Doctrine of Accumulation: Definition and Meaning

A direction of accumulation of income from any property means restricting the free enjoyment of its incidental benefits, such as rents, production, or profits. In other words, it would mean limiting the beneficial enjoyment of the property. A direction of accumulation of income is a particular mode of restricting the enjoyment of property.

Meaning of Doctrine of Accumulation

As per Section 11 of the Transfer of Property Act, any condition that is repugnant to the interest created or that restrains the enjoyment of property that was transferred is absolutely void and inoperative. The direction of accumulation income is a kind of condition that is contrary to the interest created or limits the right to enjoyment in favor of the transferee to whom the property is absolutely transferred.

Section 17 of the Act is an exception to Section 11 and permits the accumulation of income to operate in certain cases. But sections 17 and 11 are different, as section 11 is only applicable in cases of transfers of absolute interest, whereas section 17 is applicable to all kinds of transfers.

Direction of Accumulation (Section 17)

The direction of accumulation of income and profits from property transferred as per the terms of the Act into a separate fund means postponing the transferee’s right to beneficial enjoyment of the property transferred.

Like the postponement of vesting of interest is discouraged under Section 14 (the rule against perpetuity), the postponement of the transferee’s right of beneficial enjoyment of property is also discouraged under Section 17 (the direction against accumulation) of the Act.

Section 14 fixes the maximum permissible limit for postponing the vesting of interest, and Section 17 prescribes the maximum permissible period up to which income and profits from the property transferred can be accumulated. Section allows accumulation of income during either of the two following periods −

• The life of the transferor

• Period of 18 years from the date of transfer (whichever is longer).

Therefore, any direction or condition that causes the accumulation of income beyond the prescribed period shall be held void. The result will be that at the end of the last mention period (permissible postponement), the property together with the incidental benefits shall go to the transferee.

Exceptions to Direction for Accumulation

Following are the major exceptions −

Payment of debts

If the purpose of the accumulation is payment of debt incurred by the transferor or anyone having an interest in property, then section 17 shall not be applicable in that case.

Accumulation for Raising Portions

Raising a portion means providing a portion of income for maintenance. If the purpose of the accumulation of income on the property transferred is to provide maintenance to the children, a distant relative of the transferor, or any other person interested in the transfer.

Preservation and Maintenance of property

In the event the income from property was directed to be accumulated for the purpose of preservation and maintenance of the property so transferred, then also Section 17 will not have application.

Section 18: Transfer in Perpetuity for the Benefit of the Public

The rule against perpetuity and accumulation does not apply in the case of the transfer of property for the benefit of the public. Making property non-transferable and putting restrictions on its transferability is against socio-economic policy and also detrimental to the property itself. But when property is transferred for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety, and other objects beneficial for mankind, the rule under sections 14, 16, and 17 shall have no application.

Conclusion

The direction for accumulation of income is a particular form of restricting the enjoyment of property. According to Section 17, such a direction for accumulation would be void and inoperative, but this section makes an exception and allows a direction for income accumulation to function in specific cases. This section allows income to be accumulated over the life of the transferor or for a period of 18 years from the date of transfer, whichever is longer.

Frequently Asked Questions (FAQ)

Q1. What is the direction for the accumulation of transfers of property?

Ans. A property's direction of income accumulation means restricting the free enjoyment of its incidental benefits, such as rents, commodities, or profits. In other words, it would mean limiting the property's beneficial enjoyment.

Q2. What is the direction for the accumulation of income under Section 17?

Ans. As a result, such income accumulation is prohibited by law under Section 17. That means that the direction of income accumulation is valid if it is first up to the transferor's life or second up to a period of 18 years from the date of the transfer.

Q3. Can a transfer of property be made in perpetuity?

Ans. Section 14 of the Transfer of Property Act of 1882 covers the rule against perpetuity. So the phrase "perpetuity" simply means ""indefinite period." This rule against a transfer makes a property inalienable for an indefinite period.