Commissioner of Income-Tax v. Gosar Family Trust — 1990 DIGILAW 147 (GUJ)

JUDGMENT : R.K. Abichandani, J. The Income-tax Appellate Tribunal has referred to us for our opinion the following two questions under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the said Act") : "(1) Whether, in law and on facts and having regard to the provisions of sub-section (1) of section 164 of the Income-tax Act, 1961, the assessee is entitled to the concessional rate of tax ?" (2) Whether, in law and on facts and in view of the provisions of the trust deed, the trust cannot be subjected to maximum marginal rate of tax ?" 2. By a deed dated October 3, 1981, a private trust known as "Gosar Family Trust" was created by the settlor, Shri Hirji Pethraj Shah. A sum of Rs. 500 was handed over by the settlor to the trustees for holding it jointly upon trust. The trustees were empowered to invest the amount and authorised to collect the interest and income of investments representing the said sum as well as of any other amounts which may be received by them as provided in the trust deed as also the share of profits in any business which may be carried on by them pursuant to the powers granted to them under the deed. Under clause 2 of the trust deed, it was provided that the trustees may either accumulate the net income or may appropriate or apply the whole or such part of the income as the trustees may, in their absolute discretion, think fit or for maintenance, medical expenses or such necessary expenses or advancement and benefit including the setting up in business of all or any of the beneficiaries, namely, (1) Shri Gosar Devashi Jakharia, (2) Smt. Lakhmaben Gosar Jakharia, and (3) Shri Mukesh Gosar Jakharia, in such shares and proportions and generally in such manner as the trustees, in their absolute discretion, think fit. It was further provided that it shall be lawful for the trustees to exclude any of them while dividing the said net income with or without any reasons and shall accumulate the residue, if any, of the income from the trust by investing the same and the resulting income therefrom, in any of the investments authorised under the deed with the power to vary such investments accordingly. The provision which was made in clause 2 of the trust deed was to operate until the time of distribution for which provision was made in clauses 3 and 4 of the deed. The trustees were empowered, until the date of distribution, to apply the accumulations or any part thereof as if the same were income from the trust fund arising in the current year. As provided in clauses 3 and 4 of the deed, the trustees had an absolute discretion to distribute the trust fund and all accumulations of the net income of the accretion to the trust fund amongst the second group of beneficiaries named in paragraph 3, who are (1) Smt. Lakhmaben Gosar Jakharia, (2) Family members of Shri Devchand Shamji Shah, and (3) Smt. Kankuben Gulabchand Shah, up to three generations in such proportions or proportion as the trustees may, in their absolute discretion, think fit after the expiry of two years but prior to the period of 18 years from the date of the deed. It was made lawful for the trustees to exclude any of these persons mentioned in clause 3 while dividing the trust fund without giving any reasons. It was open to the trustees to distribute a part of the trust fund including the accumulated income and the trust was to continue with regard to the balance of the trust fund including the accumulated income remaining in the hands of the trustees after such distribution. As regards the part of the trust fund and the accumulated income which was distributed, the trust was to come to an end to that extent. It was also provided that, in case, at any time of distribution, none of the said beneficiaries named in clause 3 is living, then the trust fund and all accumulations of the net income and the accretion to the trust fund shall be given to a charitable trust or be given for the formation of a charitable trust in the name of Hirji Pethraj Shah Charitable Trust. Under sub-clause (k) of clause 6 of the deed, it was provided that the trustees shall be entitled to determine whether any money or property shall, for the purposes of this trust, be considered as capital or income and whether expenses, outgoing or loans ought to be paid or borne out of the corpus or income and any and every such determination of the trustees shall be conclusive. Under clause 24, it was provided that notwithstanding anything stated in the deed, in case of death of any of the beneficiaries of income mentioned in clause 2, the trustees were directed that the income shall be accumulated and they shall have no power or authority to distribute the money for the objects mentioned in clause 2 of the trust deed. 3. From the above material contents of the trust deed, it is clear that the trust created under the deed was not just a simple trust which is generally One which makes no distribution other than of current income and the terms of which require all of its income to be distributed currently and do not provide for charitable or similar contributions, but was of the character of a complex trust which provides for distribution of income or accumulation of income and then distribution of the accumulated income after a stipulated period. Under the trust deed, the beneficiaries are divided into two groups or "tiers". The first "tier" is composed of beneficiaries who may be distributed income currently and the second tier is composed of beneficiaries for whom the income is accumulated. The discretion vested in the trustees is very wide in the context of both the groups of beneficiaries and the trustees are given so-called "sprinkling" and "hose-and-spray" powers which permit the trustees to distribute, apportion or accumulate income or for the beneficiary or beneficiaries or to, for or within a class of beneficiaries or to pay out of the accumulated income to a beneficiary or beneficiaries. These are broad powers, to shift benefits, given to the trustees by the settlor in such discretionary trust. It was open to these trustees to distribute, in their absolute discretion, the income received by them either amongst the first group of beneficiaries or any of them or to accumulate the income so received for the benefit of the second group of beneficiaries. 