Commissioner of Income-tax Vs. Princess Trivikrama Kumari - Court Judgment

V.K. Singhal, J.

1. The Income-tax Appellate Tribunal has referred the following question of law arising out of its order dated June 18, 1983, in respect of the assessment years 1977-78 to 1981-82 under Section 256(1) of the Income-tax Act, 1961 :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee had only contingent interest in the trust and did not have vested interest and, therefore, no income accrued, and consequently in deleting the addition of Rs. 12,000 made by the Income-tax Officer ?'

2. The brief facts of the case are that Shri Bhagwat Singhji, the former Ruler of Mewar State, created a trust known as 'Mewar Raj Kutomb Trust'. The assessee, Princess Trivikrama Kumari, who is the daughter of the settlor, is one of the beneficiaries of the said trust having 1/2 share. The interest income of Rs. 12,000 each of the shares of the assessee for the years under appeal was credited to her account. The Income-tax Officer took the view that the interest income accrued to the assessee and, therefore, it was assessable.

3. In appeal before the Appellate Assistant Commissioner, it was pointed out that no income has accrued to her. The amount of Rs. 2 lakhs was settled by Bhagwat Singhji and the interest was to be accumulated and in the event of the appellant marrying, then after defraying the expenses the amount standing to the credit of the appellant was to be paid to her and until the marriage the appellant was not entitled to receive anything and the amount of interest was to be accumulated to the corpus of the trust fund, and, therefore, being a contingent interest the income was not assessable in her hands. The Appellate Assistant Commissioner found that the appellant was entitled to the amount only if she marries and till then the interest was only a contingent interest. She was entitled to receive the corpus along with the accumulations. Relying on the decision of the Gujarat High Court in the case of Addl. CIT v. M. K. Doshi : [1980]122ITR499(Guj) it was held that the appellant had only a contingent interest and was not having vested interest and therefore no income has accrued to her. The matter was challenged before the Income-tax Appellate Tribunal where opportunity was given to the Revenue by producing the trust deed or any other material to show as to whether the assessee was entitled to receive the income even prior to her marriage, but the Revenue has failed to produce any evidence in respect thereof. Since the contingent event in the present case was the marriage of the beneficiary it was held that the Appellate Assistant Commissioner has rightly held that the income is not assessable in the hands of the assessee.

4. The arguments of learned counsel for the petitioner have been heard. In the present matter, a finding has been recorded that the assessee was having only a contingent interest. No document has been produced or brought to our notice from which it could be said that the interest of the assessee was not contingent. Even otherwise, it is a finding of fact and it cannot be said that the said finding is not in accordance with law. The Gujarat High Court in the case of M. K. Doshi : [1980]122ITR499(Guj) has held that (at page 505) :

'The cumulative effect of the relevant clauses as stated in the two indentures of trust read with the supplementary deed of trust by which the first indenture was amended, is that the income was to be accumulated till the attainment of majority by each of the sons, and the respective share of each of the sons is to be paid and handed over to him as and when he attains the majority. The accumulated income, therefore, would be naturally, at the end of every year, capitalised and when available to the respective sharers, would be more in the nature of capital and, therefore, a corpus and it, therefore, loses its characteristic of being an income.'

5. If the income is contingent on the happening of anything or any event, it cannot be said to have accrued till that event happens and the finding that it was contingent cannot be disturbed without there being any evidence on record. The Appellate Assistant Commissioner had given a definite finding that the assessee had only a contingent interest. An opportunity was given to the Revenue by the Tribunal and despite specific opportunity the Revenue failed to rebut the same and, therefore, there was no option with the Income-tax Appellate Tribunal except to come to the conclusion that the finding arrived at by the Appellate Assistant Commissioner cannot be disturbed.

6. In these facts and circumstances of the case, we are of the opinion that the Tribunal was justified in holding that the assessee had only a contingent interest in the trust and did not have a vested interest and, therefore, no income accrued and, consequently, in deleting the addition of Rs. 12,000 made by the Income-tax Officer. The reference is, accordingly, answered in favour of the assessee and against the Revenue.