JUDGMENT
Bhaskar Rao, J.
1. In this reference made under section 256 (1) of the Income-tax Act, 1961, the Tribunal has referred the following question for our determination :
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that only a sum of Rs. 18,000 could be brought to tax under section 160(1) and that the balance of income from the share fund could not be taxed ?”
2. The facts of the case in brief are : Nawab Sir Mir Osman Ali Khan Bahadur, the Nizam of Hyderabad, created a trust of three properties, namely, (i) jewellery mentioned in the first schedule of the trust deed, (ii) 5% tax-free cumulative preference shares in Greaves Cotton and Company Ltd. of the face value of Rs. 4,00,000, and (iii) a sum of Rs. 75,000 in cash for residence (for brevity the above three are called “the jewellery, the shares and the residence funds”, respectively). In this reference, we are concerned with the share fund only. The trust is called “Sahebzadi Anwar Begum’s Trust”. Clause 5(a) of the trust deed declares that until the death of Sahebzadi Anwar Begum, wife of Prince Muazzam Jah Bahadur (son of the Nizam), or until she was divorced from Prince Muazzam Jah Bahadur or until her remarriage, whichever event takes place first, the said Anwar Begum shall be paid a sum of Rs. 1,500 per month out of the income of the share fund and the balance of the income was to be accumulated. However, the trustees are vested with the absolute discretion to pay or spend out of the said accumulations for any unforeseen emergency or other necessary expenses of the said Anwar Begum. Sub-clauses (b) and (c) of clause 5 indicate the line of succession of the rights of the beneficiary in the event of death, divorce or remarriage of the said Anwar Begum. For the assessment years 1977-78 and 1978-79, the trustees as “representative assessees” were assessed to tax by the Income-tax Officer on the entire income from the share fund under section 160(1)(iv) of the Income-tax Act on the ground that the beneficiary – Anwar Begum – is entitled to receive the said income. Having failed before the Appellate Assistant Commissioner, the assessees preferred a second appeal before the Appellate Tribunal. The Tribunal held that excepting the amount of Rs. 1,500 per month which the beneficiary is entitled to receive, the other income received from the share fund is not exigible to tax. Hence, this reference.
3. Learned standing counsel for the Revenue contended that as per clause 5(a) of the trust deed, the beneficiary is entitled to receive the entire income from the share fund, and not merely the sum of Rs. 1,500 as specified therein, to meet emergency and other necessary expenses and that, therefore, the entire income is assessable to tax. To appreciate this contention, it is necessary to have a look at section 160(1)(iv) of the Income-tax Act, which is as under :
“160. Representative assessee. – (1) For the purposes of this Act, “representative assessee” means – …
(iv) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913)); receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees.”
4. In support of his contention that the beneficiary is entitled to the entire income from the share fund, learned standing counsel sought to place reliance upon certain observations made by this court in an earlier matter in CWT v. Nizam’s Sahebzadi Anwar Begum Trust . No doubt, that decision is in respect of the same trust. The observations referred to are (p. 818) :
“The question before us is, when she is paid Rs. 1,500 per month (Rs. 18,000 per year) from out of the income of this shares fund, what would be her interest in the shares fund available for being charged to wealth-tax and whether such assessment should be under section 21(1) or section 21(4) of the Wealth-tax Act. So far as the reading of clause 5 (a) of the trust deed goes, the entire income and the accumulations thereon from out of the shares fund (apart from Rs. 18,000 per year) could be utilised for her benefit if it becomes necessary. To put it in other words, no right or interest is created in any third person in the shares fund so long as she is alive, not divorced or shall not remarry. Therefore, it is clear that she has interest in the entire shares fund and not only to a proportion of it, which fetches an income of Rs. 18,000 per year.”
5. As seen, the question therein was the extent of share fund in which the beneficiary had interest for being charged to wealth-tax. The orientation thus was from a different angle. Further, it was under a different law, viz., the Wealth-tax Act. The observations were made in the context of finding out whether it is under section 21(1) or 21(4) of the Wealth-tax Act that the assessee was to be charged. Apart from all this, it was ultimately held by this court in that decision (p. 819) :
“… when annuity to be paid is Rs. 18,000 per year for her life, the actuarial valuation of the life interest has to be calculated on that basis and not in proportion to her interest in the income from the shares fund.”
