TaxTMI 
TaxTMI 
2002 (10) TMI 222
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....ereof. These are: "(a) The trustees shall receive the income of the properties of the Trust and in the first place reimburse or pay and discharge all costs and expenses which may be incurred in or about the administration of this Trust including any Income-tax, Wealth-tax or Other Tax, charge, levy or cess levied upon the Trustees as also including all outgoings, dues, costs of repairs to immovable properties, if forming part of the Trust Fund. (b) The net balance of the Income remaining after providing for the contingencies mentioned in clause (a) above shall be distributed in such proportion and in such manner as the Trustees may in their sole and absolute discretion decide amongst the following beneficiaries:-- (1) Nira K. Shah (2) Rupa K. Shah (3) Smt. Rama K. Shah (4) Nita K. Shah (5) Bindu K. Shah (c) That the trustees shall have absolute discretion not to distribute any balance of the income of the Trust Fund for any year to any of the aforesaid beneficiaries and they shall be entitled to accumulate the same for such period as they may think fit in their absolute discretion: provided that such period shall not exceed 18 years from the date of this Dee....
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....operties on principles of joint and survivorship or joint tenancy, amongst and between the beneficiaries referred to as recipients herein these recordings, named herein to be owned, held, possessed, enjoyed, exploited, employed and deployed by them for earning the income for their common enjoyment. Properties distributed and handed Names of the recipients who hold, over to the (beneficiaries) possess, enjoy and exploit property on recipients joint and survivorship principles or on joint tenancy. ----------------------------------- ------------------------------------------- Rs. 3,000 fixed capital and 60 per&nb....
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.... accounting year or years and they shall hold the right, title and interest in the ratio and proportion as so resolved which shall not necessarily be equal unless otherwise recorded for such period or periods as is covered by such resolution. They may further decide as they may deem fit and necessary either to credit to the account of the concerned recipient and accumulate the income separately to be handed over to him at any later date or period to be decided or to pay the same immediately. In case anyone of the recipient dies in the meantime, any sum or sums in his account and due to him shall be paid and distributed equally amongst his legal heirs or to such of the persons be might have directed by a will or otherwise. (iv) Further the recipients shall hold such part or portion of the income of fund as shall not have been covered by the above resolution to be accumulated by way of compound interest and reinvesting the income or interest thereof and adding the same to the fund to be treated as one fund for all purpose. (v) The recipients may at any time and from time to time by passing an unanimous resolution. (a) Distribute and transfer the whole or any part or parts of....
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....all think fit. In the instant case the period of 18 years since the execution of the deed of settlement is not yet over. The trustees have no doubt discretion to advance the period of distribution of the corpus. But they have not taken any decision advancing the period of distribution. Their decision to distribute a part of the corpus on 25-6-1980 cannot be termed as a decision advancing the period of distribution of corpus within the meaning of sub-clause (e). If it is considered to be a decision as envisaged by the said sub-clause then by virtue of the mandate given under sub-clause (f) they should have distributed the entire corpus on 25-6-1980. Admittedly the entire corpus is not distributed. 3. In the matter of distribution of the corpus the trustee have no doubt absolute discretion. They may distribute amongst all or any of the beneficiaries and in such share or shares as they may think fit. But to whomsoever they may decide to allot the share and in whatever proportion they may allot, the allotment has to be absolute. After the allotment the recipients should be free to deal the corpus allotted to them freely in the manner thought fit by them. In the instant case not only....
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....his basis. It is thus seen that no further advancement has been achieved by the beneficiaries of the trust on account of transferring the partnership share to the Body of Individuals. Further it is seen that giving up the partnership share to the body of individuals is not the utility in proper sense...." 7. The CIT (Appeals) upheld the AO's order vide discussion in paras 3 and 4 of his order which read as under :- "3. Perusal of assessment order reveals that the appellant has contravened the provisions of trust deed already executed by him. Sub-clause (e) contemplate distribution of corpus at the end of 18 years from the date of execution of deed of settlement or such other earlier period as may be decided upon by the trustees for the time being. By sub-clause (f) it is stipulated that on the expiry of the period of distribution the trustees shall distribute the entire corpus of the trust fund amongst all or any of the beneficiaries in such share or shares as they in their absolute discretion shall think fit. In this instant case the period of 18 years since the execution of the deed of settlement is not yet over. The trustees have no doubt discretion to advance the perio....
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..... Annexure F reads the entry as: "Capital 3000-00 Transferred to Rama & Bindu Bar Fix Capital of Nirav Knitwear Co." (v) Copies of extracts from books of account of the trust showing transfer to BOI. 9. In part II of the reply, a copy of assessment order for assessment year 1981-82 accepting returned income charged under section 143(3) without adding, share income from the firm. By this, the assessee claimed that genuineness of the transfer was accepted. Therefore, there should be no deviation from earlier assessment. 10. In Part III of the reply, it is stated that no document was executed for transfer of beneficial interest as the partnership interest was a movable property. Section 9 of Transfer of Property Act which states "a transfer of property be made without writing in every case in which a writing is not necessary". 11. In beneficiaries case, the claim of the assessee is that a BOI was constituted by the part distribution and therefore, it cannot be taxed at maximum marginal rate which is applicable only in a case of AOP. It is submitted that the issue stands covered by the decision of Appellate Tribunal in the case of S.C. [IT Appeal No. 1744 (Ahd.) of 1986 ....
