INCOME TAX OFFICER Vs. KRISHNA BHANDAR TRUST
LAWS(IT)-1989-3-12
INCOME TAX APPELLATE TRIBUNAL
Decided on March 09,1989

Appellant
VERSUS
Respondents

JUDGEMENT

D.N. Sharma, Judicial Member - (1.)IN these departmental appeals though the assessees are different but the issues involved are identical and hence for the sake of convenience, they were taken up and heard together and are being disposed of by this common order.
(2.)These appeals earlier came up for hearing before the Appellate Tribunal, 'B' Bench, Calcutta which found that on the question as to whether a private discretionary trust whose beneficiaries or their shares are indeterminate or unknown, should be assessed in the status of an association of persons or an Individual, there was a conflict of decisions between different Benches of the Tribunal. It was noted by the Bench that in the cases of Educational Trust Fund v. ITO [1985] 12 ITD 563 (Hyd.), First ITO v. Daxa A. Patel (P.) Bel. Trust [1986] 17 ITD 263 (Bom.) and First ITO v. Radhasaran (P.) Religious Trust [1986]17 ITD 372 (Bom.) it was held that a private discretionary trust should be assessed in the status of an individual for the purposes of giving relief under Section SOL of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). On the other hand, the decision of the Tribunal in Fifth ITO v. D.M.C.C. Employees Medical Aid Trust [1987] 22 ITD 273 (Bom.) held that the status in such a case should be that of an Association of Persons. The Bench vide its order dated 1-12-1987 accordingly referred the following question to the President of the Income-tax Appellate Tribunal for constituting a larger Bench under Section 255(3) of the Act in order to resolve conflict:
Whether in a case of private discretionary trust whose beneficiaries or their shares are indeterminate or unknown the status under which it should be assessed should be taken as 'Association of Persons' or 'Individual' ?

The President constituted a Special Bench to hear these appeals.

The assessment year involved in these appeals is 1984-85. The assessee in each case is a private discretionary trust. In the case of Shri Krishna Bhandar Trust the trust was created by a deed of settlement dated 26-3-55 executed by Smt. Rukmini Devi Birla, wife of Sri B.M. Birla. Under this trust the settlor settled a sum of Rs. 1,000 for the objects purposes enumerated in the deed of settlement. The settlor appointed two trustees. Clause 3 of the deed of settlement runs as under :

3. The Trustees shall hold the Trust properties and shall from time to time apply the whole or part of the income and/or whole or part of the corpus of the Trust properties for the maintenance, education, marriage, medical relief of and for transfer to and/or otherwise applying for the absolute use, benefit and enjoyment of Shri Ganga Prasad Birla, his wife, sons and grandchildren, whether now living or hereafter to be born, hereinafter referred to as the 'Beneficiaries', in such proportion or shares as the Trustees may in their absolute discretion think fit and proper and upon the death of the survivor of the Beneficiaries now living namely Shri Ganga Prasad Birla, his wife Srimati Nirmala Devi Birla and his son Shri Chandrakant Birla the Trustees shall divide and hand over the Trust properties or so much thereof as may then remain in their hands amongst and transfer to the then living male descendants in the male line of Shri Ganga Prasad Birla absolutely in equal proportion or in such other proportion as may be mutually agreed by them amongst themselves and in the event of none of the male descendants in the male line of Shri Ganga Prasad Birla living at the aforesaid time the Trustees shall divide and hand over the Trust properties amongst and transfer to the other than living descendants of Shri Ganga Prasad Birla absolutely in such proportion or shares as the Trustees may in their discretion decide.

(3.)CLAUSE 3 of the deed of settlement thus shows that individual shares of the beneficiaries are indeterminate or unknown and hence the trust created by the settlor is a discretionary trust. In the other three oases, three separate trusts were created by three deeds of settlement each dated 30th March, 1962. Trusts known as Chandra Kant Trust and Chandra Lekha Trust were created under deeds of settlement executed by Sri B.M. Birla and the third trust, namely Shashi Kant Trust was created under the deed of settlement executed by Smt. Rukmini Devi Birla. wife of Sri B.M. Birla. Relevant terms of these three deeds of settlement are similar to the terms of the deed of settlement dated 26-3-1955 executed by Smt. Rukmini Devi Birla except that different persons were appointed as trustees. Trusts created under the deeds dated 30-3-1962 are also private discretionary trusts inasmuch as shares of beneficiaries are indeterminate and unknown.


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