PATHAK - (1.) THESE appeals by special leave are directed against the common judgment of the High Court of Madhya Pradesh disposing of four Income-tax References and answering the following identical question of law arising in each Reference in favour of the assessee and against the Revenue: "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the income derived by the beneficiaries under the two trust-deeds belonged to the beneficiary in individual capacity and not in the capacity as representing the Hindu undivided family ?"
(2.) THESE appeals involve the construction of two trust-deeds couched in identical terms. To understand their import it is necessary to set out a genealogical table : JUDGEMENT_512_4_1986Image1.jpg Sir Hukumchand Seth was the head of a well known family of Indore. The family carried on various businesses and owned extensive properties. Prior to 31/03/1950 Sir Hukum Chand and the members of his family constituted a Hindu undivided family. By a deed of partition dated 31/03/1950 various family properties were partitioned between Sir Hukum Chand, his wife Lady Kanchanbai and their son Raj Kumar Singh in equal shares. Sir Hukum Chand and Lady Kanchanbai executed two trust deeds on the same date, 21/03/1952 purporting to constitute a trust of the properties respectively belonging to them. The trust deeds contained identical terms and conditions. The trustees in each case were Sir Hukum Chand, Lady Kanchanbai, their son Raj Kumar Singh and his wife Prem Kumari Devi and the eldest grandson Raja Bahadur Singh. The beneficiaries named in the trust deeds were Rajkumar Singh and his sons Raja Bahadur Singh, Maharaja Bahadur Singh, Jambukumar Singh, Chandrakumar Singh and Yeshkumar Singh. With the passage of time and in accordance with the terms and conditions of the trust deeds the beneficiaries came into possession of their respective shares of the properties. Originally the income from those properties was returned by them for the purpose of their income-tax assessments in their individual status, but subsequently they began to assert that the properties were received by them as the Karta of their respective Hindu undivided families and that, therefore, the income was liable to be assessed in that status. These appeals arise out of income-tax assessments made in the case of Raja Bahadur Singh for the assessment year 1962-63, Maharaja Bahadur Singh for the assessment year 1961-62 and Jambukumar Singh for the assessment years 1961-62 and 1962-63. The Income-tax Officer assessed all three assessees in their individual status and the assessments were confirmed in that status by the Appellate Assistant Commissioner on appeal. On second appeal by the assessees the Income-tax Appellate Tribunal also took the view that the income from the properties received by the assessees under the two trust deeds fell to be taxed in their individual status. At the instance of the assessees the Appellate Tribunal referred the cases to the High Court of Madhya Pradesh for its opinion in each case on the question of law set forth earlier. The High Court understood the two trust deeds differently from the appellate Tribunal and the taxing authorities and held that the properties had been settled with the assessees in their representative capacity as Kartas of their respective Hindu undivided families.
(3.) IT may be mentioned at the outset that neither the assessees nor the Revenue dispute the legality of the trust deeds and we must proceed on the assumption, as did the High Court, the Appellate Tribunal and the taxing authorities, that the authors of the trust deeds were competent to settle the properties in accordance with the terms and conditions expressed in those documents. The sole question before us is whether upon those terms and conditions it was intended by the settlors that the beneficiaries should receive the properties in their individual capacity or in a representative capacity as Kartas of the respective Hindu undivided families. It is not necessary to refer to all the provisions of the trust deeds because the parties are in common agreement that the principal provisions calling for consideration are cls. 1, 3 and 4 of the trust deeds. Clause 1 empowers the trustees to apply the income from the trust properties to the rent, rates, taxes and other liabilities in respect of the trust properties, including the cost of maintenance, and thereafter to divide the balance left over in equal shares between the beneficiaries, so that each beneficiary received one-sixth of the balance. In the event of a beneficiary being a minor, his share of the income was payable to his natural guardian for being applied towards his education, maintenance and advancement in life, marriage and other expenses. It was also provided that in the event of a beneficiary dying before the time of distribution of the properties between the beneficiaries under cl. 4 the share of the beneficiary so dying would be used to support and maintain his widow and his male issue "in such manner as the trustees shall in their absolute and uncontrolled discretion deem proper" and the surplus, if any, of the share of that beneficiary and the income therefrom would be accumulated and kept in credit to his account and preserved in order to be distributed in accordance with Cl. 4. In the event of a beneficiary dying before the time of distribution without leaving any widow or male issue his share was to be divided equally among other beneficiaries then alive or the then widow and male issue of any other deceased beneficiary, if any, entitled to share in the distribution, subject, however, to provision being made for the maintenance and education until marriage and the marriage expenses of the daughter or daughters, if any of the said beneficiary. Clause 3 declares that if any moneys were required for meeting extra-ordinary expenses of or for the benefit of any beneficiary or his wife or children on special occasions, such as the marriage of the beneficiary and of his children, the illness of the beneficiary or of his children, travelling expenses of the beneficiary and of his family for going abroad, their education in a foreign country or on such other occasions as the trustees may deem fit for special treatment, the trustees were empowered to pay to the beneficiary such amounts from time to time as they thought fit in their absolute discretion. Such amounts could be paid to the beneficiary out of the trust properties either by way of advance or loan either on interest or out of his share of the corpus. In the latter event the share of the net income payable to the beneficiary was liable to proportionate reduction. Clause 4 provides that upon the youngest of the beneficiaries attaining the age of 30 years the trustees would divide and distribute the trust properties together with the accumulated interest and income thereon among the beneficiaries according to their respective rights and shares, that is to say equally, and in making such division the trustees would take into consideration the amount due by the beneficiary to the trustees by way of loan or advance made to him. It was further provided that if any beneficiary should have died before the time of such division or distribution leaving a widow and any son or sons or only son or sons the widow and/or the sons would take by substitution the share which the beneficiary would have taken had he been alive, and such share would be divided equally between the widow and the sons. The proviso declares that if at the time of the division and distribution any beneficiary should have died without leaving any son but leaving only a widow, the widow would get half of the share of that beneficiary while the other half would be distributed among the remaining beneficiaries and the heirs of the beneficiaries entitled to distribution. A further provision declares that if at the time of division and distribution any beneficiary should have died without leaving a widow or a son his share would, subject to such adequate provision made for the maintenance and education until marriage and the marriage expenses of the daughter or daughters of such beneficiary as the trustees may in their discretion think, fit, be distributed among the remaining beneficiaries and the heirs of the beneficiaries entitled to distribution.;