Law: Income Tax Act, 1922

Section:

Income-tax----Representative assessee---Trustee---Creation of trust by assessee for benefit of his minor son---Assessee and his wife appointed trustees---Transfer of business held by assessee as an individual to trust represented by his wife for consideration---Transfer was valid---Income from business which had been transferred was not assessable in hands of assessee---Indian Income Tax Act, 1961. The assessee created a trust for the benefit of his minor son. The trustees were the assessee and his wife. The beneficiary was possessed of funds of his own and the creation of the trust was with a desire that the funds of the beneficiary should be properly and profitably managed. The minor was admitted to the benefits, of a partnership. In that process, there was a credit entry of Rs.3,31,469, dated March 31, 1979, in the name of the minor son. On April 2, 1979, there was an agreement between the assessee in his capacity as the individual proprietor of a printing business V and the trust, for the sale of the printing business V to the trust in its entirety for a consideration of Rs.3,79,810.66. The trust was represented by the assessees wife. The Income-tax Officer rejected the assessees claim that the income from printing business was not assessable in his hands. However, the Tribunal found that the trust had been validly and legally created. The Tribunal also recorded that it was a genuine trust. The Tribunal observed that the transaction entered into on April 2, 1979, was a purchase of the business for the benefit of the minor and the purchase was out of the funds of the minor. The Tribunal held that the income from printing business V was not assessable in the hands of the assessee. On a reference: Held, (i) that on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that there was a valid trust. (ii) That the transaction of sale was clearly between the vendor and vendee where the vendor was an individual and the vendee was a trust and in the transaction the trust was represented by the remaining trustee. The document showed consideration. Even under the Transfer of Property Act there can be a transfer by a…

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