COMMISSIONER OF INCOME TAX Vs. SITALAKSHMI MINOR

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following question for the opinion of this court under section 256(2) of the Income-tax Act, 1961:

(2.) IN the assessment year 1977-78, Shri R. V. Bhuvanesh created a trust known as "Baby Sitalakshmi Trust" by a deed dated February 5, 1976, for the benefit of the assessee-minor. According to the trust deed, the settlor settled a sum of Rs. 3,000 in the trust for the benefit of his minor niece, Sitalakshmi. The assessee objected to the inclusion of the trust income in her hands on the ground that according to clauses 11 and 12 of the trust deed, the corpus and income of the trust were to be accumulated and paid over to Sitalakshmi, the assessee-beneficiary only on her attaining the age of 18 years and in case she dies before attaining the age of 18 years, the corpus and income will be handed over to her legal heirs. According to the assessee, since she did not attain the age of 18 years during the relevant accounting year ended on March 31, 1977, the trust income could not be taxed in her hands. IN support of this contention reliance was placed upon the decision of the Bombay High Court in the case of Yogindraprasad N. Mafatlal v. CIT [1977] 109 ITR 602. However, the INcome-tax Officer held that the income of Rs. 60,921 arising to the trust should be included in the assessee's total income. On appeal, the Commissioner of INcome-tax (Appeals) accepted the contention put forward by the assessee and deleted the addition. On further appeal, the Tribunal upheld the order passed by the Commissioner of INcome-tax (Appeals).