V.S. Desai, J.
1. Two questions have been referred to this court by the Income-tax Appellate Tribunal under section 66(1) of the Indian Income-tax Act and they are as follows :
'(1) Whether on the facts of the case the provisions of section 16(3) (a) (iv) are applicable to the two trusts created by Keshavji Morarji and Jaysingh Keshavji both on February 22, 1952 and
(2) Whether, on the facts and in the circumstances of the case, the creation of a trust by the assessee in favour of his minor grand-children, concurrently with there creation of a trust by the assessee's son in favour of the assessee's daughters, constitutes an indirect transfer of assets to his children, for the purposes of section 16(3) (iv) of the Act ?'
2. The assessee, Keshavji Morarji, transferred a sum of Rs. 5,00,000 to his son Jaysinh, on the 14th of June, 1952. Thereafter, on the 22nd of February, 1954, Keshavji made a settlement of Rs. 4,41,000 in favour of his minor grandchildren, who were the son and daughter respectively of his son, Jaysinh, under a deed dated 22nd of February, 1954. On the same day Jaysinh, the son of Keshavji, executed a trust deed settling a sum of Rs. 1,54,000 upon his three sisters, Indumati, Kusum and Dipika, the last of whom, that is, Dipika, was a minor. In the assessment of Keshavji and his son, Jaysinh, the Income-tax Officer held that the simultaneous execution of the trust deeds by Keshavji and Jaysingh constituted indirect transfers of assets by Keshavji to his daughters and by Jaysingh to his children. He accordingly held that the income from these transfers had to be included in the total income of the assessees under section 16(3) (a) (iv) of the Income-tax Act. In the appeals filed by the assessees to the Appellate Assistant Commissioner, the view taken by the Income-tax Officer with regard to the nature of these transactions was confirmed by the Appellate Assistant Commissioner. He, however, held that the income which could be so included in the total income of the assessees would be only such as related to the interest in the assets conveyed in favour of the minors and not the income of the whole of the assets. The Income-tax Appellate Tribunal confirmed the decision of the Appellate Assistant Commissioner and on applications made by Keshavji and Jaysingh under section 66(1), it consolidated the two applications and drew up a statement of the case referring the two questions of law, which arose out of its order, to this court. These two questions have already been set out at the beginning of this judgment. We will deal death the second question, the first question need not be answered. Before dealing with the same, we may, however, point out that the said question requires to be reframed. As it reads, it only relates to one of the two trusts, namely, the trust executed by Keshavji in favour of his grandchildren. Since the decision of the Tribunal and the question raised thereon relate to both the trusts, the question will have to be reframed as follows :
'Whether, on the facts and in the circumstances of the case, the creation of a trust by Keshavji in favour of his minor grandchildren concurrently with the creation of a trust by Jaysingh in favour of Keshavji's daughters, constitute indirect transfers of assets by Keshavji and Jaysingh to their respective children, for the purposes of section 16(3) (a) (iv) of the Act ?'
3. In the present case Keshavji has executed a trust settling property compared therein upon trustees for the benefit of his minor grand-children. Assuming that the execution of a trust settling property in trust upon trustees for the benefit of the beneficiaries would amount to a transfer indirectly in favour of the beneficiaries, the beneficiaries are not the wife or the minor children of the transferor and the transfer, therefore, by Keshavji under the trust would not be an indirect transfer in favour of his minor children. Similarly, the trust deed executed by Jaysinh, being again for the benefit not of his own minor children, but for the benefit of his sisters, would not amount to an indirect transfer by him of the assets in favour of his minor children. The contention, however, is that, although the beneficiaries under the trust deeds executed by the father and son are not their respective children, the simultaneous execution of the thrust deeds by them would amount to indirect transfer by them in favour of their respective children. It is contended that the two trust deeds executed by Keshavji and his son were mutual transactions, one being the consideration for the other and, therefore, amounted to indirect transfers.
4. Now, the only circumstance on which this contention of indirect transfers is based is that the two trust deeds were executed on the same day. In our opinion that circumstance alone will not be sufficient to establish that the trust deeds were executed each in consideration for the other and the simultaneous execution of the two deeds constituted but a single transaction whereby each of the settlors made provision for his own minor children. It may be pointed out that, at the date of the execution of the trust deeds, the settlements have been made out to properties, which belonged exclusively to each of the two settlors. The extent of property settled under the two trust deeds is also not the same. As has been pointed out by the Madras High Court in C. M. Kothari v. Commissioner of Income-tax, the fact that there are cross-gifts either by itself or taken with the fact that the gifts are simultaneous in point of time, does not establish that each transfer constitutes the consideration of the other and that the transfers are mutual. The facts in the Madras case, were much stronger than in the case before us because cross-gifts in that case were not only simultaneous but also for identical amounts. In the case before us, apart from the facts that the trust deeds were executed the same day, there does not appear to be any material circumstance from which the mutuality of the transfers can be inferred or they can be regarded as one being in consideration of the other.
5. Mr. Joshi learned counsel for the revenue, has pointed out that in the trust deed executed by Keshavji, the son Jaysinh, has been shown as a confirming party and there is a recital stating that he has joined the settlor in the conveyance. This, according to Mr. Joshi, is a circumstances indicating mutuality of the transfers. In our opinion no such inference is possible. It will be seen from the recitals in the trust deed executed by Keshavji that one of the properties settled under that deed was a property in respect of which a mortgage had been executed in favour of both Keshavji and Jaysinh, although the entire amount had proceeded from Keshavji alone and it was for that reason that Jaysingh had been made a confirming party to the trust deed and had also joined in granting, conveying and confirming the property along with Keshavji. In our opinion, therefore, the creation of the simultaneous trusts by Keshavji and Jaysingh did not constitute indirect transfer of assets by them in favour of their respective children for the purposes of section 16(3) (a) (iv) of the Act. The second question, therefore, must be answered in the negative. We answer it accordingly.
6. The contention raised on the first question is that section 16(3) (a) (iv) will have no application where the transfers are in favour of the trustees and not in favour of the minors. The argument is that under section 16(3) (a) (iv) the transfers of the assets have to be the minor children themselves and, therefore, when the transfer is not to the minor child, but to the trustee, though for the benefit of the minor child, it is not a transfer to which the provisions of section 16(3) (a) (iv) of the Act applies. We do not think it necessary to answer this question in view of our answer to the second question. Even on the footing that the settlement by a trust deed would amount to an indirect transfer in favour of the beneficiaries under the settlement, we have held in dealing with the second question that on the facts and in the circumstances of the case, there were no direct or indirect transfers by Keshavji and his son in favour of their own minor children. That being so, we do not answer the first question as being unnecessary to be answered. The assesses will get their costs from the Commissioner.
7. Second question answered in the negative.