Indeterminate beneficiary shares made the trust discretionary; a later rectification deed could not retrospectively cure the original omission.

Under Explanation 1(ii) to Section 164 of the Income-tax Act, a trust is treated as discretionary where the beneficiaries' shares in income or corpus are not expressly stated in the trust deed and cannot be ascertained from the instrument on the date of settlement. Here, although the original deed named the beneficiaries, it did not specify their individual shares, so the shares were indeterminate for the relevant assessment years. A later rectification deed executed after those years could not operate retrospectively to cure the omission or alter the trust's character for the earlier periods. The trust was therefore treated as discretionary for those assessment years.

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Issues: Whether the trust was a discretionary trust for the relevant assessment years, and whether the rectification deed executed later could cure the omission in the original trust deed and relate back to the date of settlement.

Analysis: Under Explanation 1(ii) to Section 164 of the Income-tax Act, 1961, the shares of beneficiaries are treated as indeterminate or unknown unless they are expressly stated in the trust instrument and are ascertainable on the date of the deed. The original trust deed named the beneficiaries but did not specify their individual shares in income or corpus, and those shares could not be ascertained from the instrument itself. The later rectification deed was executed after the relevant assessment years and could not operate retrospectively to alter the character of the trust for those years.

Conclusion: The trust was rightly treated as a discretionary trust for the assessment years in question, and the rectification deed did not relate back or cure the defect in the original trust deed.

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