Contingent beneficial interests in trust income prevent determinate shares until distribution and trigger maximum-rate taxation.

A trust deed directing fixed payments for the daughters' marriages and houses, with the residue to be divided only among daughters then living, did not give any daughter an immediate vested right to a defined share in the accumulated income. Because entitlement to the residue depended on survival until distribution, the beneficial interest remained contingent rather than vested, and the shares could not be treated as determinate merely because the number of living daughters was known. On that construction, the beneficiaries' shares were indeterminate during the relevant years, so the first proviso to section 41(1) applied and the trust income was assessable at the maximum rate.

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Issues: Whether, on a proper construction of the trust deed, the beneficiaries' shares in the trust income were determinate so that the first proviso to section 41(1) of the Indian Income-tax Act, 1922, would not apply.

Analysis: The trust deed directed the trustees to spend specified sums for the daughters' marriages and construction of houses, and then to divide any remaining fund between the settlor's daughters then living. The right under the residuary clause depended on the daughters being alive when the balance became distributable, so no daughter had an immediate right to a defined share in the accumulated income during the assessment years. The interest in the residue was therefore contingent, not vested, and the shares could not be treated as ascertained merely because the number of daughters then living was known. The court distinguished authorities dealing with vested interests and held that a contingent interest does not give a beneficiary a determinate share before the contingency occurs.

Conclusion: The beneficiaries' shares were indeterminate and unknown during the relevant years, so the first proviso to section 41(1) applied and the trust income was assessable at the maximum rate.

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