BHARUCHA - (1.) THESE appeals are directed against the judgment and order of a Division Bench of the High Court of Kerala. The High Court answered in the negative and in favour of the revenue the following question : "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that a valid trust came into existence in pursuance of the document dated 17-8-1971 and whether the Tribunal was justified in holding that the assessment for the years 1973-74 and 1974-75 on the trustees had to be made in accordance with the provisions of Section 161 of the Income-tax Act, 1961 ?" The question aforementioned relates to the Assessment Years 1973-74 and 1974-75. (Similar questions for subsequent years were answered similarly and are the subject matter of the connected appeals).
(2.) THE facts, briefly stated, are that a trust deed was executed on 17/08/1971. It records this : "... And whereas the beneficiaries, viz., Mary Varghese on behalf of her minor daughters Laizamma Varghese and Rasalin Varghese ... has transferred and assigned to the trustee upon trust the sums referred to in clause 17 against their respective names ... ... Whereas T.J. Joseph and his mother-in-law have transferred and assigned to the trustee upon trust the sum of Rs. 50,000 (Rupees fifty thousand only) as nominees of minor T.A. Joseph ... .... Whereas P.J. Joseph had his brother have transferred and assigned to the trustee upon trust the sum of Rs. 25,000 (Rupees twenty five thousand only) as nominees of T.S. Varghese ... ... Whereas Mary Varghese has transferred and assigned to the trustees upon trust the sums of Rs. 29,000/- (Rupees twenty nine thousand only) and Rs.21,000.00 (Rupees twenty one thousand only) respectively as nominees of minors T.S. Varghese and Deisy ... Whereas Mrs. Ammini Abraham has transferred and assigned to the trustees upon trust the sum of Rs. 54,000.00 (Rupees fifty four thousand only) and Rs. 3,000 (Rupees three thousand only) as nominees of minors T.S. Laly and T.S. Daisy... Whereas all such transfers as aforesaid were made to the Trustees as nominees of the respective beneficiaries and it was agreed prior to the date of such transfers that the trustees should execute such declarations of trust." The body of the trust deed states, "The trustees hereby accept this trust and acknowledge the receipt of Rs. 3 lacs received from each of the beneficiaries as under which they shall hold for and on behalf of the Trust : JUDGEMENT_658_SCALE1_1999Html1.htm . The Income-tax Officer rejected the claim that the assessee should be assessed as a representative assessee within the meaning of Section 161(1) of the Income-tax Act because he found that the trust created by the trust deed was invalid. (Similar assessments were made for subsequent years.) The Appellate Assistant Commissioner, allowed the assessee's appeal and his order was confirmed by the Income-tax Appellate Tribunal. The Tribunal referred to letters and other documents not mentioned in the Trust Deed to reach the conclusion that the donation to the trust had not been made by minors.
(3.) . From out of the order of the Tribunal, the question aforementioned was referred to the High Court. The High Court, relying upon the provisions of the trust deed which we have quoted, concluded that all contributions to the trust were made by or on behalf of the beneficiaries so that the authors and the beneficiaries were the same persons. It then referred to the provisions of Section 7 of the Trust Act and held that they were mandatory in so far as they spoke of the persons qualified to create a trust. Thereunder, a trust created by or on behalf of a minor without obtaining the prior sanction of a civil Court was not a trust in the eye of law. The trust was created by minors and did not comply with the requirement of Section 7. It was, therefore, invalid. . The assessee is in appeal by special leave. It was contended on behalf of the assessee that the final fact finding authority was the Tribunal. The Tribunal, having gathered all available evidence, had reached the conclusion that the trust was valid. This was a finding of fact which the High Court was not entitled in a reference application to ignore. It was submitted that if we were to accept the correctness of the impugned judgment the functioning of the Tribunals would be destroyed. It was also submitted that the High Court had picked out the one word "nominee" in the trust deed out of the context and had based its entire judgment thereon, ignoring the letters and documents which the Tribunal had relied upon to come to the conclusion that in fact, the donations to the trust had not been made by or on behalf of minors.;