2003 (10) TMI 33

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....hereinbelow the facts in Income-tax Appeal No.2 of 2003. Facts: The appellant, Manik Chandra, is an individual. For the assessment year 1980-81, he was assessed under section 143(3) of the Income-tax Act, 1961. The order of assessment was passed on February 28, 1981. Thereafter on January 31, 1985, he was served with a notice under section 148 of the Act. He filed his return of income on February 26, 1985. He objected to the reopening of assessment. The assessment was reopened for the following reasons: Nidhi Life Trust was created by one Shri Surender Goyal, brother-in-law of the assessee, by settling Rs. 7,500 in favour of the trust. Similarly, Ruchi Life Trust was created by Yogender Goyal, brother-in-law of the assessee, by set....

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....f Income-tax (Appeals) took the view that the minors had no right to receive the income of the trust till the age of 18. The learned Commissioner of Income-tax (Appeals) took the view that since the minors had no right to receive the income during their minority the provisions of section 64(1)(iii) read with the Explanation 2A was not applicable and therefore the income of Rs. 1.12 lakhs could not be clubbed with the income of the assessee. Being aggrieved by the order passed on February 5, 1996, by the Commissioner of Income-tax (Appeals), the Department preferred an appeal before the Income-tax Appellate Tribunal, New Delhi. By impugned judgment and order dated July 22, 2002, the Tribunal took the view that the two trusts were created for....

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....o income accrued to the minor(s) during the assessment year in question and therefore Explanation 2A to section 64(1)(iii) is not attracted. In this connection, it was submitted on behalf of the assessee that two conditions were required to be satisfied in order to attract Explanation 2A to section 64(1)(iii), namely, that the income should arise to the trustee from the membership of the trust in the firm and that such income should accrue for the benefit of the minor during the assessment year in question. Mr. Vashishth submitted that the second condition in this case is not satisfied. He argued that income has not accrued to the minors during the assessment year in question because under the trust deed the income had to be accumulated up ....

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....nder the trust deed it has been stipulated that in the event of death of the minor(s) before reaching 18 years would result in devolution in favour of the younger brothers/younger unmarried sisters surviving on the date of the death of minor(s). That in the event of the marriage of the minor(s) before their death the interest of the deceased beneficiary in the corpus, income and assets of the trust fund devolved on her brother which indicated that income had accrued to the rninor(s) even before attaining the age of 18 and therefore the above income of Rs. 1.12 lakhs was required to be taxed in the hands of their father, the assessee. Questions: The following questions have been referred to us in the above appeals: "(a) Whether, the....