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N. M. Ranka, Senior Advocate, has explained the law and procedure of how substantial taxes can be legitimately saved through the mechanism of Wills, Family Arrangements and Private Trusts. The learned author has referred to all the important statutory provisions and judicial pronouncements on the subject. He has also emphasized the safeguards that taxpayers should take to ensure that their tax planning efforts do not fall foul of the law<\/strong><\/p>\n A rupee of tax saved is much more than the rupee of income earned. After understanding the tax laws, availing of various exemptions, deductions and incentives provided under the tax laws and resorting to tax management \/ tax planning, many tax payers could promote their resources and prosper. So much so that one could reduce the tax burden to a tolerance limit. Brunt of taxation can be substantially reduced by adopting proper tax planning. Tax management is sound law and certainly not bad morality to so arrange one’s affairs as to reduce the brunt of taxation to a minimum. <\/p>\n <\/p>\n Arranging affairs in such a manner that charge of tax is reduced is not prohibited. Availing various recognised methods of tax planning is lawful and has the sanctity of the courts. Avoidance of tax is not tax evasion. End effect of tax planning, tax avoidance and tax evasion is one and the same but tax evasion alone deserves to be deprecated and need not be resorted to. Adopt \/ Suggest Tax Management – It is your duty. Not Tax Evasion – It is a crime against Society and needs to be deprecated and tax evaders socially boycotted.<\/p>\n Meaning and method : ‘Will’ as defined under sec. 2(h) of the Indian Succession Act means “the legal declaration of the intention of a testator with respect of his property which he desires to be carried into effect after his death”. A Will comes into effect after the death of the testator and is revocable during the life time of the testator. Every person of sound mind not being a minor can dispose of his property by Will. The testator is at liberty to bequeath the disposable property to any person, he likes. There is no restriction that a Will has to be made in favour of legal heirs, relatives, close friends, etc. <\/p>\n A Will or codicil need not be stamped or registered though it deals with vast immovable properties. A Will can be on a sheet of paper. It need not be on a stamp or Government paper. However, to generate confidence, it is advisable to execute on a stamp of any denomination. It is advisable to get each sheet of the Will signed in the aforesaid manner from the testator and to put photo of the testator.<\/p>\n According to sec.63 of the Indian Succession Act, 1925 three things are required for a valid execution of a Will: <\/p>\n (i) it must be in writing, <\/p>\n (ii) the testator must sign or affix his mark to the Will or it shall be signed by some other person in the presence of the testator and by his directions and the signatures or mark of the testator or the signatures of the person signing for him shall be so placed that it shall appear that it was intended thereby to give effect to the writing as a Will, and <\/p>\n (iii) the Will shall be attested at least by two or more witnesses, each of whom has seen the testator sign or affix his mark or has seen some other person sign the Will, in the presence and by the directions of the testator, or has received from the testator a personal acknowledgement of his signature or mark or of signature of such other person and each of the witness shall sign the Will in the presence of the testator. <\/p>\n However, it shall not be necessary that more than one witness be present at the same time. There is no particular form of attestation for the Will but aforesaid requirements need be complied with. It is desirable that additional witnesses are near relatives \/ legal heirs. An executor to execute the Will on death be appointed.