Law:

Section:

Section 64 of the Income-tax Act, 1961 - Transfer of assets - For benefit of spouse, etc. - Assessment years 1979-80, 1982-83 and 1983-84 - Assessee and her husband settled certain amount in a trust for benefit of their daughter-in-law and grand-children - While making her assessment, Assessing Officer applied clause (vi) of section 64(1) and added 50 per cent of income of trust to total income of assessee - Whether since transfer of money by settlers was not made directly or indirectly to their daughter-in-law or grand-children, but to a trust for their benefit, clause (vi) of section 64(1) would not be applicable and, therefore, no part of income derived by trust was includible in hands of assessee under section 64(1)(vi) - Held, yes - Whether clause (viii) of section 64(1), which is applicable in case of transfer to a trust or an AOP, has been made effective with effect from 1-4-1985, and, therefore, would not cover relevant assessment years - Held, yes FACTS The assessee and her husband created a private trust and settled certain amount in said trust for the benefit of their daughter-in-law and four grand-children. The Assessing Officer, while making her assessment, held that under the provisions of section 64(1)(vi), 50 per cent of the income from the trust was includible in the total income of the assessee. On appeal, the AAC held that section 64(1)(vi) was not applicable to the facts of the case. The Tribunal upheld the view taken by the AAC holding that the transfer of money by two settlers was not made directly or indirectly to their daughter-in-law or grand-children, but had been made to a trust for their benefit and in such circumstances section 64(1)(vi) would not apply. On the revenue's appeal to the High Court : HELD Clause (vi ) of section 64(1) mentions that in case the assessee has transferred assets to his son's wife, i.e.,daughter-in-law or his/her grand-children directly or indirectly, then income from those assets is to be added to the total income of the assessee. Clause (viii) was inserted by the Taxation Laws (Amendment) Act, 1984 with effect from 1-4-1985 and, therefore, there was no such provision in the concerned assessment years.…

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