Indeterminate trust shares trigger section 164 taxation despite low income, and trustees cannot rewrite the original settlement.

Where a trust deed leaves beneficiaries' shares indeterminate or unknown, section 164(1) of the Income-tax Act applies even if the trust income is below the stated monetary threshold, because the statutory condition turns on the nature of the beneficial interest, not the size of the income. A supplementary deed executed by trustees cannot validly alter the original settlement or confine the beneficiaries to named persons unless the trust instrument or law gives that power; trustees must administer the trust according to its original terms. On the original deed, the beneficiaries' shares were not fixed with certainty, so the trust fell within section 164(1).

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Issues: (i) Whether the trust income, though below Rs. 5,000 in the relevant assessment years, was liable to tax under section 164(1) of the Income-tax Act, 1961 and the corresponding Finance Act provisions. (ii) Whether the supplementary deed executed by the trustees was valid and effective to alter the original trust and make the beneficiaries' shares determinate. (iii) Whether the original trust deed made the beneficiaries' shares indeterminate and unknown so as to attract section 164(1) of the Income-tax Act, 1961.

Issue (i): Whether the trust income, though below Rs. 5,000 in the relevant assessment years, was liable to tax under section 164(1) of the Income-tax Act, 1961 and the corresponding Finance Act provisions.

Analysis: Section 164(1) authorises tax to be charged, where beneficiaries' shares are indeterminate or unknown, either as if the income were that of an association of persons or at sixty-five per cent, whichever is more beneficial to the revenue. The income being below Rs. 5,000 did not exclude the operation of that provision once the statutory conditions were satisfied.

Conclusion: The income was liable to tax notwithstanding that it was below Rs. 5,000, and the question was answered against the assessee.

Issue (ii): Whether the supplementary deed executed by the trustees was valid and effective to alter the original trust and make the beneficiaries' shares determinate.

Analysis: The original trust was created for the benefit of all the issues of Smt. Sumitra Devi, and the trustees were bound to carry out the settlor's directions. In the absence of authority in the original deed or any legal power to vary the settled terms, the trustees could not restrict the beneficiaries to only two named persons by a later supplementary deed. Under the law of trust, trustees must fulfil the trust according to its original purpose.

Conclusion: The supplementary deed was ineffective, and this issue was answered against the assessee.

Issue (iii): Whether the original trust deed made the beneficiaries' shares indeterminate and unknown so as to attract section 164(1) of the Income-tax Act, 1961.

Analysis: On the terms of the original deed, the beneficiaries were not fixed with certainty and their individual shares were not specified. The fact that the beneficiaries could be identified in a particular assessment year did not make the shares determinate. The cited Calcutta decisions did not assist the assessee on the facts of this trust.

Conclusion: The beneficiaries' shares were indeterminate and unknown, and this issue was answered against the assessee.

Final Conclusion: The reference was disposed of by holding that the trust income was taxable under section 164(1), the supplementary deed could not alter the original settlement, and the trust fell within the statutory rule applicable to indeterminate beneficiaries' shares.

Ratio Decidendi: Where a trust deed creates a discretionary or otherwise indeterminate beneficial interest, trustees cannot unilaterally vary the settled beneficiaries by a subsequent deed, and section 164(1) applies notwithstanding that the income in a year is small if the statutory conditions for indeterminate shares are satisfied.

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