Trust income with indeterminate beneficiaries and shares attracts maximum-rate tax under Section 41 proviso.

Trust income not finally disposed of during the accounting year, and retained by trustees pending a contingency or effective appointment, falls within the proviso to Section 41 of the Income-tax Act, 1922 where it is not specifically receivable on behalf of one person or the beneficiaries' shares are indeterminate or unknown. The proviso was treated as covering both uncertainty as to the beneficiary and uncertainty as to the quantum of each share. On that construction, the income was assessable at the maximum rate because the ultimate recipient and corresponding shares could not be identified with certainty.

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Issues: Whether trust income falling within the proviso to Section 41 of the Income-tax Act, 1922 was chargeable to tax at the maximum rate because it was not specifically receivable on behalf of any one person and the individual shares of the beneficiaries were indeterminate or unknown.

Analysis: The trust deed did not finally dispose of the relevant income during the accounting year. The income remained with the trustees and, on the construction of the deed, the ultimate recipient could not be identified with certainty until the contingency in the settlement occurred or an effective appointment was made. The proviso to Section 41 applies where the income is not specifically receivable on behalf of one person or where the individual shares of the persons entitled are indeterminate or unknown. The words were treated conjunctively so that the provision covered both uncertainty as to the beneficiary and uncertainty as to the shares.

Conclusion: The proviso applied and the income was liable to tax at the maximum rate; the answer was in the affirmative.

Ratio Decidendi: Where trust income cannot be attributed to a specific beneficiary with determinate shares, the proviso to Section 41 mandates assessment at the maximum rate.

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