Beneficiary surrender of vested trust interest upheld where release merely accelerates successor enjoyment and avoids prohibited transfer.

A beneficiary may relinquish a vested beneficial life interest in trust property during coverture where the settlement uses "without power of anticipation" as a restraint on alienation rather than an absolute bar on surrender. Section 9 of the Indian Trusts Act, 1882 is enabling, and a release deed is valid if it does not amount to a prohibited transfer and merely extinguishes the prior interest. Where the successor interests are already vested and no contrary intention appears in the trust deed, the surrender accelerates their enjoyment. After a valid release, no trust income accrues to the beneficiary and the extinguished life interest cannot be included in her net wealth.

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Issues: (i) Whether the assessee could validly relinquish her beneficial life interest in the trust properties during coverture; (ii) whether the release deed dated 23 August 1969 was valid under the Indian Trusts Act, 1882; (iii) whether the income from the trust was assessable in the assessee's hands after 23 August 1969; and (iv) whether the assessee's life interest in the trust properties could be included in her net wealth for the assessment years 1970-71 to 1973-74.

Issue (i): Whether the assessee could validly relinquish her beneficial life interest in the trust properties during coverture.

Analysis: The restriction expressed as "without power of anticipation during coverture" was construed as a restraint on alienation, not as an absolute prohibition on surrender or self-effacement. A release by a beneficiary in favour of the trustees, where the next takers already had interests under the settlement, did not amount to a transfer in the sense prohibited by the Indian Trusts Act. The doctrine of acceleration applied because the trust deed did not disclose a contrary intention and the subsequent interests were vested rather than contingent.

Conclusion: The assessee had the power to relinquish her beneficial interest during coverture, and the answer is in favour of the assessee.

Issue (ii): Whether the release deed dated 23 August 1969 was valid under the Indian Trusts Act, 1882.

Analysis: Section 9 of the Indian Trusts Act, 1882 was treated as enabling and not disabling. It only recognised a beneficiary's ability to renounce the trust interest and did not exclude the general power of surrender where such surrender did not offend sections 56 and 58. Since the deed did not effect a prohibited transfer and merely brought about extinction of the prior interest, the release was not hit by the statutory restraint.

Conclusion: The release deed was valid in law and the answer is in favour of the assessee.

Issue (iii): Whether the income from the trust was assessable in the assessee's hands after 23 August 1969.

Analysis: Once the assessee validly surrendered her life interest, no income from the trust accrued to her thereafter. The later enjoyment by the successor beneficiaries flowed from the original settlement and the acceleration of their vested interests, not from any transfer by the assessee that could attract section 64 of the Income-tax Act, 1961.

Conclusion: The income from the trust was not assessable in the assessee's hands after 23 August 1969, and the answer is in favour of the assessee.

Issue (iv): Whether the assessee's life interest in the trust properties could be included in her net wealth for the assessment years 1970-71 to 1973-74.

Analysis: After the valid release, the assessee no longer retained any life interest capable of valuation as an asset in her net wealth. The extinguishment of the prior interest meant that nothing remained in her hands for wealth-tax purposes in respect of the trust property.

Conclusion: The assessee's life interest could not be included in her net wealth for the relevant assessment years, and the answer is in favour of the assessee.

Final Conclusion: The trust deed did not bar a valid surrender by the assessee, the release deed was effective, the successor interests were accelerated, and the tax and wealth-tax consequences followed in favour of the assessee.

Ratio Decidendi: A beneficiary's surrender of a prior vested trust interest does not amount to a prohibited transfer where the trust deed shows no contrary intention, the successor interests are already vested, and the act merely accelerates the subsequent enjoyment of the trust property.

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