4. It was open to these trustees to distribute, in their absolute discretion, the income received by them either amongst the first group of beneficiaries or any of them or to accumulate the income so received for the benefit of the second group of beneficiaries. 4. In the above background of the nature of the trust created under the deed, the Income-tax officer assessed the income of the trust under section 143(3) for the assessment year 1982-83, holding that the trust was not created with a bona fide object to help the settlor's relatives but the sole object was to retain the income, tax free with the family members of the second group of beneficiaries and further holding that since the beneficiaries of the second group (described as corpus beneficiaries) were having taxable income and were also beneficiaries of several other trusts, the trust was not entitled to be taxed at a concessional rate but was to be taxed at the "maximum marginal rate" under section 164(1) of the said Act. 5. The respondent-assessee challenged the order of the Income-tax officer dated March 23, 1985, before the Appellate Assistant Commissioner, Jamnagar, in Appeal No. JAM/46/85-86 and the Appellate Assistant Commissioner allowed the appeal holding that the trust must be assessed at the concessional rate applicable to an association of persons and riot at the maximum marginal rate. He was of the view that the trust in question cannot be said to be a sham trust because all the formalities required for creating a valid trust were duly observed. The Appellate Assistant Commissioner found that for the purpose of the provisions of section 164(1), one has to consider to whom the income of the previous year goes and the income to which such beneficiaries are entitled in a particular year and whether they have chargeable income or not. He found that the beneficiaries of the second group (corpus beneficiaries) were not entitled to any part of the previous year's income and, therefore, they were not income beneficiaries. He found that the accumulated income which may be received by them was part of the corpus of the trust and was not income received by them as a part of the previous year's income. He found that the accumulated income which may be received by them was part of the corpus of the trust and was not income received by them as a part of the previous year's income. He came to the conclusion that, for the purpose of application of the proviso to section 164(1) of the said Act, one has to consider only income beneficiaries and not corpus beneficiaries. 6. The Revenue appealed against the decision of the Appellate Assistant Commissioner before the Income-tax Appellate Tribunal, Ahmedabad Bench "C". The Tribunal, concurring with the order of the Appellate Assistant Commissioner, held that the word "beneficiaries" in section 164(1) of the said Act means only income beneficiaries and that the controversy was unnecessarily raised. The Tribunal, rejecting the reference application made by the Revenue, held that there was no referable question of law and refused to draw up a statement of case. However, as directed by this court, this reference was made under section 256(2) of the said Act. 7. Mr. K.M. Raval, learned counsel appearing for the Revenue contended that the assessee-trust does not fall within the proviso to section 164(1) of the said Act because the word "beneficiary" in the proviso to section 164(1) of the said Act covers all beneficiaries including corpus beneficiaries. He submitted that these beneficiaries were taxpayers and also beneficiaries under other trusts. He submitted that, for interpreting the proviso to section 164(1), it was not necessary to restrict the meaning of the word "beneficiary" only to the income beneficiaries. He further argued that, in view of the fact that the trust deed provided for distribution of accumulated income to the second group of beneficiaries mentioned in clause 3 of the trust deed and the fact that they are taxpayers, the said proviso was not attracted to the present case. He relied upon the decision of the Bombay High Court in CIT v. Lady Ratanbai Mathuradas, [1968] 67 ITR 504, in which it was held that, on a reading of the relevant clauses of the trust deed, it did not appear that the income in the hands of the trustees which they were expressly directed to accumulate could be treated as part of the corpus. He also referred to the decision of the Calcutta High Court in Official Trustee of West Bengal v. CIT, [1954] 26 ITR 410, in which it was held that the effect of the main clause of section 41 of the Indian Income-tax Act, 1922, was that where there were no complications and income was received by a trustee specifically on behalf of a single person, or specifically on behalf of each of a number of persons or on behalf of a number of persons whose shares were determinate and known, there may be an assessment of such income in his hands and such assessment will be a separate assessment for each of the persons on whose behalf the income was received. Construing the proviso to section 41(1), the High Court further held that the second part of the proviso would cover cases where, although the income might be receivable or even