Section 40 of ITA : Section 40: Power To Vary Investments

Explanation using Example

Imagine Mr. Sharma is the trustee of a trust that holds a significant amount of shares in a private company as part of its investment portfolio. The market is volatile, and Mr. Sharma worries about the stability of this investment. Under Section 40 of The Indian Trust Act, 1882, Mr. Sharma has the discretion to sell these shares and reinvest the proceeds into government bonds, which are considered a more secure investment as mentioned in section 20 of the same Act.

However, Mrs. Gupta, a beneficiary, is entitled to the income generated by the trust for her lifetime. Before Mr. Sharma can make this change in investment, he must obtain written consent from Mrs. Gupta, as she is competent to contract and currently entitled to the trust's income. If Mrs. Gupta agrees and provides her consent in writing, Mr. Sharma can proceed with the investment change, ensuring the trust's assets are protected and the interests of the beneficiaries are served.