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(iv) the relevant income is receivable by the trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession, tax shall be charged as if the relevant income or part of relevant income were the total income of an association of persons. "

5. There is no doubt that in this case the income was received by the trust on behalf of the beneficiaries whose shares were indeterminate and unknown. In this case it also appears that there is no dispute that Clause (i) of the proviso would not be applicable. In this case though it appears that one such contention was made before the AAC, such contention was not pursued thereafter and we are not concerned in this reference with that aspect of the matter. Clause (iii) of the proviso enjoined that the relevant income should be receivable under a trust created before the 1st of March, 1970, by a non-testamentary instrument. This condition is also indisputably fulfilled in this case. It further enjoined the ITO to be satisfied " having regard to all the circumstances existing at the relevant time that the trust was created bona fide exclusively for the benefit of the relatives of the settlor ". Therefore, in order to come within Clause (iii) of the proviso to Sub-section (1) of Section 164 it had to be an instrument of trust created before 1st of March, 1970, by a non-testamentary instrument and, secondly, the ITO had to be satisfied " having regard to all the circumstances existing at the relevant time that the trust was created bona fide exclusively or the benefit of the relatives of the settlors ". Therefore, there is not much dispute, at least the Tribunal has not proceeded on that basis, that the trust was not created exclusively for the benefit of the relatives of the settlors.

7. The assessee went up in appeal before the AAC and the AAC observed that it was argued before him on behalf of the assessee that the beneficiaries of the trust were minor sons and daughters of the settlors and that none of the beneficiaries had any independent income as they were dependent on the settlors. This would have attracted Clause (i) of the proviso to Sub-section (1) of Section 164, but as we have mentioned before, this point was not pursued later on. The AAC further held that it was urged before him that the trust was covered by Sub-clause (iii) of the proviso, to Sub-section (1) of Section 164. The AAC was satisfied that it was so covered inasmuch as the trust was created prior to 1st March, 1970, and as the trust was for the benefit of the relatives of the settlors, he directed the ITO not to levy taxes at the rate of 65% but at the normal rate applicable to an association of persons. Being aggrieved by the said order of the AAC, the Revenue went up in appeal. After setting out the relevant facts and rival contentions, the Tribunal observed in its order, inter alia, as follows :

" We have considered the rival submissions. It will be necessary to point out that all the conditions laid down by Clause (iii) of the proviso to Sub-section (1) of Section 164 have to be met and it is not enough if some of the conditions have been satisfied. One of the conditions laid down by this clause is that the Income-tax Officer is satisfied that the trust was created bona fide exclusively for the benefit of the relatives of the settlors having regard to all the circumstances existing at the relevant time. For this purpose it will be necessary to find out whether the income of the trust was applied for the purposes and objects of the trust. It is not under dispute before us that no part of the income of the trust since its inception has so far been spent for any of the purposes or objects of the trust. The Income-tax Officer, therefore, in our opinion, in these circumstances, was not unjustified in coming to the view that the trust was not created bona fide exclusively for the benefit of the settlors. It is, therefore, not necessary for us to consider whether the trustees, who were also the settlors, had the discretion in spending or not anything out of the income of the trust for the purposes or objects of the trust. It will be necessary here to point out that we are of the view that the words that 'having regard to all the circumstances existing at the relevant time' should not be given the restricted meaning of the circumstances existing only at the time of creation of the trust and not the circumstances existing subsequently including the previous year to which the assessment relates. Taking all these facts into consideration we are of the view that the Income-tax Officer was correct in holding that the trust was not created bona fide for the benefit of the relatives of the settlors and since one of the conditions laid down under Clause (iii) of the proviso to Sub-section (1) of Section 164 was not met, the assessee-trust was liable to tax at the maximum rate of 65%. The Appellate Assistant Commissioner, therefore, in our view wrongly held that the assessee trust should be assessed not at the rate of 65% but at the rate applicable to an association of persons. On this point, therefore, the order of the Appellate Assistant Commissioner is reversed while that of the Income-tax Officer is restored. "
" Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that since the trust was not created bona fide for the benefit of the relatives of the settlors and one of the conditions laid down under Clause (iii) of the proviso to Sub-section (1) of Section 164 was not met, the assessee trust was liable to be assessed at the prescribed rate of 65% and not at the rate applicable to the total income of an association of persons ? "

10. The ground upon which the Tribunal has proceeded, as we have set out hereinbefore, is that having regard to the fact that there was non-application of the fund for educational purpose of the trust since its inception up to the date of relevant assessment year, the settlement or trust was not created bona fide and that the ITO was justified in coming to his finding. The question is, whether the Tribunal had applied the correct test in coming to that conclusion. We have noticed the Section. It required, as we have noticed, that the trust should be created by a non-testamentary instrument and the ITO was required to be satisfied having regard to all the circumstances existing that the trust was "created bona fide". Therefore, what was required to be satisfied was whether the trust was created bona fide and for that all the circumstances existing at the relevant time should be considered. The trust, in terms, did not enjoin that any income should be applied particularly in a particular year for the education or for any specific object. It gave complete discretion to the trustees to apply it in such manner for the benefit of the relatives of the dependant members of the family as they considered best. Education is one of them, medical assistance may be another. The question is, whether the mode and method of application or the manner of its application are circumstances which are germane in deciding whether the trust was created bona fide or not. Now, in our opinion, on a proper reading of the Section, it is clear that the creation of the trust must be made bona fide and, therefore, the ITO must be satisfied by all the relevant circumstances existing at the relevant time, that is to say, at the time when the trust was created that it was done bona fide. It is true that in some cases subsequent conduct of the parties might throw light as to the intention of the parties at the time of the creation of the instrument or a document. But the trust is, as we have noticed, for the benefit of the members of the settlors' family. The manner or the mode or the method of such benefit is not particularly described but it is indicated as by way of education, marriage, medical expense, maintenance, to be applied for the benefit. There is no conduct here which indicated that the trustees had applied the fund for any benefit to themselves or in derogation of the trust but there was only the non-application of the fund for the year in question. Now, that may or may not be for very many good reasons. That may be because the minor dependants or the relatives-dependants did not require the use of the fund for educational purpose or the trustees may or may not have thought that larger accumulation of fund would be a better way of helping for any future use when lump sum money would be required for any of the objectives stipulated in the trust. But, there is no evidence that any trust fund was misutilised by the trustees or by the settlors during all these years. If that is so, merely by the fact that there was no application of the trust fund for the objects of the trust since its creation by itself would not be the decisive factor to determine that at the relevant time, that is to say, at the time of the creation of the trust, it was not made bona fide. In that view of the matter, it appears to us that the Tribunal applied an incorrect test in coming to the conclusion as it did.