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Mrs. Leela Nath Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 15 of 1977
Judge
Reported in[1982]134ITR507(Cal)
ActsIncome Tax Act, 1961 - Sections 62(1) and 63; ;Trusts Act - Sections 77 and 78
AppellantMrs. Leela Nath
RespondentCommissioner of Income-tax
Appellant AdvocateD. Pal, ;R.N. Bajoria, ;D. Dhar and ;A.K. Dey, Advs.
Respondent AdvocateSuhash Sen and ;M. Bhattacharjee, Advs.
Cases ReferredProvat Kumar Mitter v. Commissioner of Income
Excerpt:
- sabyasachi mukharji, j.1. in this reference under section 256(1) of the i.t. act, 1961, the following question has been referred to this court :' whether, on the facts and in the circumstances of the case, and on the proper interpretation of the trust deed the tribunal was justified in holding that the said trust is a revocable trust '2. the assessment year involved is 1970-71. the assessee is one mrs. leela nath, who had executed a deed of trust on 25th september, 1958. as the question involved in this case mainly depends on the construction of the trust deed, it would be relevant to refer to the said deed in a little detail. in the recital of the said deed, the names of the trustees were mentioned as the assessee herself, her husband and one sri wazir chand for their lives. in the.....
Judgment:

Sabyasachi Mukharji, J.

1. In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court :

' Whether, on the facts and in the circumstances of the case, and on the proper interpretation of the trust deed the Tribunal was justified in holding that the said trust is a revocable trust '

2. The assessment year involved is 1970-71. The assessee is one Mrs. Leela Nath, who had executed a deed of trust on 25th September, 1958. As the question involved in this case mainly depends on the construction of the trust deed, it would be relevant to refer to the said deed in a little detail. In the recital of the said deed, the names of the trustees were mentioned as the assessee herself, her husband and one Sri Wazir Chand for their lives. In the recital the settlor recited as follows:

'This indenture made this twenty-fifth day of September, 1958, by Mrs. Leela Nath, wife of Mr. Mahendra Nath, resident of 2, RobinsonStreet, Calcutta (hereinafter referred to as the founder), of the one part and (I) Mr. Wazir Chand, son of Mr. Dalpat Raj Bajaj residing at Qr. No. 5, Block 13, Govindnagar, Kanpur, (2) Mr. Mahendra Nath, son of Dr. Kedar Nath, resident of 2, Robinson Street, Calcutta of the other part.

Whereas the founder, above named, is desirous of creating a trust for the object set out hereinafter and has requested the persons abovenamed to act along with herself as trustees for the purpose.

And Whereas the abovenamed persons, namely, Mr. Wazir Chand and Mr. Mahendra Nath have agreed to serve as trustee.

And Whereas the founder has three minor children as described below:

(a) Daughter named Nita Nath, aged 12 years.

(b) Son named Kamal Nath, aged 11 years.

(c) Daughter named Rita Nath, aged 5 years.

And Whereas the founder is desirous of making an adequate provision for the education, marriage, setting up in life and other benefits of her minor children named above.

And Whereas for the abovenamed purposes she has decided to set apart the movable property described more fully in Schedule as mentioned below for the benefit of her minor children above named (hereinafter collectively referred to as the beneficiaries) on the terms and conditions hereinafter appearing now this indenture witnesseth as follows :... '