<\/p>\n A person can make a bequest in favour of any living person, idol, charitable trust, firm, Hindu Undivided Family, institution, corporate body, society, an infant (including a child en ventre sa mere<\/em>), an idiot, a lunatic or other disqualified person. <\/p>\n A bequest can be made to the heirs or relations or nearest relations or family or kindred or nearest of kin or next of kin of a particular person without any qualifying terms. In such cases the class so designated forms the direct and independent object of the bequest and the property bequeathed shall be distributed as if it had belonged to such person and he had died intestate in respect of it. <\/p>\n Where a bequest is made to the representatives or legal representatives or personal representatives or executors or administrators of a particular person and the class so designated forms the direct and independent object of the bequest, the property bequeathed shall be distributed as if it had belonged to such person and he had died intestate in respect of it.<\/p>\n 2.2.1 A Will can be made in favour of would be daughter-in-law or would be son-in-law or prospective wife of a minor son or grandson etc. If it is specified that in case the specified person does not marry up to a particular date, the bequeathed property shall vest in the person living. Reliance can be placed on the decisions of the Madras High Court in CIT vs. P. Bhandari (1984) 147 ITR 500, L. Goutam Chand and another vs. CIT (1989) 176 ITR 442, Sakhti Charities vs. CIT (1984) 149 ITR 624<\/em> and CIT vs. M. K. Chandrakanth (1997) 225 ITR 101.<\/em> <\/p>\n It is possible to make a bequeath in favour of a person not to devolve on him as individual property but as the property of Hindu Undivided Family with such individual as Karta, if the Will declares such intentions in clear terms. In this manner the property received by such person would be of his Hindu Undivided Family and a new unit of assessment would come up.<\/p>\n Where the property and the parties are situate in the territories of Bengal, Chennai and Mumbai and where the parties are not residing in those territories but the property involved is situated within those territories, a probate has to be obtained by the executor. The burden of proof lies on party propounding the Will. He must satisfy the conscience of the Court that the instrument so propounded is the last Will of a free and capable testator.<\/p>\n (i) It is easy to make. Can be executed on white sheet of paper with two witnesses. Registration is not compulsory. Can be lodged for registration with the Sub-Registrar, to be opened only after the death. Can be executed by the testator in any language. It is desirable to get it not arised by a Notary Public, which is easy.<\/p>\n (ii) More than one Will can be executed in respect of different property in favour of different legatees but there should not be any contradiction and it should not be mentioned that it is the only Will. (iii) Joint Will can be executed by the spouse bequeathing property belonging to both in favour of the survivor. On the death of the deceased, property of the two would vest in the survivor. It can be stated as to how the residue estate after death of the two would stand bequeathed.<\/p>\n (iv) It is easy to cancel. Can be cancelled by executing another Will. Only last Will survives, not the earlier Will(s).<\/p>\n (v) One discretionary trust can be formed by Will and if such trust is the only trust so declared by him, shall not be liable to charge of tax at the maximum marginal rate on account of proviso (ii) to sub-section 1 of section 164. Normally a family welfare trust can be declared by Will and by way of such trust the beneficiaries as well as distribution of the asset can be in-determinate or unknown.<\/strong><\/p>\n (vi) Capital gains on transfer of a capital asset can be avoided (sec.47(ii)). The cost of acquisition of the asset shall be deemed to be the cost, for which, the previous owner of the property acquired it, u\/sec.49(1)(ii))<\/p>\n (vii) Any sum of money or property given by way of a Will to any extent, is not treated as income from other sources of the beneficiary\/legatee (sec.56 (2)(vii) proviso (c)).<\/p>\n (viii) It can be made in favour of any person. It can also be made in favour of a (ix) Property bequeathed on the death of the testator vests in the executor. The executor has to distribute the bequeathed property in favour of the specified person(s). It can be done by mere declaration and handing over of the property\/title deeds without any stamp duty or registration.<\/p>\n (x) A Will can be made in such a manner, whereby the distribution of the estate is postponed and during such period an assessment of the deceased in the name of the estate and through the executor u\/s. 168 would be made. Thereby a dead person can be assessed till distribution.