- (1.) The Commissioner of Income-tax, Bombay City I, has preferred this appeal to this Court on a certificate of fitness granted by the High Court of Bombay under S. 66A(2) of the Indian Income-tax Act, 1922.
(2.) The assessee, who is the respondent before us, was assessed to income-tax as an individual in respect of his income for the assessment year 1954-55. The taxing authorities included in the assessee's total income for the year two sums, namely, a sum of Rs. 410 and a sum of Rs. 14,170. It was stated that these two sums accrued in the relevant account year in the following circumstances. On January 12, 1953 the assessee created a trust in respect of a sum or Rs. 25,000, the trustees whereof were the Central Bank Executor and Trustee Co., the assessee himself, his wife and brother. The scheme of the trust-deed was that the said sum of Rs. 25,000 was set apart by the assessee and it was provided that the interest on that amount should be accumulated and added to the corpus and a minor daughter of the assessee, named Chandrika, was to receive the income from the corpus increased by the addition of interest, when she attained the age of 18 on February 1, 1959. She was to receive the income during her life time and after her death the corpus was to go to persons with whom we are not concerned. The income derived from the said trust fund amounted to Rs. 410 in the relevant account year and the taxing authorities included this amount in the total income of the assessee, purporting to act under S.16(3)(b) and/or S. 16(3)(a)(iv) of the Income-tax Act. As regards the second sum of Rs. 14,170 it appears that on December 1, 1941, the assessee's father had created a trust in respect of some shares and a cash sum of Rs. 30,000 for the benefit of his four sons including the assessee. The trustees were the Central Bank Executor and Trustee Co. Ltd., the assessee himself and one other person. The said trustees were to bold the trust funds upon trust to pay the net interest and income thereof to the assessee "for the maintenance of him self and his wife and for the maintenance education and benefit of all his children till his death." The sum of Rs. 14,170, it was stated, accrued as income in the hands of the assessee in the relevant account year from the said trust funds. The view of the taxing authorities and the Income-tax Appellate Tribunal was that under the aforesaid provision of the trust deed the assessee was the sole beneficiary and that the amount was received by him for his own benefit and he was not accountable to any one in respect of the amount and, therefore, this amount was liable to be included in his total income.
(3.) On behalf of the assessee the contention was that the sum of Rs. 410 aforesaid was not liable to be included in the total income of the assessee inasmuch as Chandrika, the minor daughter of the assessee, had no right to the income nor any beneficial interest therein in the relevant year of account under the provisions of the trust-deed and, therefore, neither S. 16(3)(a)(iv) nor S. 16(3) (b) applied to the case. As to ths sum of Rs. 14,170 the case of the assessee was that it should not be included in his total income as the sole beneficiary, because the beneficiaries under the trust settlement were not only the assessee but his wife and children as well, it was contended that the assessee received the amount in trust for himself and his wife and children and it was open to the Department to proceed under the first proviso to S.41(1) of the Income-tax Act and recover tax on a separate assessment made on the assessee as a trustee in respect of the said sum at the maximum rate, because the individual shares of the beneficiaries on whose behalf the money was receivable were indeterminate and not known.;