TaxTMI 
TaxTMI 
2005 (6) TMI 37
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....e case, the Tribunal was correct in law in holding that the trust created by the assessee for the benefit of his minor daughter in obedience to the terms of decree of divorce passed against him under the provisions of the Parsis Marriage & Divorce Act, 1936, in a suit brought against him by his wife, was for adequate consideration and, therefore, would not fall within the scope of section 64(1)(vii) of the Income-tax Act, 1961?" The factual matrix giving rise to the question referred is as follows: The assessee, Behram B. Dubhash, was married to one Mehroo according to Zoroastrian rites on May 12, 1966. Both were Parsis. Out of the wedlock a female child, by name Farida, was born on November 30, 1970. A suit came to be filed by Mehroo....
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....unt, viz., Rs. 33,950. As per the terms of the settlement Mehroo was required to spend the said amount on the child. The Income-tax Officer brought these amounts to charge by including them in the net income of the assessee under section 64(1)(vii). The assessee appealed, and the Commissioner of Income-tax (Appeals) sustained the order. Aggrieved by the findings of the aforesaid authorities the assessee filed I.T.A. Nos. 3126/Bom/1983 and 446/Bom/1984. The Tribunal passed a detailed order, after hearing the parties at length, holding that the trust created by the assessee did not fall within the scope of section 64(1)(vii) and reversed the concurrent findings. The Tribunal held that the trust was for adequate consideration inasmuch as it wa....
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....inor child ensuring her proper maintenance and education and that there was a legal obligation on the assessee -father to maintain the minor daughter, irrespective of the suit filed by the mother of the minor child for divorce. No doubt the decree was passed pursuant to the agreement between the assessee and his estranged wife with a condition to make a provision for the minor child, but that did not mean that the assessee was under no obligation to make a provision for the minor child. The only question was the manner of making such provision for the minor child. The conscious choice by the assessee to create a trust to provide for the maintenance of the minor child, from the income of the trust was one of the safest and most acceptable mo....
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....passed between the settlor and the trust the question of excluding the income from the purview of section 64(1)(vii) does not arise. From the order of the Income-tax Officer it is not clear whether he had perused the document creating the trust in favour of the minor child or the decree of the High Court dated June 16, 1975, in the divorce petition, which specifically directs the settlement of a sum of Rs. 5,50,000 to be invested with the Central Bank Executor & Trustee Co. Ltd., as the trustees, for providing maintenance for the minor child Farida. On the other hand the order of the Tribunal clearly indicates that the Tribunal has perused the trust deed and the decree of divorce and came to the conclusion that there was consideration fo....