<\/p>\n (xi) Stamp duty on transfer can be avoided.<\/p>\n 2.5 A Hindu can bequeath his individual property as well as share in the coparcenery property by way of Will. Manifold benefits are inherent by making a Will. However, it has been noticed that very negligible few taxpayers are taking advantage of the medium of Will. It can be a tool for further reducing the nominal rate of tax and expanding units of assessments with manifold advantages to regulate the members of family and relatives. <\/p>\n Its importance need not be emphasised but is well-known. It is highly desirable that every person make a Will to avoid and avert litigation amongst legal heirs and representatives and in order to reduce rate of tax in the hands of relatives and would be children, grand-children, daughters and sons-in-law and to create Hindu Undivided Family, to add more units. Such persons could be surely reminded: “Have you executed your Will, if so, please see that it is in a safe place and do inform your spouse about it. If not, please fix up the earliest appointment with the ever friendly lawyer next door! <\/p>\n All the ladies should ask their husbands that there is a proper Will duly executed and insist on seeing it and also to ensure that the wife is the sole beneficiary under that Will. One should be advised to act expeditiously. Liability of tax after death of an individual can be better managed through Will. It is high time to explore multifold benefits of WILL as noticed hereinbefore.<\/p>\n Death is certain and none could and can avoid. It is highly desirable that every person above the age of 60 years take it seriously and avoid inheritance by non-estamentary succession, which causes family disputes amongst legal heirs, disrupting family peace and harmony.<\/strong> <\/p>\n Hindu Undivided Family<\/strong>: The expression “Hindu Undivided Family” has not been defined under the Income-tax Act or in any other statute. When we dissect – essentials are (i) Should be Hindu, (Jain, Sikh and Buddhist are treated as Hindus but not Musalman or Christian); (ii) A family i.e., group of persons – more than one; and (iii) should be undivided i.e., living jointly and having commonness amongst them. All the three essentials are cumulative. <\/p>\n It is a body consisting of persons lineally descended up to three generations or three degrees from a common ancestor and include their wives, children and adopted child. By the Hindu Succession (Amendment) Act, 2005 w.e.f. 9th September, 2005, daughter, even after marriage, would be a co-parcener, of which her father is a co-parcener and in addition, on her marriage, shall become a member of her husband’s joint Hindu Undivided Family. Her rights in the parental family would remain intact as that of a son. Discrimination on account of gender stands abolished for good, though belated.<\/p>\n The concept of Joint Family under Hindu law as well as the HUF in Income-tax Act, 1961 is broadly the same. HUF is purely a creature of law and cannot be created by an act of parties (except in case of adoption and reunion). An HUF is a fluctuating body, its size increases with birth of a member in the family and decreases on death of a member of the family. Females come into HUF on marriage. If there is family nucleus, under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and the Income-tax Act does not indicate that a Hindu Undivided Family as an assessable entity must consist of at least two male members (Refer Gowli Buddanna vs. CIT (1966) 60-ITR-293 (SC). <\/em>Where a coparcener having a wife and minor daughters and no son receives his share of joint family property on partition, such property, in the hands of the coparcener, belongs to the HUF of himself, his wife and minor daughters. (Refer N. V. Narendranath vs. C.W.T. (1969) 74-ITR-190 (SC)<\/em>. Assessment in the status of a Hindu Undivided Family can be made only when there are two or more members of the Hindu Undivided Family. (Refer C. Krishna Prasad vs. C.I.T. (1974) 97-ITR-493 (SC)<\/em>. Husband and wife can constitute HUF if property is received on partition. (Refer CIT vs. Parshottamdas K. Panchal (2002) 257-ITR-96 (<\/em>Gujarat<\/em>).