COMMISSIONER OF INCOME TAX Vs. SEEMATTI TRUST

JUDGEMENT

(1.) THE following question has been, at the instance of the Revenue, referred to us by the Income-tax Appellate Tribunal, Cochin Bench :

(2.) THE assessment year is 1972-73. Three persons, Shri Veeriah Reddiar, Shri V. Ramachandran and Shri T. Rama Murthy, jointly filed a return of income derived from business claiming that they received it as trustees appointed under a written instrument. Accordingly, they claimed the benefit of Section 161 of the I.T. Act, 1961 (the "Act"), for being assessed as representative assessees. This claim was disallowed by the ITO on the ground that no valid trust existed at the relevant time to justify the claim. On appeal, the contention of the assessees was accepted by the AAC to the extent of a sum of Rs. 70,000 which was held to be the sole trust property. In respect of the other assets claimed to be trust properties, the AAC held that no trust was created in regard to them. This decision was accepted by the assessees, and they, in fact, filed a cross-objection before the Tribunal supporting it. THE Revenue appealed to the Tribunal challenging the finding of the AAC as to the existence of the trust. THE Tribunal held that a valid trust had come into existence on the execution of an instrument, but the trust properties consisted of the assets enumerated in the inventories mentioned under the instrument. THE Tribunal further held that the sum of Rs. 70,000 found by the AAC to be trust property did not partake of the character of trust property.

(3.) THE Tribunal found that this acknowledgment was made on May 11, 1971, i.e., a day before the instrument was executed. THEse inventories relate to the assets of four firms, namely, Gouri Mahal, Alleppey, Seematti Stores, Ernakulam, Seematti Stores, Thiruvalla and Seematti Stores, Pathanamthitta. In respect of each inventory, Reddiar acknowledged receipt in identical terms as stated above.