TaxTMI 
TaxTMI 
TaxTMI 
2006 (9) TMI 105
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....ciaries was the income of the applicant-Trust and the applicant-Trust was not entitled to a deduction of the same?" 2. The short facts giving rise to the present matter are that during the assessment proceedings for the Assessment Year 1985-86, the Assessing Officer observed that the Assessee-Trust had credited an amount of Rs.44,030/- on account of interest to the account of the beneficiaries and claimed deduction thereof. He called for the explanation and after rejecting the same, added the said amount of Rs.44,030/- to the income of the Trust and accordingly, taxed the Trust. The Trust, all through, had been submitting that the Trust was a specific Trust with six minor beneficiaries, having definite share and that only two Trustees were....
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....the beneficiaries were not having any control over their income till it was absolutely transferred to them. The Tribunal also held that the Trust cannot be allowed to allocate interest to the beneficiaries when they have not actually paid any amount to the beneficiaries except making a book entry which was not going to vest any right in the beneficiaries for utilisation of the amount so far as so passed under those book entries. 4. Shri Talati, learned Counsel for the Assessee, placing his strong reliance upon the judgement of the Division Bench of this Court in the matter of Commissioner of Income-Tax vs. Tanvi Sajni Family Trust, [(1994) 209 I.T.R. 497], submitted that if the money was treated to be loan and interest was paid on the same....
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....wers hereof including any income-tax, wealth-tax or other taxes, dues, duties, impositions imposed by the Central Government, the State Government, the Municipal Corporation or any other competent authority and costs of ordinary repairs to the immovable property, if any forming part of the Trust fund. And subject thereto, the Trustees shall distribute or treat as distributed without actually distributing the same (by crediting to their respective accounts) the balance of the annual or other income or residue into cash or kind in the manner and in the proportions among the Beneficiaries as mentioned hereunder Name Share 1) Arunkumar Popatlal Thakkar 10 np. (2) Smitaben Popatlal Thakkar 25 np. (3) Nimaben Popatlal Thakkar 25 ....
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.... would clearly appear that the money can be paid in cash and loan thereafter can be taken or a book entry can be made and the money in cash can be paid to the beneficiaries at any later time. The Trust Deed does not say that any book entry in favour of the beneficiaries, on non-payment of the amount in cash, would be treated to be a loan from the side of the beneficiaries in favour of the Trust. 9. In the commercial world, there is a pointed distinction between the deposit and the loan. For the loan, there must be a/an settlement/agreement between the parties that particular amount would be given by one party to another party. The terms would be that it would be refunded or returned either on demand or on the directions of the creditor and....
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.... behalf of the beneficiaries. If the money to be paid is deemed to be paid, but, is actually not received by the depositor, then, the liability of the Trust would come to an end and as a Depositee, it would be answerable to refund and payment in cash. In this case, credit entry was one of the modes of distribution of the profits and that was not the only mode of payment. 11. In the matter of Tanvi Sajni Family Trust, (supra), the Court found and we would agree to the observations that the Trust is a distinct legal entity and different from the beneficiaries and therefore, it could not be said that after the money becomes payable to the beneficiaries under the deed as per the determinate shares, it could be treated by the Trust as its own ....