6. Thus, though it was observed that the beneficiary was having an interest in the entire share fund, the whole fund was not charged to wealth-tax. We, therefore, do not find much substance in this argument advanced by pressing into service the observations noted above.
7. Learned standing counsel next contended that apart from Rs. 18,000 per year which the beneficiary is entitled to receive, clause 5(a) of the trust deed authorises payment of amounts for unforeseen emergency or other necessary expenses of the beneficiary thereby rendering the beneficiary entitled to the whole income from the share fund, in which event as per section 160(1)(iv) itself, the assessees would be liable to be assessed for the entire income from the share fund.
8. To examine the contention of learned counsel, it is necessary to refer to sub-clauses (a) and (b) of clause 5 of the trust deed :
“(a) Until the death of the said Sahebzadi Anwar Begum or until she shall have been divorced from the said Prince Muazzam Jah Bahadur or until she shall remarry some other person whichever of the three events shall take place first, to pay to her a sum of Rs. 1,500 (rupees one thousand and five hundred only) per month out of the income of the shares fund and to accumulate the balance of the income thereof with liberty to the trustees to pay to or spend after the said Sahebzadi Anwar Begum such monies from time to time out of the accumulations of the balance of the said income as the trustees may, in their absolute discretion, think fit for any unforeseen emergency or other necessary expenses of the said Sahebzadi Anwar Begum.
(b) On and after the death of the said Sahebzadi Anwar Begum or on and after she shall have been divorced from the said Prince Muazzam Jah Bahadur or on and after her remarriage as aforesaid, whichever of the three events shall take place first, to hold and stand possessed of the shares fund and the unspent accumulations of the balance of the income thereof then in their hands and the investments thereof (all of which are for the purposes of this sub-clause included in the expression ‘the Shares Fund’) upon the trusts following, namely :-
(i) To pay and divide the net income of the shares fund amongst the children and other issues howsoever remote of the said Sahebzadi Anwar Begum by the said Prince Muazzam Jah Bahadur per stirpes from generation to generation in the proportion of two shares for every male to one share for every female standing in the same degree of relationship so that no person shall take a share in the net income of the shares fund as long as his or her parent entitled to a share under this sub-clause shall be alive and so that person standing in the same degree of relationship shall take between themselves in the proportion mentioned above their respective parent’s share and so on from generation to generation.
(ii) On the failure of any child or children or other remote issue of the said Sahebzadi Anwar Begum by the said Prince Muazzam Jah Bahadur to pay the net income of the shares fund to the said Prince Muazzam Jah Bahadur for and during the term of his natural life.
(iii) On and after the death of the said Prince Muazzam Jah Bahadur to pay the net income of the shares fund to the settlor’s eldest son, Prince Azam Jah Bahadur, for and during the term of his natural life.
(iv) On and after the death of the said Prince Azam Jah Bahadur to pay and divide the net income of the shares fund amongst the children and other remote issue of the said Prince Azam Jah Bahadur by his wife, Princess Durre-Shehavar, per stirpes from generation to generation in the proportion of two shares for every male to one share for every female standing in the same degree of relationship and so that no person shall take a share in the net income of the shares fund as long as his or her parent entitled to a share under this sub-clause shall be alive and so that persons standing in the same degree of relationship shall take between themselves in the proportion mentioned above their respective parent’s share and so on from generation to generation.”
9. The above clauses of the trust deed clearly show that the beneficiary is entitled to Rs. 1,500 per month (Rs. 18,000 p.a.) regularly and apart from this amount, she can also claim any other amounts to meet any unforeseen emergency or other necessary expenses. The trustees have got absolute discretion to grant such sum or not. Thus, the beneficiary is entitled to receive any sums granted by the trustees to meet any unforeseen emergency or other necessary expenses apart from Rs. 18,000 p.a. as per the clauses of the trust deed. The balance income thereof accumulates with the shares fund and after death, or divorce or remarriage of Sahebzadi Anwar Begum, the fund goes in the line of succession indicated in the sub-clauses (b) and (c) of clause 5 of the trust deed but, however, she is not entitled to the entire income of the shares fund. Therefore, it cannot be said that she is entitled to receive the entire income of the shares fund. Therefore, the contention of learned counsel for Revenue is not tenable.
