Alfred Henry Lionel Leach, C.J.
1. By four deeds, all dated the 5th April, 1983 and referred to in these proceedings as 'deeds of trust and settlement' the assessee settled immovable properties on each of his four daughters. The properties were to be held by the assessee as trustee during his lifetime. The deeds also provided that after his death his eldest son was to be the trustee. The assessee reserved to himself powers to revoke the settlements or to make fresh dispositions just as he deemed fit. In view of the provisions of Section 16 (1) (c) of the Indian Income-tax Act, a clause which was inserted by the Amendment Act of 1939, the Income-tax Officer held that the assessee was liable, to be taxed in respect of the income received by his daughters from the settled properties during the year of account, (1938-1939). The assessee objected. He contended that the Income-tax Officer was wrong in giving what he called retrospective effect to the latter part of Section 16 (1)(c). Accordingly he appealed to the Assistant Commissioner who concurred in the order of the Income-tax Officer. On the application of the assessee the Commissioner of Income-tax has referred to this Court under the provisions of Section 66 (2) the following question:
Whether the income of the year 1938-39 derived from the assets comprised in the revocable instruments of Trust and Settlement executed by the petitioner in favour of his four daughters on the 5th April, 1933, i.e., before the commencement of the Indian Income-tax Act VII of 1939 can be deemed to be income of the petitioner under revocable transfers of assets as contemplated by Clause (c) of Sub-section (1) of Section 16 of the Indian Income-tax Act XI of 1922 as amended by the Indian Income-tax Amendment Act VII of 1939.
In referring this question the Commissioner has given reasons supporting the order of the Income-tax Officer and we agree with him.
2. Section 16 (1) (c) says:
All income arising to any person by virtue of a settlement or disposition whether revocable or not, and whether effected before or after the commencement of the Indian Income-tax (Amendment) Act, 1939, from assets remaining the property of the settlor or disponer, shall be deemed to be income of the settlor or disponer and all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income of the transferor.
It is admitted, as it must be, that the deeds executed by the assessee operate to transfer the assets, and being revocable, the income arising from the lands transferred must from the 1st April, 1939 be deemed to be the income of the assessee. But it is said that the income which the Income-tax Officer proposed to tax in respect of the year 1939-40 was income which had accrued before the passing of the Amendment Act and that this makes all the difference. The learned advocate for the assessee has laid stress on the fact that with regard to the deeds falling within the first part of the clause quoted the Legislature has been careful to state that the provision shall have effect whether the deed was executed before or after the commencement of the Amendment Act. The fact that there are no words to this effect in the latter part of the clause indicates, he says, that the Legislature did not intend income arising from properties which are comprised in revocable transfers to be taxed until the amending Act had been in force sufficiently long to cover the year of account.
3. This argument ignores the plain wording of the clause and the scheme of the Income-tax Act. When there is income accruing to a person by virtue of a revocable transfer of assets that income is to be deemed the income of the transferor. When the Income-tax Officer made the assessment in this case the Amending Act had come into force. The. Income-tax. Act says that an assessee shall pay the tax in respect of the assessment year based on the income received by him in the previous year. The assessee's income which the Income-tax Officer had to assess for the year 1939-1940 included the income received from the properties which were covered by these revocable deeds of transfer. The income had actually been received by the daughters, but as the result of the Amending Act that income must be, deemed to be the income of their father. Therefore we agree with the Commissioner of income-tax in his opinion that it is the law in force at the time of assessment which governs the assessment in this, case and not the law as it was during the year in which the income was earned. The same Opinion has been expressed by the Patna High Court-See H.P. Banerjee v. Commissioner of Income-tax, Bihar and Orissa I.L.R.(1940) Pat. 202.
4. For the reasons given we answer the reference in the affirmative. The Commissioner of Income-tax is entitled to his costs, which we fix at Rs. 250.