Law:

Section:

Income-tax----Trust--income of beneficiary assessed in hands of beneficiary--Quantum of income does not amount to actually paid to beneficiary, but real income received by Trust on behalf of beneficiary after permissible deductions under Income-tax Act. Where part of the amounts borrowed by the assessee were utilized for personal expenses, to that extent, the borrowings were not referable to investments, and interest paid on the borrowings to that extent was not admissible as a deduction in computing the income of the assessee under the head "Income from other sources". (b) Income-tax-- ---Income from other sources--Deductions--Interest on borrowings--Not allow able as deduction to the extent borrowings referable to personal expenses. What is assessable in the hands of the beneficiary of a trust is the income of the trust received by it on behalf of the beneficiary. What the trustee receives as the income pertaining to the beneficiary is received by him under an obligation to pass .on that income to the beneficiary. However, in most cases, administration charges and expenses have to be met out of the trust's income and it is only the net income, which reaches the beneficiary. If the income had passed directly to the beneficiary and not under the trust through a trustee, the beneficiary would have equally to meet those outgoings, leaving a net income in his hands, which for the purposes of the Income-tax Act would have been computed after reducing the gross income by the deductions admissible under the Act. It is not the income shown in the books of account of the trust as actually paid to the beneficiary after deduction of the outgoings from the income received in the hands of the trust, but the real income of the trust that has to be included in the total income of the beneficiary after taking into consideration the different items of permissible deductions under the Act in relation to that income. Padmavathi Jaikrishna v. Addl. C.I.T. (1987) 166 I T R 176 (SC) fol. Padmavathi Jaykrishna v. C.I.T. (1975) 1011 T R 153 (Guj.) ref. JUDGMENT R.S. PATHAK C.J.--The appellant is an assessee who derives income from various sources, including income from the Shrimati…

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