Will-created trusts and section 164 relief: later asset transfers cannot turn multiple trusts into a single qualifying trust.

Section 164(1), proviso (ii) applied only where income was receivable under a trust declared by will and that was the sole trust so declared by the testator. Because the will in question created three trusts, the assessee-trust could not invoke the proviso merely because trustees and beneficiaries later agreed to transfer assets from two trusts to one. The statutory position had to be tested by the trusts created in the will, not by subsequent arrangements of convenience. The assessee was therefore not entitled to the benefit of the proviso, and the answer was against the assessee and in favour of the Revenue.

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Issues: Whether the assessee-trust could claim the benefit of section 164(1), proviso (ii) of the Income-tax Act, 1961, when the will had created more than one trust and the trusts later arranged for transfer of assets to one trust.

Analysis: The relevant proviso applied only where the income was receivable under a trust declared by a person by will and that trust was the only trust so declared by him. On the admitted facts, the will created three trusts. Subsequent agreement among trustees and beneficiaries to transfer assets from two trusts to the third could not alter the fact that the testator had declared more than one trust. The provision had to be applied on the basis of the trust created by the will, not on later acts of convenience by the parties.

Conclusion: The assessee was not entitled to the benefit of section 164(1), proviso (ii); the answer was against the assessee and in favour of the Revenue.

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