specifically receivable on behalf of a number of persons, still their shares were indeterminate or unknown and, in such a case, the maximum rate would apply to the whole of the income, where the whole of the income was so receivable, or to a part of the income where only a part was receivable on behalf of a number of persons whose shares were indeterminate or unknown. Mr. Raval also referred to the decision of the Calcutta High Court in Nirmala Bala Sarkar v. CIT, [1969] 74 ITR 268 in which, while construing clause 10 of the deed, the High Court held that the contingency contemplated therein did not arise during any of the assessment years in question and, as it did not, the shares of the daughters in the income were not determinate and the Tribunal was right in holding that the first proviso to section 41(1) was applicable. Mr. Raval also referred to the decision of the Andhra Pradesh High Court in CWT v. Trustees of H.E.H. the Nizam's Miscellaneous Trust [1980] 126 ITR 233, in which the High Court held that section 21(4) of the Wealth-tax Act, 1957, was attracted to the amounts which were not specific where the beneficiaries were not known and the actuarial valuation of the totality of the beneficial interest of the remainder men or reversioners had to be assessed separately under section 21(4). He finally referred to the decision in Commr. He finally referred to the decision in Commr. of Stamp Duties v. Atwill, [1973] 1 All ER 576 (PC) in support of the proposition that although it was often the function of the proviso merely to limit or qualify rather than to add to the substantive provision, a proviso does not necessarily have that restricted effect. 8. Mr. K.C. Patel, learned counsel appearing for the assessee, contended that the case of the Revenue throughout was that there were two distinct sets of beneficiaries, namely, income beneficiaries and corpus beneficiaries. He submitted that the distinction between income and corpus was well recognised in the realm of accountancy and the accumulated income which is converted into capital or corpus is treated as an asset forming part of the net wealth liable to be taxed under the cognate Act, namely, the Wealth-tax Act. He submitted that, by the context and from several explicit indications, reference to beneficiary in clause (i) of the proviso to section 164(1) can only be to the income beneficiaries of the relevant previous year. He submitted that, for the purpose of tax liability under the Income-tax Act, one cannot see beyond the previous year in question. He submitted that the accumulated income would cease to be income at the end of relevant previous year and partakes of the character of capital or corpus irrespective of its treatment. He submitted that, applying these tests, corpus beneficiaries in the present case had no right to income for the first two years and even thereafter they had only a contingent right depending upon the happening of several eventualities. He submitted that, in effect and in reality, a corpus beneficiary will not become a beneficiary, even in a larger sense, in the previous year, in the absence of any allotment of share from the corpus in the relevant previous year meaning thereby his contingent interest stands extinct in the absence of such allotment for that particular year. He submitted that the corpus beneficiaries who are potential recipients of past income or accumulated income are not covered by clause (i) of the proviso. He submitted that the corpus beneficiaries who are potential recipients of past income or accumulated income are not covered by clause (i) of the proviso. He submitted that, construing clause (i) of the proviso to section 164(1) in the context of the other relevant provisions of the said Act and on a plain reading of section 164(1), it was clear that since the income beneficiaries, namely, the beneficiaries of the first group had no taxable income and were not beneficiaries in any other trust, the maximum marginal rate was not attracted in the instant case. Mr. Patel referred to the decision of the Bombay High Court in CIT v. Trustees of Staff Gratuity Fund of Shree Ram Mills Ltd., [1986] 162 ITR 471, in which it was held that, whether or not the persons on whose behalf the representative assessee received income were indeterminate or unknown had to be determined on the last day of the accounting year in which the income was received and, therefore, on the last day of the relevant accounting year, the employees who were eligible to obtain gratuity under the indenture and their share thereof was determinable. The assesses, as representative assessee, were, therefore, to be assessed not under the provisions of section 164 but under the provisions of section 161 of the Act In the said case, the relevant assessment years were 1963-64 and 1965-66 to 1971-72. In this context, it may be noted that Explanation I was inserted in Section 164 by the Finance (No. 2) Act, 1980, with effect from April 1, 1980, inter alia, providing that, for the purpose of the said section, the individual shares of the persons on whose behalf or for whose benefit such income is received, shall be deemed to be indeterminate or unknown unless the individual shares of the persons on whose behalf or for whose benefit such income is receivable are expressly stated in the trust deed and are ascertainable as such on the date of the deed. It would appear that the case cited by learned counsel has to be read subject to Explanation I introduced in section 164 with effect from the assessment year 1980-81. Mr. It would appear that the case cited by learned counsel has to be read subject to Explanation I introduced in section 164 with effect from the assessment year 1980-81. Mr. Patel then drew our attention to the decision of the Supreme