Deferred trust income for a minor, payable only on majority, falls outside clubbing under section 64(1)(iii).

Accumulated trust income payable to a minor only on attaining majority was not treated as income immediately receivable by the minor, so no accrual arose during minority. Applying the existing binding precedent, the Karnataka High Court held that such a deferred benefit falls outside the mischief of section 64(1)(iii) read with Explanation 2A of the Income-tax Act, 1961. On that reasoning, the Tribunal was right in cancelling the section 263 order, and the trust income was not includible in the assessee's income.

---

---

Issues: Whether the Appellate Tribunal was right in cancelling the order passed under section 263 by holding that income from a trust, accumulated for a minor beneficiary to be received on attaining majority, could not be included in the assessee's income under section 64(1)(iii) read with Explanation 2A of the Income-tax Act, 1961.

Analysis: The trust deed required the income to be accumulated and paid over only when the minor attained majority. On that basis, the income was not immediately receivable by the minor and nothing had accrued to the minor during minority. The controlling principle applied was that a deferred benefit which vests only after the beneficiary becomes a major is not a benefit for a minor child within the mischief of section 64(1). The question was treated as covered by the existing binding precedent, which had taken the same view on accumulated trust income and non-applicability of the clubbing provision.

Conclusion: The Tribunal was right in law in cancelling the order under section 263, and the trust income was not includible in the assessee's income under section 64(1)(iii) read with Explanation 2A.

---