaining consent of settlor and company 'U' - ITO held that transfer of shares by assessee to trust 'J' was in contravention of provisions of section 11 of Indian Trust Act, 1882 and trustees had no power to gift or alienate any portion of property of assessee trust in terms of settlement deed - Tribunal held transfer of said shares void for more than one reason - Tribunal referred some question on application filed under section 256(1) except that consent of all major beneficiaries of assessee was not obtained before making transfer of said shares and that basis, direction and purposes for which shares in company 'C' were transferred by company 'U' had not proved - Whether questions of law did arise out of order passed by Tribunal - Held, yes FACTS The assessee trust was created by a registered trust deed dated 20-5-1943 for the up, keep of the properties and maintenance of the male descendants of the family of the settlor. Subsequently company 'U' donated certain shares of company 'C' to the assessee trust. Some shares of other companies were also received by way of dividends from company 'C' by the assessee trust. In 1964, trust 'J' was created and the assessee transferred all the shares the of company 'C' held by it to 'J'. The said transfer of the shares was made after receiving the consent of the settlor and the 'U' company. During the course of the assessment proceedings, ITO discovered that the trustees of the assessee had gifted the aforesaid shares to the trust 'J' on 30-3-1964. He was of the view that the transfer of the shares made by the assessee in favour of trust 'J' was in contravention of the provisions of section 11 of the Indian Trusts Act, 1882, and that the trustees did not…

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