COMMISSIONER OF INCOME TAX Vs. ARVIND H DALAL

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal has referred the following question of law for opinion of this Court in respect of asst. yrs. 1979-80 and 1980-81. This is by way of two separate references referred to hereinabove. Since common question of law is involved in both these references, these references are disposed of by this common order. The question of law referred to this Court under S. 256(1) of the IT Act, 1961, is as under:

(2.) THE assessee is an individual. By a deed of settlement dt. 23rd March, 1978, the assessee settled certain shares and cash totally valued at about Rs. 98,000 on a trust for the benefit of the members of the HUF of the settlor-the members being the assessee, his wife, son and a daughter, all of whom were major. The trustees were expected to hand over the net income of the trust to the Karta of the HUF for the purpose of maintenance, education and for any other purpose which the trustees deemed fit. After considering the provisions of the trust deed, the AO held that the aforesaid settlement dt. 23rd March, 1978, of the property on trust amounted to an indirect transfer of the property by the assessee to his HUF without consideration through the media of a trust. The AO applied S. 64(2) of the Act and clubbed the income arising to the HUF as a result of the property settled on the trust in the hand of the assessee. On appeal by the assessee, the AAC however, took a view that provisions of S. 64(2) of the Act were not attracted. He, however, came to the conclusion that S. 64(1)(vii) of the Act applied to the facts of the case and, accordingly, he upheld the inclusion of the income of the trust in the hands of the assessee. On further appeal, the Tribunal accepted the plea of the assessee and came to the conclusion that beneficiaries of the trust were the members of the HUF of the settlor; that the settlement has specified the names of the members of the family being the assessee himself, his wife and two children; that the transfer was for the benefit of the settlor's family and such transfer is not affected by the provisions of S. 64 (1)(vii) of the Act. In the circumstances, on the application of the CIT, the Tribunal referred the above question of law under S. 256(1) of the Act to this Court. As stated hereinabove, the facts of the above two references are identical. Accordingly, both these references are identical. Accordingly, both these references are disposed of by this common order.

(3.) MR . Desai further contended that on bare perusal of the trust deed, it is clear that there was transfer of assets under the deed of trust for the benefit of the settlor's spouse (that is the wife of the assessee in the present case). In the circumstances, it was contended that the settlor has rightly been taxed in respect of the income arising under the trust deed. He, accordingly, submitted that S. 64(1)(vii) was applicable to the present case.