COMMISSIONER OF INCOME TAX Vs. GANGADHAR SIKARIA FAMILY TRUST

JUDGEMENT

(1.) THIS batch of four cases are referred for the opinion of this Court under S. 256(1) of the IT Act, 1961 (hereinafter referred to as, "the Act"), at the instance of the CIT, North Eastern Region, Shillong. The facts and the questions referred in all the four cases are identical and, therefore, we propose to dispose of these cases by a common judgment. The questions referred are as follows:

(2.) AS the facts in all the four cases are identical, although the parties are different, we may refer only to the facts of the IT Ref. No. 3 of 1977. From the statement of the IT Ref. No. 3 of 1977, the following material facts emerge :

(3.) A HUF consisting of Shri Gangadhar Sikaria (Karta), his wife, Smt. Devi, his major son, Bhagawati Prasad Sikaria, and his minor sons, Santosh Kumar, Ramautar and Ashok Kumar, was the owner of the rice mill known as Shri Shankar Rice Mill, situate at Udalguri in the district of Darrang, Assam. The members of the HUF, viz., (1) Sri Gangdhar Sikaria for himself and as the guardian of his minor sons (2) Smt. Sita Devi Sikaria (wife), and (3) Bhagawati Prasad Sikaria (major son) formed themselves into a partnership, in the name and style of Shri Shankar Rice Mill under registered partnership deed dated the 17th April, 1959, for the purpose of carrying on the business of running the said mill and also a ridging machine under the name and style of Shri Ganga Industries at Gauhati. The joint family was also owning a building at Ulubari in Gauhati. Being desirous of creating a trust in respect of the aforementioned family properties, (1) Sri Gangadhar Sikaria on behalf of himself and as the natural guardian of his minor sons, (2) his wife, Smt. Sita Devi Sikaria, and, (3) his eldest son, Bhagawati Prasad Sikaria executed a registered trust deed dated April 19, 1964. By the said document the aforementioned settlors created a trust known as Gangadhar Sikaria Family Trust and continued themselves as the trustees of the said trust. The family properties specified in Shdls. A, B and C appended to the deed had been transferred and assigned to the trustees to be held by them in trust for the personal benefit of the beneficiaries specified in the deed, namely, Smt. Sita Devi Sikaria (wife of the Karta), Sri Bhagawati Prasad Sikaria (major son of Karta) and the minor sons of the Karta, namely, Santosh Kumar, Ramautar and Ashok Kumar, and also for the benefit of the sons of the Karta to be born thereafter, equally in their individual capacity. It may be noted here that the Karta is the only member of the HUF, excluded from the benefit of the trust and barring the Karta all the other members of the HUF are the beneficiaries of the trust. It is provided in the trust deed that the partnership hitherto carrying on business in the name and style of M/s Shri Shankar Rice Mill at Udalguri and in the name and style of M/s Ganga Industries at Gauhati shall cease to function and the said business shall belong to the trust with all its assets and liabilities as per books account save and except the investment of capital in Sikaria Brothers in the name of Gangadhar Sikaria and the taxation liabilities and other liabilities not appearing in the books of account. Clause 5 of the trust deed provides that the net income of the trust shall be divided equally among the beneficiaries, viz., Smt. Sita Devi Sikaria, Bhagawati Prasad Sikaria and the minor sons of Gangadhar Sikaria, and that any son to be born to him after the commencement of the trust shall also be entitled to an equal share of the income of the trust but in case of loss the same shall be borne equally by the major beneficiaries and the minor beneficiaries shall not be liable for the losses.