Court in CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust, [1977] 108 ITR 555, wherein it was held that the question in regard to the applicability of sub-section (1) or sub-section (4) of section 21 of the Wealth-tax Act, 1957, was to be determined with reference to the relevant valuation date. It will be seen that even in the Wealth-tax Act, 1957, Explanation I is added to section 21 by the Finance (No. 2) Act, 1980, with effect from April 1, 1980, which, inter alia, provides that, for the purpose of sub-section (4) of section 21, the shares of the persons on whose behalf or for whose benefit such assets are held shall be deemed to be indeterminate or unknown unless the shares of the persons on whose behalf or for whose benefit such assets are held on the relevant valuation date are expressly stated in the instrument of trust and are ascertainable as such on the date of such instrument. 9. The provisions contained in sections 160 to 167 deal with the assessments of "representative assesses" formerly covered by sections 40 to 43 of the Act of 1922. The provisions of these sections were simplified and recast on the lines of the corresponding provisions in the South African Income-tax Act. Under the provisions of section 164 of the said Act, before the amendment made by the Finance Act, 1970, income of a trust in which the shares of the beneficiaries were indeterminate or unknown was chargeable to tax as a single unit treating it as the total income of an association of persons. This provision afforded scope for reduction of tax liability by transferring property to trustees and vesting discretion in them to accumulate the income or apply it for the benefit of any one or more of the beneficiaries at their choice. By creating a multiplicity of such trusts each one of which derives a comparatively low income, the incidence of tax on the income from property transferred to the several trusts was maintained at a low level. By creating a multiplicity of such trusts each one of which derives a comparatively low income, the incidence of tax on the income from property transferred to the several trusts was maintained at a low level. In such arrangements, it was often found that one or more of the beneficiaries of the trust were persons having high personal incomes, but no part of the trust income being specifically allocable to such beneficiaries under the terms of the trust, such income could not subjected to tax at a high personal rate which would have been applicable if their shares had been determinate. With a view to put an effective curb on the proliferation of such trusts and to reduce the scope of tax avoidance through such means, the Finance Act, 1970, replaced section 164 of the said Act by a new section under which a representative assessee who received income for the benefit of more than one person whose shares in such income were indeterminate or unknown was chargeable to income tax on such income at a flat rate of 65% or the rate which would be applicable if such income were the total income of an association of persons, whichever course would be more beneficial to the Revenue. In order to obviate hardship in genuine cases where the circumstances were such that tax evasion could not be considered to be the main purpose of creating the trust, certain exceptions were specified where the flat rate of 65% was not to apply and the first exception was that where none of the beneficiaries of the trust had any other income chargeable to income-tax, the income of the trust was to be charged to tax at the progressive rates of tax applicable in the case of an association of persons. The provisions of section 164 as substituted came into effect on April 1, 1971. The provisions of section 164 as substituted came into effect on April 1, 1971. Sub-section (1) of section 164 was amended by the Finance (No. 2) Act, 1980, with effect from April 1, 1980, as a measure to plug loopholes for tax avoidance through the medium of private trusts, since it was felt that, even after the amendment in 1970, the provisions of section 164 had not been fully effective in curbing the use of private trusts for avoiding proper tax liability and the entire income of a discretionary trust was made liable to tax at the maximum marginal rate of income tax (including surcharges) applicable by the Finance Act of the relevant year to the highest slab of income in the case of an association of persons. Under the provisions as they existed prior to the amendment made by the Finance (No. 2), Act, 1980, the average rate of 65% did not apply in a case where none of the beneficiaries of the trust had other income chargeable to income-tax. This special dispensation was misused in some cases by the creation of a large number of discretionary trusts, the beneficiaries of which did not have any other income chargeable to income-tax. With a view to ensuring that the provision is not misused in this manner, the said amendment Act provided that a discretionary trust would be liable to tax at the maximum marginal rate unless none of the beneficiaries had any other income chargeable to tax or was a beneficiary under any other private trust. As a result, the income of a discretionary trust would be chargeable to tax at the maximum marginal rate in cases where any of the beneficiaries has any other taxable income exceeding the exemption limit or if any of the beneficiaries is a beneficiary under any other private trust. The provisions of section 164(1) with the first clause of its proviso which are material for our purpose, read as under : "164. The provisions of section 164(1) with the first clause of its proviso which are material for our purpose, read as under : "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 assesses 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 i s 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 on the relevant income or part of relevant income at the maximum marginal rate. 10. Provided that in a case where- (i) none of the beneficiaries has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case of an association of persons or is a beneficiary under any other trust ; or ... tax shall be charged on the relevant income or part of relevant income as if it were the total income of an association of persons." 