3. Then, the deed recites that the settlor had handed over the trust property to the trustees for the benefit of the three minor children, viz., (1) Nita Nath, (2) Kamal Nath and (3) Rita Nath, as mentioned in the trust deed, to be utilised and dealt with in accordance with the terms of the trust. Clause 4 stipulates that the property of the trust shall be the said movable property described in Schedule 'A' and the ' accumulation on such income or accretion thereof or additions thereto by further contribution or otherwise '. Next clause provided that the founder or any other trustees or any other person interested in the welfare of the beneficiaries shall be entitled to make further contributions to this trust and for the benefit of the aforesaid beneficiaries and all such contributions when received and accepted by the founder or the trustees for the time being shall become an integral part of the corpus of the trust and should be dealt with as if they were part of the property originally included in the trust. Clause 6 provided that the beneficiaries mentioned in the said deed should be entitled to the property forming the subject-matter of the trust in 'equal shares'. Incidentally, Clause 7, we may mention, was inadvertently not printed in the paper book and we have allowed the assessee to produce before us, a typed copy of the 7th clause to be prepared, with the consent of the parties, which provided merely that the founder, along with oneMr. Wazir Chand and the husband of the founder or settlor, Mr. M. Nath, should be the sole trustees during their lifetime of the property of the trust. Clause 8 of the said trust provided that the trustees for the time being should be entitled to ' invest the property of the trust in such manner as they in their absolute and uncontrolled discretion may consider proper and shall not be subject to any restrictions as described in the Trusts Act, 1882, or any other law pertaining to trustees during their lifetime, for the property of the trust'. Clauses 9, 10, 11, 12 & 13 of the said deed provided as follows :

' 9. Without prejudice to the general powers of investment set out in the preceding paragraph, the trustees for the time being may at their absolute discretion, sell, exchange, dispose of or otherwise deal with any part of the trust property and invest the said property and/or the sale proceeds thereof in any other securities, shares, debentures, bank deposits, loans to companies, private parties or firms or in acquiring any movable or immovable properties or in mortgage or pledge or hypothecation of property and goods or in any business venture or otherwise. The trustees for the time being shall also be entitled to invest and utilise the property of the trust or any part thereof in any business or undertaking carried on by themselves in the name of the trust alone or in partnership with any other person, firm or company or in any other business, in spite of the fact that any one or more of the trustees are interested directly or indirectly in such business. The trustees for the time being may spend the income of the trust or any part thereof or a part of the accumulations on such income for the maintenance, education, marriage or set up in life of the aforesaid beneficiaries or any of them.

10. The trustees for the time being shall be at liberty to give to any beneficiary any part or whole of his or her share in the property of the trust at any time after he or she has attained the age of twenty-one years, but shall be under no obligation to do so unless the beneficiaries concerned have attained the age of forty years.

11. Upon any of the beneficiaries reaching the age of forty years or earlier at the discretion the trustees for the time being after such beneficiary has attained the age of twenty-one years, his or her interest in corpus of the trust property shall be ascertained, handed over or transferred to him or her, as the case may be, and whereupon the trust shall to that extent stand dissolved and the responsibilities as trustee in that behalf.

12. If any of the beneficiaries unfortunately dies before his or her interest in the corpus of the trust has been ascertained and handed over to him or her in accordance with the provisions in paragraphs 10 and 11 above, the right and interest of the deceased beneficiaries shall pass to his minor children, if any, at the time of death and such children shall be deemed to be beneficiaries in his or her place to the extent of his or her right or interest as mentioned above, provided, however, that if any such beneficiary dies leaving no children his or her interest in the corpus of the trust at the time of his or her death shall pass to the surviving beneficiaries.

13. That after at least two beneficiaries have attained the age of eighteen years (18 yrs.) the trustees may extend the scope of objects of the trust and add to the number of beneficiaries in such manner as they think fit, provided, however, that alterations in this behalf shall be made on a unanimous decision of the trustees and with the consent in writing of all the major beneficiaries and of the guardian of the minor beneficiaries, if any.'

4. It is also necessary, in view of the arguments advanced before us to refer to Clause 23 of the said deed which provides as follows :

' 23. If at any time there be no beneficiary to the income or property of the trust and there be no will of the founder, the corpus of the trust and all income of the same will be the property of E. M. C. Trust of Research and Technology.'

5. We must in this context mention that the trust was created by a document dated 25th September, 1958. It appears that during the year relevant for the assessment year, the assessee drew a sum of Rs. 53,336 from the said trust, for the purpose of construction of a house, free of interest. The ITO observed in the assessment order for the assessment year 1970-71 that had the money been invested in some other manner, the trust could have derived substantial income. But the assessee did not pay any interest and derived indirect benefit. He, accordingly, held that the provisions of Section 62(1), proviso, would apply to the facts of this case and, therefore, he included the income of the trust in the hands of the assessee for the year 1970-71.

