TaxTMI 
TaxTMI 
1985 (4) TMI 98
X X X X Extracts X X X X
X X X X Extracts X X X X
....her and natural guardian of the said minors. The other 50per cent of the income accruing to the trust was to be accumulated for 20 years from the date of creation of the trust for the benefit of these girls and immediately on their marriage 50per cent income of he trust so accumulated was to be handed over to their husbands. It was also provided that if these girls did not marry a man acceptable to the trustee within the period of 20 year from the creation of the trust or died without having married then the accumulated trust fund was to be distributed amongst the heirs of these girls excluding the settlers. While completing the assessment the ITO treated the trust as discretionary trust because according to him 50per cent of the income was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pon a decision of the 'E' Bench of the Tribunal in I. T. A. No. 1463(Cal) of 1979 decided on 22th Feb., 1980 wherein the Tribunal had come to the conclusion that even in respect of income accumulating on behalf of the other unknown persons if their shares are defined by deed, the trust cannot be treated as discretionary trust. Reference was also made to a decision of the Special Bench of the Tribunal in ITA No. 2573 (Cal) of 1979 wherein the Tribunal under similar circumstances held that the beneficiaries were known and determinate and s. 164 would not apply although in that case only 5per cent of the income was payable to Smt. Laxmi Devi Sadani under cl. 3 (b) of the trust deed and the balance of 95per cent was not specifically receivable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or for whose benefit such income or such part thereof is receivable during the pervious year is expressly stated in the order of the Court or the instrument of trust or wakf deed, as the case may be, and is identifiable as such on the date of such order, instrument or deed; (ii) the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is received shall be deemed to be indeterminate or unknown unless the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable, are expressly stated in the order of the Court or the instrument of trust or wakf deed, as the case may be, and are ascertainable as such on the date of such order, instrum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the marriage of the settlor's daughters and construction of a building. They were further directed to spend similar sums for the construction of a house for the third daughter of the settlor to provide for her marriage expenses and maintenance of another daughter. If the total procceds exceeded or fall below the sum of Rs. 80,000 the trustees were to reduce or enhance the amount for the marriage or construction of the house as the case may be. Clause (x) further provided that if any amount was left with the trustees after providing for the daughters of the settlor and meeting their marriage expenditure such fund was to be equally divided by the trustees between all the daughters of the settlor then living and cl. (xi) provided that if any o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which had been quoted in extenso in para 12 as under: "(iv) Under the existing provisions, the flat rate of 65 per cent is not applicable where the beneficiaries and their shares are known in the previous year, although such beneficiaries or their shares have not been specified in the relevant instrument of trust, order of the Court or wakf deed. This provision has been misused in some cases by giving discretion to the trustees to decide the allocation of the income every year and in other ways. In such a situation, he trustees and beneficiaries are bale to manipulate the arrangements in such a manner that a discretionary trust in converted into a specific trust whenever it suit them tax-wise. In order to prevent such manipulation, it i....