VijayavrgIya, J.
1. By this reference under Section 256(1) of the I.T. Act, 1961, the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following questions of law for the opinion of this court:
'(1) Whether, on the facts and in the circumstances of the case, the income being below Rs. 5,000 in the assessment years 1971-72 to 1973-74, there was any liability to tax in view of the provisions of Paragraph A of Part I of the First Schedule to the Finance (No. 2) Act, 1971, and corresponding provisions in the Finance Acts of 1972 and 1973 ?
(2) Whether, on the facts and in the circumstances of the case, the income of the trust could be charged to tax at the rate of 65% as provided under Section 16 of the Income-tax Act, 1961
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the supplementary deed of declaration dated March 14, 1971, is void and ineffective
(4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the shares of the beneficiaries are indeterminate and unknown ?'
2. The material facts giving rise to this reference as set out in the statement of the case are as follows : The assessee is a private family discretionary trust with the status of an ACP. The assessment years involved are 1971-72, 1972-73 and 1973-74. The accounting periods respectively ended on December 31, 1970, December 31, 1971, and December 31, 1972. The income charged to tax amounted to Rs. 3,780, Rs. 1,760 and Rs. 1,670 for the assessment years 1971-72 to 1973-74, respectively. In view of the amendment of Section 164 with effect from April 1, 1971, by the Finance Act, 1970, the ITO elected to tax the income of each year at the rate of 65% on the facts hereinafter stated.
3. One Shri Piarelal gave an amount of Rs. 20,000 in cash on October 1, 1963, to Smt. Tejwati Devi, Smt. Kalavati Devi and Smt. Sumitra Devi in the capacities of trustees and the trustees executed a deed of declaration of trust on October 4, 1963, and a supplementary deed was executed on March 14, 1971, by the aforesaid trustees and one Ratanlal, who was subsequently co-opted as a trustee by the other three trustees. In the original deed of trust the object of the trust, for which a gift of a sum of Rs. 20,000 was made, was stated as providing the means for meeting the obligations as a maternal grandfather in relation to the issues of Smt. Sumitra Devi Ganediwal. Smt. Sumitra Devi is the daughter of the settlor, Piarelal Sakseria. It was further stated in the said deed that the gift had been accepted by the three persons, Smt. Tejwati Devi, Smt. Kalavati Devi and Smt. Sumitra Devi, in the capacity of trustees for the purposes mentioned in the preamble, clause No. 2 of the deed. In Clause 17 of the deed it is stated that the object of the trust shall be deemed to have been finally fulfilled when the obligations in relation to the last issue of Smt. Sumitra Devi were fully satisfied on his or her attaining the age of 21 years. Clause 16 laid down that the trustees shall hand over the balance of the trust money in their hands to Smt. Sumitra Devi Ganediwal when the objects of the trust were finally fulfilled. In the supplementary deed of trust a change was introduced to the effect that Shri Piarelal Sakseria at the time of making the gift had expressed that the amount was for meeting the obligations as a maternal grandfather in relation to theissues of Smt. Sumitra Devi Ganediwal, viz.: (1) Ch. Sandeep Kumar, and (2) Ch. Kumari Suneeta equally. Clause (4) of this supplementary deed provided that the trustees shall hold the corpus and the income accruing thereon equally in the respective names of the beneficiaries, viz., Ch. Sandeep Kumar Ganediwal and Ch. K. Suneeta Ganediwal, issues of Smt. Sumitra Devi, for the fulfilment of the obligations and the general welfare and advancement in life of the respective beneficiaries. The ITO taxed the income of the assessee at 65% holding that the shares of the beneficiaries were indeterminate and unknown as per the original trust deed dated October 4, 1963, and the supplementary deed dated March 14, 1971, was of no avail as there was no provision in the original deed dated October 4, 1963, authorising the trustees to make amendment in the original trust deed. On appeal by the assessee, the AAC held that the supplementary deed of declaration which sought to make the shares of the beneficiaries determinate was ineffective and as both the number of beneficiaries and their shares were indeterminate the provisions of Sub-section (2) of Section 164 of the Act was clearly applicable. The contention of the assessee that as the income of the assessee was less than Rs. 5,000 it was exempt from income-tax was also negatived. The further appeals of the assessee to the Income-tax Appellate Tribunal were also dismissed. At the instance of the assessee, the Tribunal has referred the aforesaid questions of law for the opinion of this court.
4. Before considering the contentions raised by the learned counsel for the parties it is useful to reproduce the relevant provisions of Section 164 of the Act. Section 164(1), as amended by the Finance Act, 1970, is as follows:
'164. (1) Subject to the provisions of Sub-sections (2) and (3) where any income in respect of which the persons mentioned in Clauses (iii) and (iv) of Sub-section (1) of Section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as 'relevant income', 'part of relevant income' and 'beneficiaries', respectively), tax shall be charged-
(i) as if the relevant income or part of relevant income were the total income of an association of persons, orp1
(ii) at the rate of sixty-five percent.,
whichever course would be more beneficial to the revenue:...'
