Discretionary trust income and contingent beneficiary rights meant assessment lay with the trustee, not the beneficiary.

Discretionary trust income was not assessable directly in the beneficiary's hands where the trust deed left application of income to the trustee's discretion for maintenance, education or advancement, and transfer of the fund was postponed until the beneficiary attained 25 years. Because the beneficiary had neither actually received income nor possessed an enforceable right to it during the relevant years, the interest in the trust fund and accumulated income remained contingent. On those facts, income had not accrued directly to the beneficiary, and the trustee was the proper person to be assessed on the trust income.

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Issues: Whether, on the terms of the discretionary trusts, the income was assessable directly in the hands of the beneficiaries or only in the hands of the trustees.

Analysis: The trust deeds gave the trustee discretion to apply income for the beneficiary's maintenance, education or advancement, and provided for transfer of the trust fund only on the beneficiary attaining 25 years. The beneficiary had neither received any income during the relevant years nor had any enforceable right to receive income as of right. Reading the trust terms with the principles governing vested and contingent interests, the beneficiary's interest in the trust fund and accumulated income was contingent upon surviving till the stipulated age, while the trustee remained the proper person to be assessed on the trust income. The Tribunal also held that the question turned on accrual of income during the year, and on the facts no income had accrued directly to the beneficiary.

Conclusion: Direct assessment in the hands of the beneficiary was not permissible; the trustee alone was assessable on the trust income.

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