L GOUTHAMCHAND Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee in T. C. Nos. 114 to 119 of 1979, under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the following question of law in respect of the assessment years 1969-70 to 1974-75, has been referred for the opinion of this court.

(2.) THE assessee in T. C. Nos. 108 to 112 of 1979, L. Gouthamchand, had a 10/34ths and 15/75ths share, respectively, in the two trusts. THE first trust was created for the benefit of the prospective wife of the minor son of Lalchand, viz., Suresh. Likewise, the second trust was created for the benefit of the would-be wife of Ashok, another minor son of Lalchand. THE provision was made in the first trust deed that if Suresh did not get married before attaining the age of 30, or died without marrying, the corpus of the trust as well as the accretions should be conveyed to the other son, Ashok. In the second trust deed also, a similar provision was made that if Ashok did not get married before attaining the age of 30 or died without marrying, the amounts set apart under the trust with the accumulated income should be conveyed to the other son, Suresh. In the course of the assessment proceedings for the years in question, the Income-tax Officer assessed the share income of the assessees from the trust funds in their hands on the ground that the trusts depended upon an uncertain event, viz., the marriage of Suresh and Ashok and that the beneficiaries were also uncertain. On appeal by the assessees, the Appellate Assistant Commissioner, purporting to follow the decision of the Tribunal in 1. T. A. Nos. 261 to 263/Mds//1974-75 dated April 28, 1976 (a reference from which was dealt with and answered by this court in the decision reported in CIT v. P. Bhandari 1984 (147) ITR 500, 1984 (17) TAXMAN 44 (Mad)), held that the trusts were valid and that the share income from both the trusts cannot be assessed in the hands of the assessees. On further appeals before the Tribunal, at the instance of the Revenue, it was contended on behalf of the Revenue on the strength of another decision of the Tribunal in 1. T. A. Nos. 1617, 1618 and 2233/Mds/1976-77 dated November 19, 1977, that the share income from the two trusts should be assessed in the hands of the assessee.

(3.) THE Income-tax Officer subjected to tax the proportionate share income of the trust in the hands of the assessee on the ground that the trusts were invalid, but the Appellate Assistant Commissioner, on appeal, held that the trusts in favour of the prospective daughters-in-law were valid. THE Tribunal took the view that the trusts were valid and, consequently, the share income of the assessee in the trusts could not be included in the income of the assessee. While dealing with the reference in CIT v. P. Bhandari 1984 (47) ITR 500 (Mad), it was pointed out that to constitute a valid trust, the author of the trust must indicate with reasonable certainty his intention to create trust, the purpose of the trust, the beneficiary, the trust property and also the transfer of the property to that trust and that though it is not possible to say at the stage of the execution of the trust as to who is the actual person who is to be benefited by the trust, so long as the trust deed gives the description of the person to be benefited, the beneficiary cannot be said to be uncertain or that the trust would be otherwise invalid. It was also laid down that the initial object of the trust is to benefit the would-be daughter-in-law through the second son and if that failed for the reason that he did not marry during his lifetime, the other beneficiary would be the would-be daughter-in-law through the first son and only if those clauses failed, then, the question would arise whether the ultimate object was either vague or indefinite and that with reference to the beneficiaries, who are either named or can be ascertained, the trust cannot be said to be invalid. In this case also, under clause 6 of the deed of trust, referred to earlier, provision is made to the effect that if Suresh did not get married before attaining the age of 30 or died without marrying, then, the trustees were directed to convey the capital amount as well as the accretions to the other son, Sri Ashok. Similarly, in the other trust deed relating to "Ashok Trust" executed by the wife of the assessee in T. C. Nos. 114 to 119 of 1979, similar provision has been made to the effect that if Ashok did not get married before attaining the age of 30 or died without marrying, the amounts set apart together with the accretions should be conveyed to the other son, Suresh. It is seen that in clause 5 of the respective trust deeds, the beneficiary has been indicated with certainty, though the identity could get fixed only on the marriage of Suresh and Ashok taking place, in which case, their respective wives would be entitled to the trust funds with the accretions.