Beneficial ownership under a will determined taxation of property sale proceeds, leaving the legal holder only as trustee.

A will that directs the income or sale proceeds of a property to be used for specified beneficiaries without limiting the duration of that enjoyment confers the beneficial interest on those beneficiaries, with the legal holder retaining only a trustee-like estate. Applying that construction, the Quilon property belonged beneficially to the daughters under the will, and the assessee held only the legal title. The principle that an unrestricted gift of income or produce carries the corpus supported this result, and sections 88 and 172 of the Indian Succession Act, 1925 did not displace it. Accordingly, the capital gains on sale of the property were not taxable in the assessee's hands.

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Issues: Whether the capital gains arising on the sale of the Quilon property were assessable in the hands of the assessee or in the hands of her daughters as beneficiaries under the will.

Analysis: The will was construed as making different bequests to different persons. In respect of the Quilon property, the direction that the property bequeathed to the daughter should have its income or sale proceeds utilised for the education and marriage of the grandchildren showed that the daughters were the real beneficiaries of the property. The assessee held only the legal estate in a trustee-like capacity, while the daughters had the beneficial interest. The Court applied the principle that a gift of income not limited in duration, or of the produce of property without restriction as to duration, carries the corpus as well. Section 88 of the Indian Succession Act, 1925 did not alter this result, and section 172 of the same Act supported the conclusion that the beneficial enjoyment belonged to the legatees.

Conclusion: The capital gains were not taxable in the assessee's hands, and the assessee was merely a trustee in relation to the Quilon property.

Ratio Decidendi: Where a will confers the beneficial enjoyment of the income or sale proceeds of property on specified beneficiaries without limiting the duration of that enjoyment, the legal holder of the property is only a trustee and the beneficial interest, including the corpus, belongs to the beneficiaries.

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