<\/em><\/p>\n All property inherited by a male Hindu from his father, father’s father or father’s father’s father, is ancestral property. The essential feature of ancestral property according to Mitakshara Law is that the sons, grandsons and great-grandsons of the person who inherit it, acquire an interest, and the rights attached to such property at the moment of their birth. Thus, if ‘A’ inherits property, whether movable or immovable, from his father or father’s father, or father’s father’s father, it is ancestral property, as regards his male issue. (AIR 1936 Orissa 331). A person inheriting property from his three immediate paternal ancestors holds it, and must hold it, in coparcenary with his sons, son’s sons, and son’s son’s sons. Dipo vs. Wassan Singh – AIR 1983 SC 846 at 847- 48; Arjun Singh vs. Pingle Devi – AIR 1993 HP 34; Om Prakash vs. Sarvjit Singh – AIR 1995 HP. 92<\/em>. The share, which a coparcener obtains on partition of ancestral property, is ancestral property as regards his male issue. They take an interest in it by birth (Lal Bahadur vs. Kanhaiya Lal, (1907) 29 All 244: 34 IA 65; Chatturbhooj vs. Dharamsi, (1885) 5 Bom HCOCJ 128: Rulla Ram vs. Amar Singh, AIR 1994 HP 102 relying on AIR 1987 SC 558 and AIR 1986 Pat 1753).<\/em><\/p>\n 3.2.1 Accumulations of income of ancestral property, property purchased or acquired out of income or with assistance of ancestral property, the proceeds of sale of ancestral property, and property purchased out of such proceeds, or obtained in lieu of such property, are ancestral property. (Maya Ram vs. Satnam Singh, AIR 1967 Punj 353).<\/em> It is well established that sons, grandsons and great-grandsons acquire a vested interest not only in the income and accretions of ancestral property, which accrued after their birth, but also in the income and accretions, which accrued prior to their birth. (Isree Persad vs. Nasif Koover – AIR 10 Cal 1017 at 1021; Jagmohan Das vs. Mangal Das) 11 Mad 246.<\/em><\/p>\n 3.2.2 According to the Mitakshara School of Hindu Law all the property of a Hindu joint family is held in collective ownership by all the coparceners in a quasi-corporate capacity. The textual authority of the Mitakshara lays down in express terms that the joint family property is held in trust for the joint family members then living and thereafter to be born (see Mitakshara, Chapter 1.1-27). The incidents of co-parcenership under the Mitakshara law are : first, the lineal male descendants of a person up to the third generation, acquire on birth ownership in the ancestral properties of such person; secondly that such descendants can at any time work out their rights by asking for partition; thirdly, that till partition each member has got ownership extending over the entire property conjointly with the rest; fourthly, that as a result of such co-ownership the possession and enjoyment of the properties is common; fifthly, that no alienation of the property is possible unless it be for necessity, without the concurrence of the coparceners, and sixthly, that the interest of a deceased member lapses on his death to the survivors. A coparcenery under the Mitakshara School is a creature of law and cannot arise by act of parties except in so far that on adoption the adopted son becomes a co-parcener with his adoptive father as regards the ancestral properties of the latter." State Bank of <\/em>India<\/em> vs. Ghamandi Ram – AIR 1969 SC 1330<\/em>.<\/p>\n 3.3. Family Arrangement: When a partition is effected between the co-parceners \/ members of a joint Hindu Family, the partition deed attracts stamp duty under the State Law. However, it can be avoided by arriving at a family arrangement in between the members. The family arrangement may be even oral. If the terms of the family arrangement are reduced to writing; a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made, either for the purpose of the record or for information of the Court for making necessary mutation. It has been held that in such a case the memorandum, itself, does not create or extinguish any rights in immovable property and is, therefore, not compulsorily registrable. (Refer Tek Bahadur Bhujil – AIR 1966 SC 292; Sahu Madho Das vs. Mukund Ram – AIR 1955 SC 481; Vijay Kumar vs. Sanjay Kumar – AIR 2003 Delhi 168; Digambhar Adhar Patil vs. Deoram Girdhar Patel – AIR 1995 SC 1728, AIR 1973 Allahabad 158, AIR 1988 AP 147; AIR 1966 SC 1836; AIR 1966 (SC) 252; AIR 1997 (Raj.) 211; AIR 1998 (Raj.) 348<\/em> and Kale and others vs. Dy. Director of Consolidation and Others, AIR 1976 SC 807.