COMMISSIONER OF INCOME TAX Vs. V SRINIVASAN

JUDGEMENT

(1.) ALL these references are at the instance of the Revenue. The assessment years are 1985-86, 1986-87, 1990-91 and 1989-90.

(2.) THE assessee, Dr. V. Srinivasan, is a practising doctor of medicine at Tiruchirapalli. He was the owner of a plot at Thillainagar, Tiruchirapalli. On September 20, 1980, his father-in-law, Sri L. Rangamani, created a trust, viz., Ayyappa Family Trust, with a corpus of Rs. 10,000 for the benefit of his two grandchildren, S. Venkatakrishnan and S. Rukmani. THEir parents, Mrs. Usha Srinivasan and Dr. V. Srinivasan were made trustees. THE trust entered into an agreement with the assessee on April 13, 1981, by which the assessee permitted the trust to construct a building on the land belonging to the assessee. In consideration of this permission, the trust allowed the assessee to conduct his clinic, and to use the facilities available at the nursing home for his own patients. This agreement also recorded the willingness of the assessee to sell the land to the trust for Rs. 55,000 if the transaction is concluded within three years. THE land was not sold. Subsequently, the board of trustees resolved to let out the premises to the assessee on a monthly rent of Rs. 15,000. On April 1, 1984, a lease deed was also executed between the trust, viz., Ayyappa Family Trust, and the assessee.

(3.) THE Wealth-tax Officer, City Ward 1(4), Trichy, by order dated March 26, 1983, for the assessment year 1980-81 assessed the beneficiary S. Rukmani as an individual and assessed her to wealth-tax. By another order of the same date, and for the same assessment year, the other beneficiary S. Venkatakrishnan has also been assessed to wealth-tax. That is, both the beneficiaries, viz., S. Venkatakrishnan and S. Rukmani, were assessed to wealth-tax as beneficiaries of the trust. THErefore, the trust has been recognised as a valid trust; the properties have been recognised as trust properties; Section 164 was held not applicable for the purpose of levying income-tax on the trust and tax was levied only in the hands of the beneficiaries.