6. The assessee being aggrieved by the same, appealed to the AAC. It was submitted on behalf of the assessee that the trust was not revocable as contemplated under Section 61 and the provisions of Sections 62 and 63 of the I.T. Act, 1961, were not applicable. It was further urged that the assessee had no power to reassume the property or the income of the trust and nothing was taken by the assessee out of the income of the trust. The AAC considering the terms of the clauses of the trust came to the conclusion that the said deed provided the power to reassume the property or the income or assets of the trust property by the trustees and it made no difference if that power was to be exercised with the consent of the beneficiaries and the power of the settlor to make any alteration rendered the trust a revocable one. For this conclusion, he found support from some decisions, to some of which we shall presently refer. According to the AAC, the power of the settlor to take a loan from the trust without any security or interest led to the inference that a power was reserved by the settlor to derive the benefit indirectly. He held that the trust was a revocable one and, therefore, affirmed the action of the ITO.

7. The assessee being aggrieved by the aforesaid decision of the AAC appealed to the Tribunal. It was submitted before the Tribunal on behalf of the assessee that the revenue authorities were wrong in holding that the trust was a revocable one. It was argued that it was only the power reserved in the trust deed for the settlor to reassume the trust property or any income therefrom that could make the trust revocable and not merely the fact of the settlor getting any benefit of the trust property or the income therefrom. In support of this contention, reliance was placed on certain decisions, which we shall presently notice. It appears that the attention of the Tribunal was drawn to Clause 13 of the trust deed. It was also urged that the assessee did not derive the benefit of the income form the trust property by withdrawing the said amount free of interest and the income of the trust was not affected by such withdrawal and even if the assessee had derived any benefit then that by itself would not render the trust a revocable one. On behalf of the revenue reliance was placed on the reasonings given by the ITO and the AAC. It was argued that the various clauses gave power to the settlor to reassume the property or income of the trust, to get directly or indirectly, benefit from the income or assets of the trust. It was further argued that it was not material that the power was to be exercised by the settlor alone or with the consent of the beneficiaries or other trustees. The Appellate Tribunal, after considering the provisions of Sections 61, 62 and 63 of the Act, observed as follows :

' Section 61 provides for the inclusion of the income of the trust in the hands of the settlor in case the trust is a revocable one. Section 62 provides exceptions in certain cases to Section 61. Section 63 makes a provision for cases wherein a transfer shall be deemed to be revocable. What is to be seen is whether under Section 63 the trust in question was revocable or not. Clause 8 of the trust deed gives an uncontrolled power to the trustees to invest the trust property in such manner as they like. Clause 19 further provides for the investment of the trust property in such manner as they like. Clause 19 further provides for the investment of the trust funds in any concern in which the trustees are directly or indirectly interested. The contention of the learned counsel for the assessee is that these powers are to be exercised not by the settlor alone as a trustee but by all the trustees and according to him in such circumstances it cannot be said that any power is reserved to the settlor for deriving any direct or indirect benefit out of the trust property. The facts in the case of CIT v. Ragbhir Singh : [1965]57ITR408(SC) were that the settlor was allotted 400 shares in a company along with other properties on the partition of a joint Hindu family of which he was a member and was also made liable to pay a business debt. He created an irrevocable trust in respect of 100 shares and the income of the trust after the discharge of the debt was to be applied for the benefit of the beneficiaries. It was held that the provision for the application of the income for the payment of the debt which the settlor was under an obligation to pay did not amount to a provision for retransfer of the income or the assets to the settlor or to his being invested with a power to resume the income of the assets. The settlor did obtain a benefit from the trust but on that account the first proviso to Section 16(1)(c) of the Indian I.T. Act, 1922, was not attracted and the income from the shares could not be deemed to be the settlor's income or included in his total income. It was on the construction of the deed itself that their Lordships came to the above conclusions. The facts of the present case are quite different and the authority cited by the learned counsel for the assessee is not applicable to the facts of the present case,

It has been held in the case of Behramji Sorabji Lalkaka v. CIT : [1948]16ITR301(Bom) , that the expression 'revocable' in Section 16(1)(c) of the Indian I.T. Act, 1922, is not qualified in any manner and that a section does not speak for absolute and unqualified power of revocation and for the purpose of Section 16(lXc) a transfer is nevertheless revocable even if it can be revoked only with the consent of any named person or persons. Even if the assessee has to exercise the uncontrolled power of investment of the trust money in any concern in which the assessee is interested along with the other trustees that would not in any way detract from the reservation of a power for deriving any indirect benefit by the assessee.'