11. The above provision refers to 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 assesses. For the purpose of the present reference, we will also be concerned with clause (iv) of section 160 which reads as under : "160. (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 . . ." 12. It will be noticed from section 160(1)(iv) that the trustee receives or is entitled to receive income on behalf of or for the benefit of any person under the trust. . ." 12. It will be noticed from section 160(1)(iv) that the trustee receives or is entitled to receive income on behalf of or for the benefit of any person under the trust. Even section 164(1) refers to such income as is receivable by the representative assessee on behalf of or for the benefit of persons whose individual shares are indeterminate or unknown. The Appellate Assistant Commissioner and the Tribunal have based their findings on an interpretation given to the provisions of section 164(1) to the effect that the word "beneficiaries" did not include the second group of beneficiaries described as corpus beneficiaries and included only the first group of beneficiaries described as income beneficiaries. Admittedly, the second group of beneficiaries consists of persons having 'other income' chargeable under the Act exceeding the maximum amount not chargeable to tax in the case of an association of persons and they are also beneficiaries under other trusts. Therefore, if persons belonging to the second group of beneficiaries fall within the ambit of section 164(1), then, undoubtedly, clause (i) to the proviso to section 164(1) would not be attracted thereby subjecting the trust to the maximum marginal rate. It may incidentally be mentioned that it appears to have been overlooked until this matter was argued before us that, out of the beneficiaries, Smt. Lakhmaben is named in both the groups of beneficiaries. 13. There is no dispute about the fact that the income was not specifically receivable on behalf of or for the benefit of any one person and that the individual shares of beneficiaries were indeterminate or unknown. Therefore, the provisions of section 164(1) are attracted to the type of arrangement made under this trust. The argument that only the first set of beneficiaries who may receive the income are the class envisaged by sub-section (1) of section 164 and not the type of beneficiaries who may, ultimately, get the accumulated income on distribution is not warranted by the wording of the provision which include.; the entire class of beneficiaries on whose behalf or for whose benefit the income is receivable by the trustee. 14. The trustees receive or are entitled to receive the income (under the deed) on behalf of or for the benefit of both the sets of beneficiaries and are their representative assesses under section 160(1)(iv). 14. The trustees receive or are entitled to receive the income (under the deed) on behalf of or for the benefit of both the sets of beneficiaries and are their representative assesses under section 160(1)(iv). It cannot be said that they do not receive the income for the benefit of the second set or "tier" of beneficiaries (described as corpus beneficiaries). The trustees are empowered to accumulate the income for the benefit of the second set of beneficiaries and, therefore, they receive or are entitled to receive the income on behalf of or for the benefit of such second set of beneficiaries also notwithstanding the existence of the first set of beneficiaries to whom they may distribute the income if they so choose to do. The existence of the authority of the trustees to disburse the income they receive under the trust to the first set of beneficiaries does not militate against their entitlement to receive the income on behalf of or for the benefit of the other set for whom they can legitimately accumulate it for eventual distribution. The trustees were entitled to receive the income under this trust on behalf of or for the benefit of the entire class of beneficiaries notwithstanding the fact that they had a discretion to bestow the benefit to one beneficiary or one set of beneficiaries at the cost of the others. The fact that the income so received is disbursed to some and not to others or is disbursed now or accumulated for future disbursement should make no difference and will not change the nature of the arrangement made under the trust, namely, that the trustees receive or are entitled to receive the income for the benefit of or on behalf of the entire class of beneficiaries named in the trust. 15. The fact that the trustees are not obliged to disburse the income or accumulate it for the benefit of the first set or the second set of beneficiaries or any of them would itself indicate that the income is receivable by the trustees for the whole class of beneficiaries irrespective of the ultimate manner in which the income is distributed. 16. Actual receipt of income in the hands of the beneficiary for the previous year is not necessary for the applicability of section 164. 