Law:

Section:

Section 160 of the Income-tax Act, 1961 - Representative assessees - M created a trust by transferring certain shares to trust fund for benefit of B - Trust deed declared that until B's death, divorce or remarriage whichever event took place earlier, B was entitled to receive Rs. 1,500 per month out of income of share fund and balance share income was to be accumulated - It was also provided that trustees at their absolute discretion could also pay or spend out of aforesaid accumulation any sum/fund for any unforeseen emergency or other necessary expenses of B - Whether it could be said that B was entitled to entire trust income and in any given year, entire such income would be exigible to tax in hands of trustees as representative assessees in terms of section 160(1)(iv) - Held, no - Whether for assessment years 1977-78 and 1978-79, in addition to Rs. 1,500 per month, amount spent on B for unforeseen emergency and necessary expenses out of aforesaid accumulated share fund was exigible to tax under section 160(1)(iv) in hands of trustees as representa-tive assessees - Held, yes Facts One M created a trust by transferring certain shares to the trust fund for B's benefit. The trust deed declared that until B's death or divorce or remarriage, whichever event took place first, B would be paid a sum of Rs. 1,500 per month out of the income of the share fund and the balance of the income was to be accumulated. However, the trustees, who were the representative assessees, were vested with absolute discretion to pay or spend out of the aforesaid accumulations for any unforeseen emergency or other necessary expenses of B. For the assessment years 1977-78 and 1978-79, the representative assessees were assessed to tax by the ITO on the entire income from the share fund under section 160(1)(iv). On second appeal, the Tribunal held that excepting the amount of Rs. 1,500 per month which B was entitled to receive, the other income received from the share fund was not exigible to tax. On reference: Held In the instant case, the beneficiary of the trust was entitled to receive any sums granted by the trustees to meet the unforeseen emergency or other necessary expenses apart…

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