<\/em><\/p>\n 3.3.1 The family arrangement must be a bona fide<\/em> one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family; (2) It must be voluntary and should not be induced by fraud, coercion or undue influence; (3) The family arrangement may be oral in which case no registration is necessary; (4) It is well-settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Which create or extinguish any rights in immovable properties and would fall within the mischief of section 17(1)(b) of the Registration Act; (5) The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the arrangement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld and the Courts will find no difficulty in giving assent to the same; (6) Even if bona fide<\/em> disputes, present or possible, which may not involve legal claims are settled by a bona fide<\/em> family arrangement which is fair and equitable, the family arrangement is final and binding on the parties to the settlement. (Refer Kale vs. Deputy Director : AIR 1976 SC 807; Lakshmi Ammal vs. Chaprovahthi – AIR 1999 SC 336; C.G.T. vs. D. Nagrirathinam (2004) 266-ITR-342 (<\/em>Madras<\/em>).<\/em><\/p>\n 3.3.2 Like partition, family arrangement is not a transfer. A family arrangement, on the contrary, is a transaction between members of the same family for the benefit of the family so as to preserve the family property, the peace and security of the family, avoidance of family dispute and litigation and also for saving the honour of the family. Such an arrangement is based on the assumption that there was an antecedent title in the parties and the agreement acknowledges and defines what that title is. It is for this reason that a family arrangement by which each party takes a share in the property has been held as not amounting to a conveyance of property from a person who has title to it to a person who has no title. (Refer : S. K. Sattar S. K. Mohd. Choudhari vs. Gundappa Amabadas Bukate (1966) 6 SCC 373; C.I.T. vs. A.L. Ramnathan (2000) 245-ITR-494 (<\/em>Madras<\/em>.)<\/em><\/p>\n 3.3.3 A Memorandum of Understanding cannot be said as a bogus document on account of one being a stranger or allotted more than his share, if it is established that he had some semblance of interest and disputes have cropped up between the said persons. Memorandum of Understanding actuated to resolve disputes can be treated as family settlement (Refer Ramdev Food Products Pvt. Ltd. vs. Arvindbhai Rambhai Patel & Others AIR 2006 S.C. 3302). <\/em>It is settled law that when parties enter into a family arrangement, the validity of the family arrangement is not to be judged with reference to whether the parties who raised disputes or rights or claimed rights in certain properties had in law any such right or not. CIT. vs. Ponnammal (R.) (1987) 164-ITR- 706 (Mad.); CIT vs. Ramanathan (AL) (2000) 245-ITR- 494 (Mad.); Kele vs. Deputy Director of Consolidation (1976) AIR 1976 SC 807 and Maturi Pullaiah vs. Maturi Narasimham (1966) SC 1936 relied on in C.I.T. vs. Kay Arr Enterprises and Others (2008) 299-ITR-348 (Madras)<\/em><\/p>\n 3.3.4 Transfer of shares in Companies can be possibly made by way of family arrangement between the family members as held in CIT vs. Kay Arr Enterprises (2008) 299-ITR-348 (Madras). Mrs. P. Sheela vs. I.T.O. (2009) 308-ITR-(AT) 350 (<\/em>Bangalore<\/em>). The Apex Court in Hari Shanker Singhania & Brs. vs. Gaur Hari Singhania & Brs. AIR 2006 SC 2488<\/em> held that family settlement or arrangement is to be treated differently from any other formal commercial settlement and technicalities of limitation etc. should not come in the way of implementation for maintaining peace and harmony in a family. However as a matter of caution in such cases there may be long drawn litigation and for one or other lapse it may be a faulty proposition. It should be the last resort.