Law:

Section:

Section 164 of the Income-tax Act, 1961, read with section 77 of the Indian Trusts Act, 1882 - Trust/trustees - Charge of tax where shares of beneficiaries unknown - Assessment year 1983-84 - Whether where none of beneficiaries of a trust which is not a public trust survives before attaining majority, property or corpus of trust would revert back to settlor or heirs and legal representative of settlor in case settlor is not alive by that time - Held, yes - Assessee-trust was created in favour of two minor girls as beneficiaries - Whether trust could not be said to be invalid merely because settlor had not taken care of eventuality of both beneficiaries dying before attaining majority - Held, yes FACTS The assessee-trust filed its return of income in the status of AOP declaring its total income. The trust was created in favour of two minor girls as beneficiaries. It was provided that on both the minors attaining majority, the trustees should have a right to dissolve the trust. It was also stated that, in the event of one of the minor beneficiaries expiring before attaining majority, the other should become the sole beneficiary. The ITO was of the view that the trust was invalid because the trust deed did not provide for the eventuality of both the minor beneficiaries expiring before attaining majority and, therefore, he held that the entire income should be assessed in the hands of the settlor and as the settlor was reported to have already expired, in the hands of his legal heirs. On appeal, the Commissioner (Appeals) upheld the order of the ITO. On second appeal, the Tribunal held that it could not be said that the trust was invalid for uncertainty. On reference : HELD It was not the case that the beneficiary in the trust deed had not been named. In the event, one of the beneficiaries died before attaining the majority, the other minor girl who was the beneficiary would become the sole beneficiary and absolute owner of the property on attaining of majority. So far as the question of taking care of eventuality in case both the minor girls expired before attaining the majority was concerned, that would not render the trust invalid inasmuch as section 77 of the…

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