COMMISSIONER OF INCOME TAX Vs. SRICHAND T LULLA

JUDGEMENT

(1.) The facts leading to this consolidated reference are as follows :

(2.) Two trusts were created on 25/04/1977, by Smt. Leela Gobindram Vazir for the benefit of the minor sons of Sri Srichand T. Lulla and Sri Ramchand T. Lulla, constituting them as the trustees. Similarly, two trusts were created on 1/04/1978, by Smt. Lakshanbai, one for the benefit of the two other minor children of Sri Srichand Lulla, and the other for the benefit of two other minor children of Sri Ramchand T. Lulla, constituting them as trustees. The trustees had invested the amounts toward capital in two firms, Messrs. Sri Ram Sons and Messrs. Amar Sons, the share of income from which worked out to Rs. 14,379 and Rs. 5,724, respectively, in the previous year relevant to the assessment year 1980-81. The Income-tax Officer sought to add these amounts to the total income of the father of the minors, the assessees before us, under section 64(1) (iii) read with Explanation 2A thereto of the Income-tax Act, 1961. The Appellate Tribunal considered clause 4 of the trust deeds, which is as follows :

(3.) The Tribunal came to the conclusion that under the terms of this clause, the trustees were to accumulate the income, with the consequence that this income did not accrue to the benefit of the minor children drinking the accounting year. The Appellate Tribunal accordingly found that there was no benefit derived by the minor children inasmuch as there was no application of the income for their benefit during the current year and the said income could not, therefore, be aggregated under section 64(1) (iii) of the Act. At the instance of the Appellate Tribunal, the following questions were referred :