Shah, J. - (1.) C. R. Nagappa executed on April 14, 1955 seven separate deeds of trust settling specific properties for the benefit of his minor children. Under each deed Nagappa settled certain properties for the benefit of his named minor child and vested the properties in four trustees - Nagappa, his two wives and a married daughter. Under each deed of trust a portion of the income arising out of the trust property was to be utilised immediately for the benefit of the beneficiary and the balance was to be accumulated for his or her benefit and to be handed over to the beneficiary at a future date specified in the deed.
(2.) In the proceeding for assessment for the year 1962-63 the 5th Income-tax Officer, City Circle II, Bangalore, included in the total income of Nagappa the income arising from the trust properties and used for the immediate benefit of the beneficiaries, but not the income directed to be accumulated. The Commissioner in exercise of the power under Section 263 of the Income Tax Act, 1961, directed that the income for the deferred benefit of the minor beneficiaries be also included in the total income of Nagappa. In appeal against that order to the Income-tax Appellate Tribunal; Nagappa contended that the income from trust properties was liable to be assessed under Section 161(1) only in the hands of the trustees, and not in the hands of the settlor. The Tribunal rejected that contention. At the instance of Nagappa, the Tribunal referred two questions or the opinion of the High Court of Mysore: "(1) Whether having regard to the provisions of sub-sec. (2) of Section 161, Section 64 (v) of the Income Tax Act was applicable to the assessee's case for computing the assessee's income for the assessment year. 1962-63 (2) Whether the assessments on the minor beneficiaries for the assessment year 1962-63 are a bar for assessing the income (assessed in the hands of the minor beneficiaries) in the bands of the assessee for the same assessment year 1962-63 -
(3.) The High Court of Mysore recorded answers to the questions as follows: "(1) Section 64 (v) of the Income Tax Act, 1961, was rightly applied to the assessee's case for computing his income for the assessment year 1962-63. Sub-section (2) of Section 161 of the Act does not make Section 64 (v) inapplicable to the case of the assessee. (2) The assessments on the minor beneficiaries or the assessment year1962-63, though in themselves illegal in view of the above answer do not in law operate as a bar for the application of Section 64 (v) to the case of the assessee, the illegality of the assessments on the minors being open to correction otherwise." Nagappa has appealed against the order passed by the High Court. ;