Income from properties settled in trust for minor beneficiaries can only be clubbed with the income of the assessee under section 64 (1) (vii) of the Income-tax Act, 1961 to the extent that it is actually applied for the education and maintenance of the minors.

B. P. JEEVAN REDDY, J.

( 1 ) THE Income-tax Appellate Tribunal has referred the following question under section 256 (1) of the Income-tax Act, 1961, for the opinion of this court :"whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in concluding that the income form the properties settled in trust in favour of the minor beneficiaries could not be clubbed with the income of the assessee under section 64 (1) (vii) ?"

( 2 ) THE assessee in an individual. He was the owner of the house bearing Municipal No. 8-3-1032, Sreenagar Colony, Hyderabad. On 14/04/1975, he settled a half share in the said house in favour of his major son, Sri Paul Ravinder Ponnaiya. By another settlement deed dated 2/07/1976, he settled the other half of the house under a trust for the benefit of his two minor sons, Ezekiel and Immanuel. The elder/major son, Paul, was appointed the trustee. The object of the trust dated 2/07/1976, with which alone we are concerned herein, was to provide for the education of the two minor children. The wife of the assessee was named as the alternative trustee. The trust deed provided that from the income accrued each year, the amount remaining after meeting the expenses on managing the trust and all expenses of the beneficiaries necessary and incidental to their education, should be accumulated and handed over to the minors on their attaining majority. The half share in the property was also to be handed over to the minors on their attaining majority. For the assessment years 1977-78 and 1978-79, the Income-tax Officer held that the income arising from the half share settled for the benefit of the minors ought to be included in the income of the assessee. On appeal, however, the Appellate Assistant Commissioner held that it cannot be so included. The Revenue carried the matter to the Income-tax Appellate Tribunal. Relying on certain decisions of the High Courts, the Tribunal held that section 6 (1) (vii) of the Act has no application to the income accumulated. It, however, observed that in so far as the income which is actually applied for the education and maintenance of the minors is concerned, it is liable to be included in the income of the assessee under section 64 (1) (vii ). Thereupon, the question aforesaid was asked to be referred by the Revenue and was referred.

( 3 ) SECTION 64 (1) (vii) of the Act, in so far as it is relevant, reads as follows :"64. (1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly -. . . . . . . (vii) to any person or association of persons from assets transferred directly or indirectly otherwise than for adequate consideration to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit of his or her spouse or minor child (not being a married daughter) or both. "

( 4 ) A reading of the above provision shows that it provides that while computing the total income of any individual, all such income as arises directly or indirectly to any person/association of persons from assets transferred directly or indirectly otherwise than for adequate consideration, to the extent to which the income from such assets is for the immediate or deferred benefit of the individuals spouse or minor child, or both, shall be included. The controversy pertains to the meaning to be placed upon the words"to the extent to which the income from such assets is for the immediate or deferred benefit of his. . . . . . minor child. . . ". The contention urged for the assessee is that where the income from a property transferred to a trustee for the benefit of the minor child of the individual is directed to be accumulated and paid over to the minor only on his attaining majority, it cannot be said that there is any benefit to the minor, whether immediate or deferred. According to this view, only where the benefit

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