Commissioner of Income Tax vs Sitalakshmi

At the instance of the Department, the Tribunal referred the following question for the opinion of this court u/s 256(2) of the Income Tax Act,

1961:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the income from ''Sitalakshmi Trust''

should not be included in the hands of the assessee-minor?

In the assessment year 1977-78, Shri R. V. Bhuvanesh created a trust known as ""Baby Sitalakshmi Trust"" by a deed dated February 5, 1976,

for the benefit of the assessee-minor. According to the trust deed, the settlor settled a sum of Rs. 3,000 in the trust for the benefit of his minor

niece, Sitalakshmi. The assessee objected to the inclusion of the trust income in her hands on the ground that according to clauses 11 and 12 of the

trust deed, the corpus and income of the trust were to be accumulated and paid over to Sitalakshmi, the assessee-beneficiary only on her attaining

the age of 18 years and in case she dies before attaining the age of 18 years, the corpus and income will be handed over to her legal heirs.

According to the assessee, since she did not attain the age of 18 years during the relevant accounting year ended on March 31, 1977, the trust

income could not be taxed in her hands. In support of this contention reliance was placed upon the decision of the Bombay High Court in the case

of Yogindraprasad N. Mafatlal Vs. Commissioner of Income Tax, Bombay City-I, . However, the Income Tax Officer held that the income of Rs.

60,921 arising to the trust should be included in the assessee''s total income. On appeal, the Commissioner of Income Tax (Appeals) accepted the

contention put forward by the assessee and deleted the addition. On further appeal, the Tribunal upheld the order passed by the Commissioner of

Income Tax (Appeals).

The conclusion arrived at by the Tribunal is in accordance with the Supreme Court''s decision in the case of Commissioner of Income Tax,

Gujarat Vs. M.R. Doshi (Dead) by Lrs., . In this decision, the Supreme Court approved the decision of the Bombay High Court in

Yogindraprasad N. Mafatlal Vs. Commissioner of Income Tax, Bombay City-I, Accordingly, we answer the question referred to us in the

affirmative and against the Department. There will be no order as to costs.