A.K. Mathur, C.J.
1. This is an income-tax reference at the instance of the Revenue under Section 256(1) of the Income-tax Act, 1961. The Tribunal has referred the following three questions of law for answer by this court :
' (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the Commissioner of Income-tax (Appeals) who directed to make two separate assessments for the periods from January 1, 1981, to June 30, 1981, and July 1, 1981, to December 31, 1981 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the Commissioner of Income-tax (Appeals) who held that the first trust executed on August 1, 1978, was validly extinguished on July 1, 1981 ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the trust created on July 1, 1981, could not be said to be unlawful not to apply the provisions of Section 161 of the Income-tax Act, 1961 ?'
2. The brief facts giving rise to this reference are that the assessee-trust had filed its return on June 29, 1981, declaring 'nil' income. The Assessing Officer rejected the claims of the assessee that two separate assessments were required--one for the period from January 1, 1981, to June 30, 1981, and the other for the period from July 1, 1981, to December 31, 1981, and that the beneficiaries were to be taxed directly under Section 161 of the Income-tax Act, 1961. Against the order of the Assessing Officer, the assessee went in appeal to the Commissioner of Income-tax (Appeals), who considered the claims of the assessee and allowed the appeal. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the Department approached the Tribunal and the Tribunal, after hearing the parties, affirmed the finding of the Commissioner of Income-tax (Appeals). Thereafter, the Department approached the Tribunal for referring the aforesaid questions of law to this court for answer. The Tribunal has consequently referred the said questions of law for answer by this court.
3. Truly speaking, questions Nos. (1) and (2) which have been raised by the Department, were nowhere agitated seriously. Before we answer questions Nos. (1) and (2), it is relevant to mention here that the first trust was created on August 1, 1978, in the name and style of Dharampal Family Trust by one Shri R. K. Jindal, son of Bhagwan Das, and the deed of settlement was executed appointing Dharampal and Smt. Karuna Bansal as trustees. The beneficiaries of the trust who had their shares were as under :
(1) Smt. Karuna Bansal, w/o, Dharampal Bansal,
(2) Kumari Sheetal Bansal, and
(3) Master Rajnish Bansal.
4. This trust continued for the assessment year 1981-82. The assessment was duly completed and the beneficiaries were directly taxed under Section 161 of the Act. This trust came to an end on June 30, 1981, and an intimation to this effect was given to the Income-tax Officer, Bhilai, on July 30, 1981. Another trust was created by Bhawarlal Surana on July 1, 1981, under the deed of settlement executed on the same date, in the name and style of Dharampal Family Trust, appointing Dharampal Bansal and Smt. Karuna Bansal as trustees. The beneficiaries of this trust were as under :
(1) Smt. Karuna Bansal, w/o. Shri Dharampal Bansal.
(2) Kumari Sheetal Bansal (minor), d/o. Dharampal Bansal.
(3) Master Rajnish Bansal (minor), son of Dharampal Bansal.
(4) Master Rahul Bansal (minor), son of Dharampal Bansal.
(5) Any other male or female issue of Dharampal Bansal.
(6) Any limited company or association of persons in which any of the family members of Dharampal Bansal is interested as director, or shareholder or member, as the case may be.
(7) Any public charitable trust or institution or scientific research institutions for the time being recognised and enjoying exemption under direct tax laws.
5. Shri V.K. Tankha, learned counsel for the Revenue, submitted that, in fact, the first trust could not be extinguished since as per Section 78 of the Trusts Act, it can only be extinguished after the beneficiaries are competent to contract and with their consent. It is also pointed out from the trust deed that there is specific stipulation in the trust deed that the trust is irrevocable. Therefore, learned counsel submitted that this trust is deemed to have survived and it had to be assessed on its own income and there would be a separate assessment order for this trust. It is true that as per Sections 77 and 78 of the Trusts Act, read with paragraph (6) of the deed of settlement of 1978 which stipulates that the trust created by the settlor was irrevocable, it transpires that the trust cannot be revoked unless the beneficiaries attain majority and consent to the same. But that is not the case here. As the trust had not been extinguished either in terms of Section 78 of the Trusts Act, or otherwise also, no useful purpose would be served in giving a finding that the trust survives, for the reason that all the corpus of the trust was withdrawn and then invested in another trust which had been created in 1981. The Tribunal in this background has affirmed the finding of the Commissioner of Income-tax (Appeals) where the Commissioner of Income-tax (Appeals) has observed that the Inspecting Assistant Commissioner (Assessment) should make two separate assessments--one for the period from January 1, 1981, to June 30, 1981, and the other for the period from July 1, 1981, to December 31, 1981. Even if we accept the argument of Shri Tankha, learned counsel for the Revenue, that the earlier trust of August 1, 1978, still survived, no useful purpose would be served because the old trust had become defunct and its corpus was taken by the trustees and a new trust in which seven beneficiaries were inducted, was created. Out of these seven beneficiaries, three are common. In this view of the matter, we are of the opinion that both the questions Nos. (1) and (2), though not specifically agitated by the Department, are answered against the Revenue and in favour of the assessee.
6. Coming to the third question whether the trust created on July 1, 1981, has been rightly assessed under Section 161 of the Act or not, it may be mentioned that the Tribunal has confirmed the finding of the Commissioner of Income-tax (Appeals) and we do not take a contrary view. The second trust has come into existence and the benefits arising out of the shares of seven beneficiaries had been determined. Therefore, this trust has to be assessed in a representative capacity under Section 161 of the Act and it has been done by the Tribunal. Hence, we answer question No. (3) in favour of the assessee and against the Revenue.
7. Accordingly, all the three questions are answered against the Revenue and in favour of the assessee.