8. The Tribunal, accordingly, held that the trust was a revocable one and it did not find any reason to differ from the stand taken by the AAC. The Tribunal, therefore, dismissed the assessee's appeal. Upon these, the question of law, as indicated above, has been referred to this court under Section 256(1) of the Act.

9. In order to appreciate the question it would be necessary to refer to the relevant provisions of the Act. Chapter V of the I.T. Act, 1961, deals with income of other persons included in the assessee's total income. Section 60 of the said chapter provides for transfer of income where there is no transfer of assets. It stipulates that all income arising to any person by virtue of a transfer whether revocable or not effected before or after the commencement of the Act would, where there was no transfer of the asset from which arose income chargeable to income-tax, such income of the transferor should be included in his total income. We are not concerned in this reference with Section 60, as such. Section 61 deals with the revocable transfer of assets and provides that all income arising to any person by virtue of a revocable transfer of assets would be chargeable to income-tax as the income of the transferor and should be included in his total income. Section 62 provides for a transfer irrevocable for a specified period and it is necessary to set out the provisions of the said section which reads as follows :

' 62. Transfer irrevocable for a specified period.--(1) The provisions of Section 61 shall not apply to any income arising to any person by virtue of a transfer-

(i) by way of trust which is not revocable during the lifetime of the beneficiary, and, in the case of any other transfer, which is not revocable during the lifetime of the transferee; or

(ii) made before the first day of April, 1961, which is not revocable for a period exceeding six years ;

Provided that the transferor derives no direct or indirect benefit from such income in either case. (2) Notwithstanding anything contained in Sub-section (1), all income arising to any person by virtue of any such transfer shall be chargeable to income-tax as the income of the transferor as and when the power to revoke the transfer arises, and shall then be included in his total income.'

10. Section 63 which defines ' transfer ' and ' revocable transfer ' is also material and is in the following terms :

'63. 'Transfer' and * revocable transfer ' defined,--For the purposes of Sections 60, 61 and 62 and of this section,--

(a) a transfer shall be deemed to be revocable if-

(i) it contains any provision for the retransfer directly or indirectly of the whole or any part of the income or assets to the transferor, or

(ii) it, in any way, gives the transferor a right to reassume power directly or indirectly over the whole or any part of the income or assets;

(b) ' transfer' includes any settlement, trust, covenant, agreement or arrangement.'

11. We are not concerned with Sections 64 and 65 onwards of Chap. V of the I.T. Act, 1961. As a matter of fact, similar provisions, more or less in identical terms, were there in the Indian I.T. Act, 1922. As most of the decisions which we shall deal with, dealt actually with the provisions of Section 16(1)(c) of the Indian I.T. Act, 1922, it is necessary to set out the provisions of Clause (c) of Sub-section (1) of Section 16, which was in the following terms:

' 16. Exemptions and exclusions in determining the total income.--(1) In computing the total income of an assessee--............

(c) 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 (VII of 1939), from assets remaining the property of the settlor or disponer, shall be deemed to be the 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 the income of the transferor :

Provided that for the purposes of this clause a settlement, disposition or transfer shall be deemed to be revocable if it contains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor, or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or assets :

Provided further that the expression 'settlement or disposition' shall, for the purposes of this clause, include any disposition, trust, covenant, agreement or arrangement, and the expression 'settlor or disponer' in relation to a settlement or a disposition shall include any person by whom the settlement or disposition was made : Provided further that this clause shall not apply to any income arising to any person by virtue of a settlement or disposition which is not revocable for a period exceeding six years or during the lifetime of the person and from which income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be assessed on the said income as and when the power to revoke arises to him.'