<\/p>\n 3.4 A family arrangement must be entered into by all parties thereto. The concept of family arrangement has now been accepted in our country and the Supreme Court has generally taken a broad view of the matter and leaned heavily in favour of upholding any such arrangement. The enjoyment of properties by different members of the joint family, who have been put into possession pursuant to a family arrangement, operates as an estoppel against such member and cannot be jeopardised by a member resiling from the arrangement, more particularly when the arrangement had been entered into a considerable time ago. (AIR 2002 Bombay 129). <\/p>\n There is thin difference between joint family property and joint property. If the property is acquired with the contributions of the coparceners and the income or savings from joint family fund or from the ancestral property, that property will be a joint family property in which each and every coparcener has a right to claim. A joint property is being created by investment made by individuals from their independent earning. Priya Ranjan Bhagat vs. Saroj Bhagat – AIR 2016 Jharkhand 22 at 34.<\/em> <\/p>\n There was family arrangement by a deceased among the children of R and S. Each of the members held apart from personal properties, family properties and shared in business concerns and each of the family businesses was independently managed by one of the parties. Disputes arose between the parties. The disputes were referred to an arbitrator. The arbitrator suggested a settlement to which the parties agreed. In terms of the settlement, the assessee had to resign from KB, a firm and transfer his interest to NR for a consideration of ` 35,000\/- being the capital balance of the firm. Accordingly, the assessee transferred the shares. NR transferred the shares held by him in favour of the assessee. The assessee claimed that there was no transfer which gave rise to any capital gains. <\/p>\n However, the assessing authority held that there was a transfer, there was a capital gain and, therefore, the assessee was liable to pay the tax. The Commissioner (Appeals) confirmed the order. The Tribunal held that there was no transfer and it was only a family arrangement. Therefore, the assessee was not liable to pay tax on capital gains. <\/p>\n On appeal to the High Court it was held : “A partition is not a transfer. What is recorded in a family settlement is nothing but a partition. Every member has an enterior title to the property which is the subject-matter of a transaction, that is partition or a family arrangement. So there is adjustment of shares, crystallization of the respective rights in family properties and, therefore, it cannot be construed as a transfer in the eye of law. When there is no transfer there is no capital gains and consequently no tax on capital gains is liable to be paid”. CIT vs. R. Nagaraja Rao (2013) 352-ITR-565 (Karnataka) at 566.<\/em><\/p>\n Family arrangement \/ settlement though not registered can be used as piece of evidence. Subraya M. N. vs. Vitalla M. N. & Others – AIR 2016 S.C. 3236.<\/em> An oral partition of joint family property amongst members of a HUF is permissible : AIR 1958 S.C. 706; AIR 1988 S.C. 881; 259-ITR-265 (S.C.)<\/em><\/p>\n Trust : <\/strong>A person if competent to contract, can constitute a trust of his movable or\/and immovable property, for the benefit of any person, for a specified period. Such person is called as ‘Creator of the Trust’<\/strong>; person(s) in whose favour the trust is created is called ‘the Trust property’<\/strong> and the person(s) to whom the property is entrusted is called the ‘Trustee’ A Trustee has to be a person competent to contract and both the creator and trustee have to execute ‘Trust Deed’ duly stamped and registered if for an immovable property. On creation of a valid trust the corpus and income therefrom shall be assessed in the hands of the Trust through its representative, the Trustee<\/strong> and not in the hands of the creator of the Trust. If it is determinate trust with specified share and known beneficiaries, would be assessed where section 161 of the Income-tax Act as an individual and at normal rates, but if beneficiaries are unknown or share is indeterminate would be known as discretionary trust, assessable at the maximum marginal rate u\/s. 164 of the I.T. Act.