1994 (9) TMI 3 - SC - Income Tax

Supreme Court rules on trust income inclusion for settlor, minors exempted

Commissioner of Income-Tax Versus MR Doshi (Decd. By Irs.)

The Supreme Court interpreted section 64(1)(v) of the Income-tax Act in a case concerning the inclusion of income from trusts in the settlor's total ... Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income of the trust was not includible in the hands of the settlor under the provisions of section 64(v) Issues:- Interpretation of section 64(1)(v) of the Income-tax Act regarding the inclusion of income from trusts in the total income of the assessee.- Whether the income from trusts, to be accumulated until the attainment of majority by the settlor's minor children, is includible in the hands of the settlor under section 64(1)(v).Analysis:The Supreme Court dealt with an appeal arising from an income-tax reference for assessment years 1965-70. The High Court had ruled in favor of the assessee based on a previous judgment in the assessee's own case for earlier assessment years. The central issue was whether the income from trusts, to be accumulated until the settlor's minor children reach majority, should be included in the settlor's total income under section 64(1)(v) of the Income-tax Act. The provision requires the inclusion of income arising from assets transferred to the extent it benefits the settlor's spouse or minor child. The Court referred to previous judgments to interpret this provision, emphasizing that the benefit should be either immediately available or deferred for the minor child.The Court noted that the trusts in question stipulated that the income would be accumulated until the settlor's sons reached majority, at which point it would be divided among them. As the deferment of benefit extended beyond the minority of the minor children, the provisions of section 64(1)(v) were deemed inapplicable. The Court emphasized that the specific requirement of the law is that the immediate or deferred benefit must be for the minor child's advantage. Since the assets were to be received by the sons upon attaining majority, the provision did not apply in this case.The Court upheld the order under appeal, agreeing with the interpretation that the income from the trusts was not includible in the settlor's total income under section 64(1)(v). This decision was consistent with previous rulings by other High Courts. Consequently, the appeal was dismissed with no costs awarded.