Trust income assessable at maximum rate where beneficiaries' shares were not finally determinate or known

Trust income was treated as assessable at the maximum rate where the beneficiaries' shares were not finally determinate or known. The court construed "shares" in the proviso to mean a specific and definite portion of income, and held that fixed sums under the deed did not prevent uncertainty because the reserve fund and discretionary use of surplus income could vary the amounts payable from year to year. The case therefore fell within the second limb of the proviso to section 41(1) of the Income-tax Act, 1922, and the assessment at the maximum rate was upheld against the assessee.

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Issues: Whether the income received by trustees under the deed of endowment was assessable at the maximum rate under the first proviso to section 41(1) of the Income-tax Act, 1922 because the individual shares of the beneficiaries were indeterminate or unknown.

Analysis: The expression "shares" in the proviso was construed to mean a specific and definite part or portion of the income. On the terms of the deed, the beneficiaries were allotted fixed sums, but the reserve fund and the discretionary application of surplus income for additional religious purposes could make the amounts payable variable from year to year. As a result, the shares could not be said to be finally determinate or known, and the case fell within the second limb of the proviso.

Conclusion: The income was assessable at the maximum rate under the first proviso to section 41(1), and the question was answered in the affirmative against the assessee.

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