<\/p>\n In the case of a discretionary trust, under which the trustees have absolute discretion to distribute the income of the trust to certain specified beneficiaries, and thereafter to distribute the corpus between another set of beneficiaries, again in their absolute discretion, the latter set of beneficiaries are also beneficiaries for the purpose of s. 164 and the income from the trust can be assessed at the maximum marginal rate : Gosar Family Trust. CIT (1995) 215-ITR-55. <\/em><\/p>\n A discretionary trust is one which gives a beneficiary no right to any part of the income of the trust property, but vests in the trustees a discretionary power to pay him, or apply for his benefit, such part of the income as they think fit. The trustees must exercise their discretion as and when the income becomes available, but if they fail to distribute in the due time, the power is not extinguished so that they can distribute later. They have no power to bind themselves for the future. The beneficiary thus has no more than a hope that the discretion will be exercised in his favour : CWT vs. Estate of Late HMM Vikram Singhji of Gondal (2-14) 363-ITR-679 (SC)<\/em>. <\/p>\n Section 166 of the Act gives an option to the Department to tax either the representative assessee or the beneficial owner of the income. Once the choice is made by the Department to tax either the trustee or the beneficiary, it is no more open to the Department to go behind it and assess the other also at the same time : see Circular No. 157\/26-12-74 98-ITR- (St.) 41. Distributions received by a beneficiary from a discretionary trust can be assessed in the hands of the beneficiary or in the hands of the trust : CIT vs. Kamalini Khatau (1994) 209-ITR-101 : CIT vs. Dr. Anand Sarabhai Trust (1998) 231-ITR-524.<\/em> See also CIT vs. Bharti Devi Sarabhai (1998) 231-ITR-526 (SC).<\/em> <\/p>\n This Section 164 cannot be read as being a code in itself applicable to the taxation of the income of a discretionary trust. Consequently, it cannot be held that the beneficiary of a discretionary trust, even if he has received its income in the accounting year, cannot be taxed thereon because this section does not provide for such contingency. Where income of a beneficiary trust or a part thereof is actually received by a beneficiary, tax shall be charged thereon at the rate applicable to the total income of the beneficiary if this benefits the Revenue : CIT vs. Kamalini Khatau (1994) 209-ITR-101 (SC)<\/em>. Profits created to accounts of respective beneficiaries have to be assessed in the hands of the beneficiaries : Moti Trust vs. CIT (1999) 236-ITR-37 (SC).<\/em><\/p>\n In a case where the relevant income or part of relevant income is receivable under a trust declared by any person by Will and such trust is the only trust so declared by him, would not be assessable at the maximum marginal rate u\/s. 64 but would be assessed at normal rate. As stated in Proviso (ii) it should be by a Will as explained hereinbefore in para 2 and it should be only one and single trust created under the Will. It more than one trust is created exception would not apply.<\/p>\n Always a sincere attempt should be to resort to tax management, so as to have large cash flow and expand the trade and promote new industries. Each one of the functionary should resolve to act for common good and for the welfare of the citizens. It is high time that ways and means are evolved whereby honest and law abiding taxpayers are not put to inconvenience, harassment and witch-hunting.<\/p>\n The tax administration need to be geared up to come up to the expectations of the honest taxpayers. It is high time that during 71st year of Independence, all citizens resolve to eliminate tax evasion and bring glory to Bharat. Let each taxpayer pledge to pay the due taxes forthwith after due planning.<\/p>\n N. M. Ranka, Senior Advocate, has explained the law and procedure of how substantial taxes can be legitimately saved through the mechanism of Wills, Family Arrangements and Private Trusts. The learned author has referred to all the important statutory provisions and judicial pronouncements on the subject. He has also emphasized the safeguards that taxpayers should take to ensure that their tax planning efforts do not fall foul of the law<\/p>\n1. Tax Management <\/h2>\n
2. Will <\/h2>\n
2.1 Execution and attestation<\/h2>\n
2.2 To whom bequest can be made<\/h2>\n
2.3 Probate <\/h2>\n
2.4 There are manifold benefits as follows<\/h2>\n
\n Each Will can be handed over to the legatee.<\/p>\n
\n Hindu Undivided Family, to enable to constitute nucleous for a Hindu Undivided Family.<\/p>\n3. Family Arrangement<\/h2>\n
3.1 Concept and Assessment<\/h2>\n
3.2 Ancestral Property <\/h2>\n
4. Private Trust <\/h2>\n
4.1 Discretionary trust and its assessment<\/h3>\n
4.2 Exception <\/h3>\n
5. Conclusion <\/h2>\n
Reproduced with permission from the AIFTP Journal <\/div>\n\n
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