12. We may incidentally point out that this reference is not concerned with the question whether any benefit was derived in view of a revocable transfer because of Section 62 of the 1961 Act. The question with which we are really concerned is the construction and the effect of Section 62 in the amplitude of the question before us. Now, the question before us is, whether on a proper interpretation of the trust deed, it could be said to be a revocable trust. Therefore, that question has to be determined in the light of the definition provided in Section 63 and which provides for the purposes of Sections 60, 61, 62 and 63 a transfer shall be deemed to be revocable if it (underlined* by us) contains any provision for the retransfer directly or indirectly of the whole or any part of the income or assets of the trust to the transferor or in any way gives to the transferor a right to reassume power directly or indirectly over the whole or any part of the income or assets. There is no dispute that there was a transfer in this case as contemplated under Clause (b) of Section 63 of the Act.

13. Section 63(a)(i) provides that a transfer shall be deemed to be revocable if it (underlined by us) meaning thereby the transfer contains anyprovision for the retransfer directly or indirectly of the whole or any partof the income or assets to the transferor, or again if it, meaning thereby the transfer, that is to say, the deed of transfer in any way, gives the transferor a right to reassume power directly or indirectly over the whole or any part of the income or assets. Therefore, the main question, to which our attention must be directed, is, whether the deed itself on a proper construction can be said to contain any provision for retransfer, directly, or indirectly, of the whole or any part of the income or assets of the transferor or the settlor. Mere transfer or enjoyment of any income or assets by the transferor without there being any right to reassume by the act of transfer which is reserved, that is to say, in the transfer deed, would not make it revocable under Section 63 of the Act. Again, the transfer deed would be revocable if the deed itself gives the transferor a right to reassume power, directly or indirectly, either over the whole or any part of the income or assets of the transferor. Therefore, resumption of power aliunde would not affect the position. This is important to remember because we are concerned with the construction of Section 63 in the light- of the definition provided.

14. On behalf of the revenue, it was urged that we must construe these provisions keeping in view the object of those provisions. In this connection, on behalf of the revenue reliance was placed on a decision of the Supreme Court in the case of Tulsidas Kilachand v. CIT : [1961]42ITR1(SC) , where Hidayatullah J., as the Chief Justice then was, observed at p. 4 of the report, dealing with the scheme of Section 16 and dealt with the observations of Lord Macmillan in the case of Chamberlain v. IRC [1943] 25 TC 317 (HL), where Lord Macmillan had observed as follows-:

'This legislation............(is) designed to overtake and circumvent a growing tendency on the part of taxpayers to endeavour to avoid or reduce tax liability by means of settlements. Stated quite generally, the method consisted in the disposal by the taxpayer of part of his property in such a way that the income should no longer be receivable by him, while at the same time he retained certain powers over, or interests in, the property or its income. The legislature's counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should, notwithstanding, be treated as still his income and taxed in his hands accordingly.'

15. Thereafter, Hidayatullah J., observed, inter alia, as follows :

' These observations apply also to the section under consideration, and the Indian provision is enacted with the same intent and for the same purpose. Section 16 thus lays down certain exemptions and exclusions in determining the total income of an assessee. Some of the provisions lay down the conditions for inclusion of certain income, while others lay down the conditions for exclusion of other income. We are concerned with the income accruing in case of settlements and the conditions under which the income of a wife is treated as the income of the settlor or disponer or as the income of the husband. We have to see if the provisions for exclusion or inclusion apply to this case.

Section 16(1)(c) provides that income from assets remaining the property of the settlor or disponer or arising to any person by virtue of a revocable transfer of assets shall be deemed to be the income of the transferor. What Clause (c) means was decided by this court in Provat Kumar Mitter v. Commissioner of Income-tax : [1961]41ITR624(SC) . There, Provat Kumar Mitter had assigned the dividends only and had riot transferred the relevant shares. It was held by this court that this was a case of application of one's own income and not assignment of the source from which the income was derived, which alone saved the income from tax, subject, however, to provisions like Section 16(1)(c) and Section 16(3). The deed in favour of the wife in that case gave only a right to the dividends, and not being a transfer of an existing property of the assessee, Section 16(1)(c) and the third proviso were not attracted. That case thus has no application to the facts of the present case, where the disposition is differently made.'

