Law: Income Tax Act, 1961

Section: 164

Income-tax----Trust---Representative assessee--Trust for benefit of "would be wife" of minor--- "Would be wife" not in existence when trust was created---No certainty that such marriage would ever take place to fulfil object of trust---Trust not for benefit of beneficiary who is known and determinate---Trust to be assessed at maximum marginal rate and not at the rate applicable to an AOP---Indian Income Tax Act, 1961, S. 164(1), (3) & Expln. 1. The trust deed of the assessee-trust showed that KM settled Rs.5,000 on the "would be wife" of the minor M. KM, the settlor, had made himself trustee of the trust jointly with NKM. The source of income of the trust was share income from a -firm and income from share dealing. For the assessment year 1981-82, the Income-tax Officer found that the beneficiary was not definite and that the trust had been formed for the benefit of some unknown person which cannot be determined at any length of time, that the trust was a discretionary trust, that section 164(1) of the Income Tax Act, 1961, was applicable to the case and that, therefore, the assessee had to pay tax at the maximum marginal rate as a representative assessee. On appeal, the Appellate Assistant Commissioner found that clause 5 of the trust deed expressly stated the share of the sole beneficiary and hence there was no violation by the assessee of the Explanation to section 164, that the trust was to be assessed in the status of an association of persons and the tax would be charged at the rate applicable to an association of persons. On further appeal, the Tribunal held that so long as the trust deed gave the description of the person who was to be benefited, the beneficiary could not be said to be uncertain merely because the actual beneficiary could not be known until the marriage of the minor took place, that the clause in the trust deed that the "would be wife" was the sole beneficiary made it clear that not only the beneficiary was certain but the extent of the share in the trust property was also certain and that, therefore, the assessee-trust was to be assessed in the status of an association of persons. On a reference: Held, that in view of the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492