COMMISSIONER OF INCOME TAX Vs. MANHARLAL GIRDHARLAL DOSHIT

JUDGEMENT

(1.) THE Tribunal, Ahmedabad, has referred the following two questions for the opinion of this Court under the provisions of S. 256(1) of the IT Act, 1961.

(2.) ON 27th Dec., 1976 the assessee executed a deed of settlement by which he irrevocably assigned to the trustees, his right to receive, recover and realise from the said firm, his share according to the various partnership deeds which were executed from time to time, and all the recoveries for the relevant period already made and not accounted for by the firm prior to 31st Dec., 1995 and thereafter to be made by the firm and all the right, title, interest, claim and demand whatsoever of the assessee. The trust so formed was named as "M.G. Doshit Family Trust" and the three trustees declared that they shall hold the trust property Upon Trust as envisaged in the deed. This arrangement was made in consideration of the love and affection of the assessee towards his son and daughter. The trustees were entitled to recover and realise the trust property from the firm every year or at such periodical intervals within a year as may be agreed upon from time to time by and between the trustees and the said firm. As provided under cl. 17 of the deed of settlement, no benefit whatsoever was to be reverted to the settlor directly or indirectly. In the calendar year 1976, an amount of Rs. 49,890 became payable by the firm towards the share of the settlor assessee, who, in view of the settlement, did not include the said amount in his total income, but claimed in the return that the amount was settled on trust and as such was not liable to be assessed in his hands. Similar stand was taken by the assessee in respect of the amount of Rs. 21,998 which had accrued for the calendar year 1977. It appears that GT returns were filed in this regard by the assessee. The ITO rejected the contention raised by the assessee in respect of these two years on the ground that a decision on which reliance was placed by the assessee of the Tribunal in a similar case of Mr. Kanchanlal L. Talsania was not accepted by the Department and further that the amounts in question had accrued to the assessee and by settling the amount on the trust, the assessee had only applied his income after its accrual and, therefore, the exclusion of this income from the assessment which was to be made in the hands of the assessee, was not justified.

(3.) THE Department, feeling aggrieved by the decision in appeal, approached the Tribunal and the Tribunal taking note of the fact that in a similar case of another partner of the same firm which came to be decided by the Bombay High Court [CIT vs. Kanchanlal L. Talsania (1982) 27 CTR (Bom) 215 : (1982) 8 Taxman 1 (Bom) : TC 38R.725], similar contentions were accepted and holding that the amount in question was not determined and could be said to have accrued only when the accounts of the firm were settled which was long after the assessee had retired from the firm and that the assessee had already assigned his right or source of income, dismissed the appeal of the Department.