16. Therefore, it has to be emphasized that the object was to overtake and circumvent a growing tendency on the part of taxpayers to reduce the tax liability by means of a settlement. But the specific question, with which we are concerned, is whether in terms of the section a power had been reserved by the very deed of transfer of settlement either to enjoy the benefit of the income or asset directly or indirectly or reassume control over the asset or income directly or indirectly. On this aspect, our attention was drawn to Clause 8, which we have set out hereinbefore. Now, there, it was provided that the trustees for the time being should be entitled to invest the property in such manner as they in their absolute and uncontrolled discretion might consider proper and this power should not be subject to any restrictions as described in the Trusts Act, 1882, or any other law pertaining to trustees during their lifetime, in relation to the powers of investments by the trustees or otherwise. Now, there are two aspects of the question and the first is, whether, at all, there was any power to give an interest-free loan on the part of the trustees to the settlor by virtue of any clause. Now, the power given to the trustees was to invest the property. Keeping any money or giving money for the purpose of custody without any return cannot properly and strictly be called an investment. An investment involves a laying out of the property with certain object of a return. Therefore, strictly speaking, this act of the trustees, of giving an interest-free loan, was not investing the money and to that extent the trustees might be said to have acted not in compliance with the trust deed. Apart from this, there is no such power as such in the deed and our attention was not drawn to any such clause.

17. Learned advocate for the revenue, however, sought to urge that this argument was not urged before the Tribunal and both sides proceeded on the basis that the power of giving a loan or making an investment included the power of giving an interest-free loan. But, it appears to us, really what we have to consider is whether on the construction the trust deed by its clause contained certain clauses as contemplated in Sub-clauses (i) and (ii) of Clause (a) whether the trust deed actually contained any power of this nature or not. We are of the opinion that the trust deed did not contain any such clause and the trustees acted in violation of the powers given in the trust deed. But whether the enjoyment of any benefit by the trustees acting in derogation of the trust deed might or might not attract the applicability of Section 62, is not the question which has been raised before us. Even if we assume that the power of investment was given by the clause mentioned hereinbefore, we will have to consider whether such a clause could be construed as reserving a power as contemplated under Sub-clause (i) or Sub-clause (ii) of Clause (a) of Section 63 of the Act in order to make the trust a revocable one.

