This appeal relates to asst. yr. 1982-83. assessee is private trust which was created by Shri Upendra Thakorbhai Patel for benefit of children of his brother Atul T. Patel. according to deed of trust executed on 28th Feb., 1981 sum of Rs. 1,000 was settled on trust by said Upendra for benefit of Neil and other children that may be born of his brother Atul. deed further provides that net income is to be applied in equal share to all for benefit of children of said Atul that may be in existence on 31st March, each financial year. According to ITO in light of above provision of deed of trust beneficiaries for each particular period i.e. for each accounting period were not known to settler on date of settlement. Therefore he inferred that identity of beneficiaries were neither known nor specified. As consequence Expln. (1) to s. 164 was clearly applicable. He therefore held that interest income determined by him at Rs. 2,200 was exigible to tax at maximum marginal rate. matter was carried in appeal before AAC who observed that while t h e shares were determinate on every 31st March, same were not determinate when instrument of trust was made i.e. on 21st Feb., 1981. shares were dependent upon event which could take place in future. Therefore there would be consequential change in share of each of existing beneficiaries either by birth or by death. In this view of matter he held that shares of beneficiaries at time of creation of trust were indeterminate and therefore ITO was justified in assessing aforesaid income at maximum marginal rate. Being aggrieved assessee has come up in appeal before us. Shri Shah submitted that according to deed of trust and in particular cl. (4) thereof net income of trust was to be applied or spent or paid in equal shares for benefit of children of said Atul that may be in existence on 31st March, of each financial year. Thus share of each beneficiary was specified and beneficiaries were clearly determinate on 31st day of March, of each financial year which has been adopted as accounting year of trust. Therefore, deed of trust clearly specified not only share of beneficiaries but also beneficiaries to whom income was to be paid or applied. In this view of matter assessee's case would fail under exception set out in Expln. (1) and as such said Explanation was not applicable. He further supported his submission by relying on Circular No. 281 dt. 22nd Sept., 1980 under which scope of said Explanation has been explained. Shri Shah next pointed out that above Explanation was introduced in order to curb avoidance of tax through media of discretionary trust. Thus said Explanation would applicable in case where discretion was given to trustee to decide either allocation of income every year or right to beneficiary to exercise option to receive income. Neither of said conditions applied in instant case and therefore authorities below were not justified in assessing income of trust at maximum marginal rate. ld. Department representative on other hand relying on said Explanation as well as orders of authorities below contended that as beneficiaries were not determinate in accordance with provisions of deed of trust income was assessable at maximum marginal rate. We have considered rival submissions. controversy before us falls into narrow compass and it falls for true meaning of Expln. (1) to s. 164 of Act: "(i) any income in respect of which persons mentioned in cl. (iii) and cl. (iv) of sub-s.(1) of s. 160 are alienable as representative assessee or any part thereof shall be deemed as being not specifically receivable on behalf or for whose benefit such income or such part thereof is receivable during previous year in expressly stated in order of Court or instrument of trust of wakf deed as case may be, and is identifiable as such on date of such order, instrument or deed; (ii) individual shares of person on whose behalf or for whose benefit such income or such part thereof is received shall be deemed to be determinate or unknown unless individual shares of person on whose behalf or for whose benefit such income or such part thereof is receivable are expressly stated in order of Court or instrument of trust or wakf deed, as case may be, and are ascertainable as such on date of such order, instrument or deed." above Explanation was introduced by Finance (No. 2) Acts, 1980 with effect 1st April, 1980 with view to curb avoidance of tax liability by creation of discretionary trusts. Therefore according to said Explanation unless person on whose behalf or for whose benefit such income or such part thereof is receivable during previous year is expressly stated in deed of trust and beneficiaries were identifiable as such on date of such deed trust would be treated as discretionary trust. In other words in order to get out of mischief of said Explanation two conditions must co-exist. In first place shares of beneficiaries must clearly be specified and secondly beneficiaries must be identifiable, in accordance with deed of trust. Therefore for this purpose it is necessary to set out relevant clause which reads as follows: "4A. Until vesting Day: (1) trustees shall receive annual or other income of trust fund and all other income arising under this deed and in first place reimburse or pay and discharge all costs and expenses which may be incurred in or about administration of trust of these presents including any income-tax or wealth-tax or other tax levied upon trustees and including also all outgoing and Municipal or other rates assessments and duties and cost of ordinary repairs to any immovable property if any, forming part of trust fund and deal with residue of such annual or other income as under: whole of residue of such annual or other income shall be paid, spent or applied in equal share to or for benefit of children of Atul Thakorbhai Patel that may be in existence on 31st March, of each financial year which shall be accounting year of trust." It is clear from reading of above clause, which is material for our purpose, that share of each of beneficiaries is clearly specified. beneficiaries would be entitled to income in equal share. No discretion is left to trustees to vary share of beneficiaries. Thus requisite conditions in this regard is clearly laid down in deed of trust. Now as regards beneficiaries same are specified inasmuch as beneficiaries as may be in existence on 31st March, of each financial year i.e. end of accounting year of trust shall be entitled in equal share in income of trust. It may be pointed out here that in above mentioned circular it is inter alia laid down in para 30.3 sub-para 4(a) as follows: "any income in respect of which Court-of-wards, administrator- general, official trustee, receiver, manager, trustee or mutawalli appointed under wakf deed in liable as representative assessee or any part thereof shall be regarded as not being specifically receivable on behalf or for benefit of any one person unless person on whose behalf or for whose benefit such income or such part thereof is receivable during previous year is expressly stated in order of Court or instrument of trust or wakf deed as case may be, and is identifiable as such on date of such order, instrument or deed. For this purpose, it is not necessary that beneficiary in relevant previous year should be actually named in order of Court or instrument of trust or wakf deed, all that is necessary is that beneficiary should be identifiable with reference to order of Court or instrument of trust or wakf deed on date of such order, instrument or deed." According to this circular which reiterates Explanatory notes appended to bill it is not necessary that beneficiaries in relevant previous year should be actually named in instrument of trust. It would be sufficient if beneficiaries could be identified on date of instrument. This condition in our opinion is clearly fulfilled in view of fact that specific provision exists relating to beneficiaries to whom income shall be paid or for whose benefit income is required to be spent or applied. trustees have no option but divide income in equal shares to beneficiaries viz. children of said Atul as may be in existence on 31st March, each year. In our view therefore assessee's case clearly falls within exception engrafted in said Explanation and as such assessee's case is not hit by provisions of Explanation to s. 164 of Act. In result assessee's income in our opinion is chargeable at appropriate rate and not at maximum marginal rate. In result appeal is allowed. *** NEIL TRUST v. INCOME TAX OFFICER