COMMISSIONER OF INCOME TAX Vs. SHETH K M

JUDGEMENT

(1.) THE questions, referred for our consideration at the instance of the Revenue in this reference under section 256(1) of the Income -tax Act, 1961, read thus : '(1) Whether, on the facts and in the circumstances of the case, the capital gain of Rs. 44,726 realised on sale of 1,500 shares of Shree Changdeo Sugar Mills Ltd. is includible in the total income of the Assesses -settler for the assessment year 1965 -66 in terms of the provisions of section 64(v) of the Income -tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, 3,000 shares of Great Eastern Shipping Co. Ltd., settled upon trust by the assessee for the benefit of minor son, Ravi, vide deed dated March 13, 1964, could be said to have been transferred by the assessee to the trustees for adequate consideration ? (3) Whether, on the facts and in the circumstances of the case, the dividend income in respect of the above 3,000 shares of Great Eastern Shipping Co. Ltd. is includible in the total income of the assessee -settler for the assessment year 1965 -66 in terms of the provisions of section 64(v) of the Income -tax Act, 1961 ?'

(2.) COUNSEL are agreed that the second question must be answered in the negative and in favour of the Revenue in view of the decision of this court in Shardaben Jayantilal Mulji v. CWT : [1977]106ITR667(Bom) . Counsel are also agreed that the third question must be answered in the affirmative and in favour of the Revenue in view of the decision of this court in K. M. Shethy v. CIT/CWT : [1977]107ITR45(Bom) .

(3.) THE assessee is an individual. The assessment year concerned is 1965 -66, the relevant year of account having ended on March 31, 1965. By a deed of trust dated March 30, 1960, the assessee settled upon trust 1,500 equity shares of the Shree Changdeo Sugar Mills Ltd. The trust was created for the benefit of the assessee's minor son, Bharat. The deed of trust recorded that the assessee was under a legal obligation to provide for the food, clothing, residence, education, medical treatment and marriage expenses of Bharat; that with a view to absolve himself of his legal obligations, he had requested the trustees to take these obligations upon themselves; and that the trustees having agreed, in consideration of such agreement, the trust was created to provide for the satisfaction of the obligations to Bharat. Upon Bharat attaining the age of 21 years, the trustees were required by the deed to hand over the corpus of the trust to him. The shares were sold during the year of account ended on March 31, 1965, and a capital gain of Rs. 44,726 resulted.