10. It is next contended by learned standing counsel that as per the definition of “income” given in section 2(24)(iva), it includes :
“the value of any benefit or perquisite, whether convertible into money or not, obtained by any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the ‘beneficiary’) and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary.”
and, therefore, the entire income from the shares fund must be deemed to be for the benefit of the beneficiary so as to render it exigible to tax. It is to be noticed that this definition in clause (24) (iva) was inserted by the Finance (No. 2) Act, 1980, for being effective from April 1, 1980, whereas we are concerned with the assessment years 1977-78 and 1978-79. Therefore, this submission is of no help.
11. It is finally contended by learned standing counsel for the Revenue that even a plain reading of section 160(1)(iv) reveals that the trustees are liable to be assessed for the actual amounts received by the beneficiary and since it is not disputed that the beneficiary, apart from Rs. 18,000 per year, received certain amounts for unforeseen emergency or other necessary expenses, such amounts including the specified amount of Rs. 18,000 per year should be rendered liable to be assessed to tax. We find sufficient substance in this argument of learned counsel. As rightly submitted, section 160(1)(iv) contemplates the income received or entitled to be received on behalf or for the benefit of the beneficiary. The amount received, apart from Rs. 18,000 per year, by the beneficiary is also, therefore, exigible to tax.
12. Mr. Ratnakar, learned counsel for the assessee, contended that the amount over and above Rs. 18,000 per year is at the discretion of the trustees – they may grant or refuse the request for additional amount – and, therefore, even if some amount is granted, such a sum cannot be added to the specified amount of Rs. 18,000 for being assessed to tax. We may straightaway observe that no doubt it is a matter of absolute discretion of the trustees but the fact remains that, as per that discretion, the beneficiary received certain sums over and above Rs. 18,000 per year. Learned counsel also sought to place reliance upon a decision of the Bombay High Court in CIT v. Hemant Bhagubhai Mafatlal . That was a case where the trustees were enjoined to apply income for support, maintenance, education and advancement of the beneficiary and no amount as such was specified. The assessee was the sole beneficiary and no indication as regards the line of succession or the rights of the beneficiary appears to have been made in the trust deed. The discretion of the trustees there was absolute besides being immune from being questioned by anyone. Further, there was no power in the trustees therein to accumulate the income or any part thereof and add the same to the corpus of the trust. The terms of the trust deed in the case on hand are altogether different. There is a definite amount specified in the deed to which the beneficiary is entitled, there is an indication as regards the line of succession and there is power vested in the trustees to accumulate the income from the shares fund. The indefinite portion of the amount is only in relation to unforeseen emergency or other necessary expenses of the beneficiary. Therefore, the analogy of that decision cannot be extended to the instant case.
13. Learned counsel also sought to place reliance upon another decision of the Bombay High Court in Maharani Shri Vijaykunverba Saheb of Morvi v. CIT . That was a case concerned with the assessment under section 16 (3) (b) of the Indian Income-tax Act, 1922, which corresponds to section 64 (1) of the present Act. There, the father who created a trust in favour of his minor son, was assessed to tax on the income of the trust under section 16 (3) (b) of the repealed Act of 1922. The Tribunal, on facts, found that the trust deed provided in clause 4 for the accumulation of the income of the trust funds, in clause 5 for application of the accumulated income for purposes of education, etc., of the minor, in clause 6 to spend certain amounts at the time of betrothal and marriage ceremonies of the minor and in clause 7 to transfer the trust funds to the minor on his attaining 21 years. The Tribunal also found that no part of the income was utilised as provided in clause 5 or clause 6. The Bombay High Court, therefore, found the Tribunal to be right in taking the view that in none of the assessment years, the income of the trust could be added on to the income of the assessee under section 16 (3) (b) of the Indian Income-tax Act, 1922. The facts, as seen therein, are entirely different from those on hand and, therefore, that decision is of no assistance to the assessees. We, therefore, hold that apart from Rs. 18,000 per year, the amount received by the beneficiary in each of the assessment years is also liable to be assessed to tax under section 160(1)(iv) of the Income-tax Act, 1961. The reference is accordingly answered. No costs.