16. Actual receipt of income in the hands of the beneficiary for the previous year is not necessary for the applicability of section 164. It is sufficient if the income is receivable by the trustees for the benefit of the persons named in the trust, The real question is whether the persons named in the trust have an interest, whether vested or contingent, in the income that is receivable on their behalf. Income includes the value of any benefit obtained by any representative assessee, whether convertible into money or not a fortiori, it would include monies received on behalf of or for the benefit of all the persons named in the trust including beneficiaries to the accumulated income. It will not lose the character of such income by the trustees deciding not to pay the same to the first set of beneficiaries so that it is accumulated for the second set of beneficiaries. The fact that it is made part of the capital will not change the nature of its being such income. The question of taxing the corpus, really speaking, does not arise since the income is taxed in the hands of the trustees and not after it forms part of the corpus. The very fact that the income received by the trustees can find its way into the corpus to be ultimately distributed amongst the second set of beneficiaries shows that it is income received/receivable by the trustees for the benefit of the second set of beneficiaries. 17. Even the so called income beneficiaries have no vested interest in the income, yet it would be income receivable on their behalf despite the possibility of the trustees not giving a farthing to them from such income. The income the trustees receive is "receivable" by them on behalf of both the sets of beneficiaries depending on their decision to distribute or defer the distribution and to choose the beneficiary. 18. It was even open to the trustees to decide beforehand as to whether and if so how they should distribute the income. For example, they could have taken an advance decision not to distribute to any of the beneficiaries of the first group. Such a decision could have been taken even at the beginning of the previous year. 18. It was even open to the trustees to decide beforehand as to whether and if so how they should distribute the income. For example, they could have taken an advance decision not to distribute to any of the beneficiaries of the first group. Such a decision could have been taken even at the beginning of the previous year. The possibility of the beneficiaries of either group or any of them within the group getting the trust income in their hands solely depended on the discretion of the trustees. It cannot be the intention of the Legislature to leave it to the sweet will of the trustees to subject the income to the maximum marginal rate or not simply, by virtue of their decision, to distribute the income to the first set of beneficiaries or to accumulate it for the eventual benefit of the second set of beneficiaries. Applicability of the maximum marginal rate cannot be made dependent on the discretion of the trustees as to the manner in which the income received by them may be applied amongst the beneficiaries. 19. The phrase "for the benefit of" used in section 164(1) is not a phrase of art at all but a general phrase which has to be interpreted in view of the general nature of the subject-matter which is being dealt with by this section (see Sergeant L.J. in Dale v. Mitcalfe, [1928] 1 KB 383 (CA) at p. 390). It would seem plain that, in ordinary parlance, it could be said that the accumulations of income which were being held for the ultimate advantage of the second set of beneficiaries were accumulations that were being made for the benefit of those persons and, therefore, there is no warrant to exclude the beneficiaries of the second group from the ambit of section 164(1) of the said Act. There is no doubt in this case where the trustees were entitled to receive the income on behalf of both the groups of beneficiaries that they, then and there, became liable for the payment of income-tax due thereon. It seems to us irrelevant to consider how they, after receiving the income, might dispose of it in order to carry out the purposes of the trust. It seems to us irrelevant to consider how they, after receiving the income, might dispose of it in order to carry out the purposes of the trust. We are of the view that a trustee may be taxable on income received by him which he is obliged to hand over to the beneficiary as capital. Income of the trust which is dealt with by accumulating it in any form and in such a way that it may in future become payable to the second group of beneficiaries or be made applicable to them would be income received on behalf of or for the benefit of such second group of beneficiaries. It is clear to us that clause (i) of the proviso to section 164(1) addresses itself to the entire class of beneficiaries on whose behalf or for whose benefit the income is receivable by the representative trustee. In this view of the matter, we are unable to accept the contentions canvassed on behalf of the assessee and we find ourselves in disagreement with the view taken by the Tribunal and the Appellate Assistant Commissioner. 20. We, therefore, answer the questions referred to us in the negative and hold that the assessee is not entitled to the concessional rate of tax and should be subjected to the maximum marginal rate of tax under section 164(1) of the said Act for the relevant assessment year. Reference answered accordingly with no order as to costs. 21. A copy of this judgment should be sent under the seal of this court and the signature of the Registrar to the Income-tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad. 22. At this stage, learned counsel for the assessee prays for a certificate of fitness under section 261 of the said Act. Having regard to the facts and circumstances of the case, in our opinion, this case is not a fit one for appeal to the Supreme Court. We, therefore, reject the prayer of learned counsel.