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....kes a collateral objection, the tender is good (l). Where, however, a party has separate demands for unequal sums against several persons, an offer of one sum for the debts of all, not distinguishing the claims against each, is not a valid tender, and will not support a plea by one of the debtors, that his debt was tendered (m). 2. A tenant in a fee-simple: A tenant in a fee-simple possesses over the estate held in fee; for he may either grant to another the whole of such estate, or charge it in any manner he think fit, or he may create out of it any less estate or interest; and to the estate or interest thus granted he may annex such conditions, not repugnant to the rules of law, as he pleases (n). In these cases, the rule of the civil law applies; non debet cui plus licet quod minus est non licere (o): or, as it is usually expressed in our books, cui licet quod majus non debel quod minus est non licere (p). 3. Authority-having power to do the more: He who has authority to do the more important act shall not be debarred from doing that of less importance, a doctrine founded on common sense, and of general application, not only with reference to the law of real property, but ....
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....ty subject to an obligation which the testator has imposed upon him. The obligation follows from a peremptory direction of the testator that the trustee must dispose of his estate in certain definite ways or upon certain specified or ascertained or ascertainable objects. A trustee has no freedom of choice as to how he should distribute the testator's estate. He is bound to carry out the injunction given by the testator, and his conduct in the matter of disposition of the estate must strictly conform to that injunction. He must act within the sphere of the testator's direction and must not deviate from it or modify it. In the case of power, the position is quite different. There is no direction by the testator. There is only his wish or recommendation and the wish is that the donee of the power would have absolute discretion and free unfettered choice as to the objects, institutions or persons amongst whom the estate of the testator might be distributed. Powers are never imperative; they leave the act to be done at the will of the party to whom they are given. Trusts are always imperative, and are obligatory upon the conscience of the party instructed. The test is whether what is....
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....ry Interpretation by FAR Bennion are of exercising a power and not dealing with an obligation of a trustee. We, accordingly, do not find any force in this contention of the assessee. 21. Part II of the trust deed as extracted above deals with the terms and conditions subject to which the trustees have to hold the trust funds. Sub-clause (a) of this part obliges the trustee to reimburse or pay and discharge all costs incurred for the administration of the trust. Clause (b) casts an obligation to apply the balance for the benefit of the five beneficiaries named in the trust deed. Clause (c) gives an absolute discretion to the trustee not to distribute the balance and accumulate the same for such period as they think fit not exceeding 18 years from the date of the deed. Clause (d) gives an absolute discretion to the trustees to utilise the corpus of the trust funds for the five objects of health, education, maintenance, marriage expenses and advancement in life of any of the beneficiaries. The period of distribution is defined in sub-clause (e) of Part-II of the trust deed to mean the period of 18 years from the execution of the deed or such other earlier period as may be decided b....
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....be invalid and beyond the powers of the trustees. We also find ourselves in agreement with the observations of the Assessing Officer in para 6 of the order that it was not a case of exercising the discretion of the trustees to use the corpus of the funds for any of the objects mentioned in clause (d) of Part II of the trust deed. No plea has been put forth for utilisation of the corpus funds for the first four objects of health, education, maintenance or marriage expenses. The attempt is to justify the distribution for the last category namely advancement in life. Clause (d) provides for utilisation and not distribution. Be that as it may, in what way and to what extent this distribution benefited the beneficiaries was not made clear. No advancement has been shown to have been achieved by the beneficiaries of the trust in transferring the partnership share to the Body of individuals. 24. We may now deal with the contention of the assessee that the Assessing Officer having accepted the claim of the assessee in the earlier year cannot take a contrary view in the subsequent year when the facts and circumstances are the same. Reliance is placed on the judgment of Gujarat High Court ....
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....le to be taxed at maximum marginal rate. 27. The issue is not whether there was a BOI or not but whether there was an "Association of Persons" within the meaning of section 167A. Section 167 A at the relevant time stood as under:-- "167A. Charge of tax where shares of members unknown where the individuals shares of the members of an association of persons (other than a company or a co-operative society) in the whole or any part of the income of the such association are indeterminate or unknown, tax shall be charged on the total income of the association at the maximum marginal rate." 28. On a close reading of this section, one thing is clear that a wider coverage is given to the concept of an "Association of Persons". It is an "association of persons" which is other than a company or a co-operative society. In this larger context, the term "association of persons" may include the combination of individuals and others including BOI individuals, combination of individuals and non-individuals and also combination of non-individuals and other non-individuals. Both these entities namely association of persons and Body of Individuals have been included in clause (v) of section 2....
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....ow and her minor sons who are engaged in the business activity which generates income. He does not make any difference that the widow and the minor sons did not start the business. The business was inherited. But the fact that the business has been continued by the widow or her own behalf as well as on behalf of the minor sons after buying the interest of the mother goes to show that there is an organised activity jointly carried on to produce income. It is a clear case of joint business venture of a few individuals. The income of this business has been rightly assessed in the status of a 'body of individuals'." 30. From the aforesaid extract, it is clarified by the Supreme Court in clear terms that it does not make any difference that the widow or the minor sons did not start the business and that the business was inherited. But the fact that business has been continued by the widow on her own behalf as well as on behalf of minor sons after buying the interest of the mother goes to show that there is organised activity jointly carried on to produce income and it was a clear case of joint business venture of a few individuals. In the subsequent paragraphs, the Supreme Court obse....