2006 (7) TMI 170 - HC - Income Tax

Disputed will: Executor not a trustee for minors. Income-tax Act provisions not applicable.

The High Court held that no trust was established under the disputed will, emphasizing that the executor was acting as an executor of the will, not a ... - Issues:Interpretation of trust creation under a will for minors and its tax implications under section 64(1)(iii) of the Income-tax Act.Detailed Analysis:The case involved a dispute regarding the tax liability arising from a will executed by an individual in favor of minors. The will, executed by the mother of the assessee, bequeathed certain assets to minors, designating the assessee's brother's wife as the executor. The will stipulated that the executor would join the partnership and manage the income for the minors. The Assessing Officer held the assessee accountable for the trust created in favor of the minors. However, the Income-tax Appellate Tribunal interpreted the provisions of the will and concluded that no trust was actually created, and the executor was merely acting on behalf of the minors based on trust reposed in her by the testator.Upon reviewing the Tribunal's decision and hearing arguments from the Revenue's counsel, the High Court concurred that no trust was established under the disputed will. The Court emphasized that the executor joining the partnership and managing income for the minors did not transform her into a trustee but rather an executor of the will. Consequently, the Court affirmed that the provisions of Explanation 2A to section 64(1)(iii) of the Income-tax Act were not applicable in this scenario. The Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue. As a result, the reference was disposed of with no costs awarded.