Perpetual annuity from vested trust property remains income, and trustee remuneration may stay taxable when redirected after accrual.

A perpetual annuity paid by the State under the Bihar Land Reforms Act, 1950 in place of trust property income retains the character of income, because the statutory scheme treats it as a continuation of the trust's net income rather than a capital payment in instalments. The text also states that 15% of net income treated as trustee remuneration remains includible where the deed does not divest the right at source and the amount is only redirected after accrual, not diverted by overriding title; the Act's explanation permits such remuneration within the prescribed ceiling for religious or charitable trusts.

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Issues: (i) Whether the perpetual annuity received from the State Government in respect of trust properties vested under the Bihar Land Reforms Act, 1950 was income. (ii) Whether inclusion of 15% of the net income from the trust properties as the trustee's remuneration was justified.

Issue (i): Whether the perpetual annuity received from the State Government in respect of trust properties vested under the Bihar Land Reforms Act, 1950 was income.

Analysis: The trust properties had vested in the State, but the income arising from those properties continued to flow for the purposes of the trust. Section 24(3) of the Bihar Land Reforms Act, 1950 contemplates payment of compensation to a genuine public religious or charitable trust as a perpetual annuity equal to the net income or the relevant portion of it. The statutory scheme showed that the annuity was a continuation of the income from the trust properties, only the payer having changed from the private holder to the State. The amount therefore retained the character of income and was not a capital payment in instalments.

Conclusion: The annuity was income, and the finding was against the assessee.

Issue (ii): Whether inclusion of 15% of the net income from the trust properties as the trustee's remuneration was justified.

Analysis: The deed of relinquishment did not divest the assessee of the remuneration at its source. On its true construction, the amount was still treated as the trustee's remuneration and was directed to be applied for the benefit of the deities and the temples. That amounted only to a diversion after accrual, not a diversion by overriding title. The Bihar Land Reforms Act, 1950 also contained an explanation to section 24(3) permitting salary, remuneration, or allowance to a trustee of up to fifteen per cent of the net income dedicated to religious or charitable purposes, so long as it did not amount to a prohibited reservation of pecuniary benefit.

Conclusion: Inclusion of 15% of the net income as trustee's remuneration was justified, and the finding was against the assessee.

Final Conclusion: Both referred questions were answered in the affirmative in favour of the Revenue, and the assessee failed on both issues.

Ratio Decidendi: Where a statute provides that compensation for vested trust income shall be paid as a perpetual annuity equal to the net income, the annuity retains the character of income; and a trustee's remuneration, when only redirected after accrual and not effectively extinguished at source, remains taxable if the governing law permits such remuneration within the prescribed ceiling.

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