Trust income under minor-benefit provisions requires present benefit in the accounting year, not merely contingent or postponed advantage.

Section 16(3)(b) of the Indian Income-tax Act, 1922 was applied only where the minor derived a present benefit in the relevant accounting year through receipt of income, accrual of income, or an existing beneficial interest. Mere accumulation of trust income until majority did not create such a present interest. A trustee's discretionary power to use income for maintenance, education or other benefit was insufficient where no part of the income was shown to have been applied and the minor could not compel exercise of the discretion. A contingent provision for betrothal or marriage expenses also gave no present benefit in the years in question. On that construction, the trust income was not includible in the settlor's total income.

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Issues: Whether the income of a trust created by the assessee for the benefit of his minor child was includible in the assessee's total income under section 16(3)(b) of the Indian Income-tax Act, 1922, where the income was to be accumulated, could be applied at the trustees' discretion for the minor's maintenance, education or benefit, and was partly earmarked for future marriage expenses.

Analysis: Clause (b) of section 16(3) was held to operate only where, in the relevant previous year, the minor derived some benefit under the trust deed, namely by receiving the income, by having income accrue to him, or by having a beneficial interest in that income during that year. Mere accumulation of income until the minor attained majority did not itself confer a present beneficial interest. The discretionary power to apply income for maintenance, education or benefit did not assist the revenue because no part of the income was shown to have been so applied and no material showed that the minor could compel the trustees to exercise the discretion in his favour. The provision for expenditure on betrothal and marriage also conferred no present benefit in the accounting years, as those contingencies had not arisen. The contrary view taken on a wider reading of beneficial interest was rejected as inconsistent with the strict construction of the artificial charging provision and with the governing principle that there must be benefit in the relevant year of account.

Conclusion: The trust income was not assessable in the hands of the settlor under section 16(3)(b) for the relevant assessment years.

Ratio Decidendi: For section 16(3)(b) to apply, the minor beneficiary must derive a present benefit in the relevant accounting year, by receipt, accrual, or a then-existing beneficial interest; a merely postponed or contingent advantage under a trust does not attract inclusion in the assessee's income.

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