5. The proviso and the other provisions of the said section are not relevant for the purposes of this reference.
6. It cannot seriously be disputed that the individual shares of the persons on whose behalf or for whose benefit the income was receivable by the assessee in the original deed of trust are indeterminate or unknown and the beneficiaries and their individual shares were made determinate and known by the provisions of the supplementary deed of trust executed by the trustees. If the supplementary deed of trust is effective the provisions of Section 164(1) of the Act would not be attracted. Therefore, the learned counsel for the assessee strenuously contended that the view taken by the Tribunal that the supplementary deed of trust was void and ineffective was not correct in law and the assessment of the assessee under Section 164(1) of the Act was unsustainable. The contention of the learned counsel for the assessee cannot be upheld. Although the original deed of declaration of trust was not executed by the settlor, Shri Piarelal Sakseria, and it was executed by the trustees it was provided in the deed that the approval of Piarelal, the donor of the gift, to the terms of this trust deed be obtained and recorded. It is apparent from this deed of trust that Shri Piarelal Sakseria made a gift of a sum of Rs. 20,000 for providing the means for meeting his obligations as the maternal grandfather in relation to the issues of Smt. Sumitra Devi. It was further provided in the deed that the object of the trust should be deemed to have been finally fulfilled when the obligations relating to the last issue of Sumitra Devi were fully satisfied on his or her attaining the age of 21 years. If the gift of Rs. 20,000 by the donor, Shri Piarelal Sakseria, was for the benefit of all the issues of Smt. Sumitra Devi and the trust was irrevocable, the trustees had no right to vary the terms of the trust and to provide that the beneficiaries shall be only Ch. Sandeep Kumar and Kumari Suneetha, son and daughter of Smt. Sumitra Devi. The beneficiaries in the original deed of trust were all the issues of Smt. Sumitra Devi and, therefore, the trustees had no power to restrict the beneficiaries to the two issues of Sumitra Devi namedin the supplementary deed of trust executed by the trustees.
7. Under Section 11 of the Indian Trusts Act the trustee is bound to fulfil the purpose of the trust and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract. In the circumstances, the Tribunal has not committed any error of law in coming to the conclusion that the supplementary deed of trust executed by the trustees was ineffective and the trustees could not vary the terms of the original deed of trust. The learned counsel for the assessee was unable to point out any provision of law under which the trustees had the power to vary the terms of the original deed. In this view of the matter the answer to question No. 3, which is the real question, arising in the reference has to be in the affirmative and against the assessee.
8. Regarding question No. 1 the learned counsel for the assessee contended that as the income of the assessee was below Rs. 5,000 in each assessment year it was exempt from tax and, therefore, it could not be taxed under the provisions of Section 164 of the Act. The contention of the learned counsel for the assessee cannot be upheld. If the provisions of Section 164 of the Act are attracted power is given to the ITO to charge the tax as if the relevant income or part of the relevant income were the total income of an association of persons or at the rate of sixty-five percent., whichever course would be more beneficial to the revenue. As in the present case it was beneficial to the revenue to charge the tax at the rate of 65%, it has been so charged and it cannot be said that any error of law has been committed by the taxing authorities in doing so. Question No. 1, therefore, has to be answered against the assessee.
9. Regarding questions Nos. 2 and 4 the learned counsel for the assessee contended that it cannot be said that in any given assessment year the shares of the beneficiaries in the original deed of trust were indeterminate and unknown and, therefore, the provisions of Section 164(1) of the Act were not attracted. He contended that it can be found out as to who were the beneficiaries in any assessment year and, in the absence of any provision regarding the share of the beneficiaries, their share would be presumed to be equal. He placed reliance upon the decisions in CIT v. Pulin Behari Dey : [1951]20ITR314(Cal) and CIT v. Smt. Ashalata Devi : [1951]20ITR326(Cal) . The contention of the learned counsel for the assessee cannot be upheld. From the terms of the original deed of trust it is quite clear that the number of beneficiaries therein are indeterminate and unknown and, therefore, their shares are also indeterminate and unknown. The fact that in a given assessment year the number of the beneficiaries can be determined does not make any difference. The cases referred to by the learned counsel for the assessee are distinguishable on facts and does not help the assessee. In this view of the matter, questions Nos. 2 and 4 have to be answered in the affirmative and against the assessee.
10. As a result of the discussion aforesaid, our answers to questions referred to us are as follows: Question No. 1, on the facts and circumstances the case, the income being below Rs. 5,000 in the assessment years 1971-72 to 1973-74, it was liable to tax in view of the provisions of Section 164(1) of the Act, the provisions of Para. A of Pt. I of the First Schedule to the Finance (No. 2) Act 1971, and the corresponding provisions in the Finance Acts of 1972 and 1973 notwithstanding.
11. Questions Nos. 2, 3 and 4 are answered in the affirmative and against the assessee. In the circumstances of the case, there shall be no order as to costs of this reference.