Trust income clubbing under tax law fails where minor child derives no benefit in the relevant year.

Income from a trust created for the benefit of a minor child is not clubbed in the transferor's hands under section 16(3)(b) of the Indian Income-tax Act, 1922 unless the minor actually derives a benefit in the relevant accounting year. Where the trust income remains with the trustees, does not accrue to or become received by the minor, and no beneficial interest is enjoyed during the year of account, the amount cannot be included in the transferor's total income merely because the settlement was for the minor's benefit. On the facts, the trustees had discretion and the minor daughter did not enjoy the disputed income during the relevant year, so the amount was held not includible.

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Issues: Whether the sum of Rs. 2,412 arising under a trust for the benefit of the assessee's minor daughter was includible in the assessee's total income under section 16(3)(b) of the Indian Income-tax Act, 1922.

Analysis: The statutory scheme of section 16(3) requires, for clubbing under clause (b), that the minor child should derive some benefit in the relevant accounting year from the income arising out of the transferred assets. Where the trust income remains with the trustees and neither accrues to the minor child nor is received by her, and no beneficial interest is actually enjoyed during the year of account, the amount cannot be brought to tax in the hands of the transferor merely because the transfer was for the minor's benefit. The trust deed and the findings of fact showed that the trustees had discretion and that no part of the disputed amount accrued to or was enjoyed by the minor daughter in the relevant year.

Conclusion: The sum of Rs. 2,412 was not includible in the assessee's total income under section 16(3)(b) of the Indian Income-tax Act, 1922.

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