18. In this connection, it is necessary to bear in mind the entire scheme of Sections 60 to 63. Section 61 makes all income arising to any person by virtue of a revocable transfer of assets chargeable to income as the income of the transferor. Section 62 stipulates that the provision of Section 61, that is to say, addition of income by virtue of a revocable transfer of assets to the income of the transferor should not apply to income arising to any person by virtue of a transfer by way of, inter alia, a transfer which is not revocable during the lifetime of the beneficiary or made before the 1 st April, 1961, which is not revocable for a period exceeding six years. But Sub-section (1) of Section 62 is hedged by a proviso, which is applicable provided that the transferor does not derive any direct or indirect benefit from such income in either case. If the transferor does derive, in fact, direct or indirect benefit from a transfer and even if the conditions of Sub-clause (i) or (ii) of Sub-section (1) of Section 62 are fulfilled, it would be treated as a revocable trust. In this case; it is again necessary to emphasise that in view of the question that is posed before us and1 in view of the arguments that the Tribunal had occasion to consider, it is not necessary for us to examine whether the transferor actually derived any direct or indirect benefit from the income arising out of the transfer because we are only concerned with whether the transfer, that is to say, the deed of transfer, was a revocable one by fulfilling either of the conditions stipulated in Clause (a) and Clause (b) of Section 63 of the Act. Indeed, an argument might have been possible that having used an interest-free loan out of the transferred asset the assessee had, in fact, in the background of the case, derived direct or indirect benefit. Whether such an argument would have been sound or not, it is not necessary for us to decide or discuss because that is not within the ambit of the question posed before us. As we have mentioned before, in order to be a revocable transfer under Section 63 of the Act, the transfer deed must contain a provision for retransfer directly or indirectly of the whole or any part of the income which must go to the transferor or the right to reassume power directly or indirectly over the whole or any part of the income or assets. This aspect, in our opinion, in view of the clauses mentioned in the deed, on principle, cannot be said to be a revocable trust under Section 63 of the Act (sic). We have set out the relevant clauses. If, as we have indicated, Clause 8 of the deed of transfer is construed to mean that the power for the discretion to invest the money of the trust did not include the power to give an interest-free loan, the trustees acted in breach of the terms of the deed, for a benefit derived by the settlor, where the trustees acting in derogation or in breach of the deed of transfer, it cannot be said that the deed of transfer was revocable because it contained a term permitting either retransfer directly or indirectly over the whole or any part which must go to the transferor or the right to reassume power directly or indirectly over the whole or any part of the income or assets. Even if we proceed on the basis that the power to invest absolutely includes the power to grant an interest-free loan even then, in our opinion, no provision under Clause 9 entitles the transferor or the settlor to transfer directly or indirectly the whole or part of the income or the assets to the transferor. It may be that it gave a right to the transferor or the settlor or one who was the owner to be a borrower of certain money. But that cannot be construed to mean that it conferred a right to retransfer, that is to say, hand over the assets or the income in the same capacity that the transferor held before the deed of transfer, nor can it be construed to permit the transferor to reassume, that is to say, to take the sum in the same capacity or in the same capacity which he had before the transfer, directly or indirectly, or either whole or part of the income or assets. Learned advocate for the revenue emphasised that Clause 8 permitted or entitled the trustees to invest the property in such manner in their absolute and uncontrolled discretion and it also excluded the operation of the restriction prescribed by the Trusts Act or any other law pertaining thereto. It might be that it gave an uncontrolled right to the trustees to reinvest but it did not permit or give any power either to transfer or to hand over the property in the same capacity, that is to say, as owner of either the income or the asset or the property in the same capacity as that of the transferor. If Clause 8 is read in conjunction with -cl. 9 then, in our opinion, it cannot be construed that there was any right which the settlor reserved in the deed of transfer by virtue of which it could be said that he had reserved the rights contemplated under sub-els. (i) and (ii) of Clause (a) of Section 63 of the Act. This construction, in our opinion, is well settled by judicial decisions. The first decision to which we must refer is the decision of the Division Bench of this court in the case of CIT v. Sir S.M. Bose : [1952]21ITR135(Cal) . There, the court was concerned with the first proviso to Section 16(1)(c) of the Indian I.T. Act, which we have set out hereinbefore, and which corresponds to Section 63(a), Clauses (i) and (ii). But what was one in proviso to Clause (c) of Sub-section (1) of Section 16 of the Indian I.T. Act, 1922, has now been placed in two sub-clauses being Sub-clauses (i) and (ii) of Clause (a) of Section 63 of the Act of 1961. The Division Bench of this court held that the first proviso to Section 16(1)(c) of the Indian I.T. Act, 1922, only contemplated cases where the settlor could lawfully reassume power over the income or the assets. There, what happened was that the assessee had settled certain property on himself as a trustee to hold it in trust for his daughter. The deed, which was in the ordinary form, an out and out trust on the English model, provided that the trustee was to take possession and after paying the outgoings the income of the trust estate was to be paid to his daughter during the term of her natural life for her sole and separate use. The deed also made provisions as to how the income was to be dealt with on the death of the daughter. But the settlor retained no right whatsoever over the corpus or the income, and he had no power of revocation. Clause 3 of the deed provided that ' as long as the present trustee, viz., the settlor or the persons, named as trustees in addition or substitution, shall act as trustees, they shall not be accountable to any of the beneficiaries under these presents relating to his or their dealings as to the income of the trust estate '. The question was whether the income from the trust properties was taxable in the hands of the assessee as his income by virtue of the provisions of s. I6(1)(c) of the Indian I.T. Act, 1922. It was held that the settlor by the trust deed put the income for ever out of his control and that being so the income from the trust properties could not be assessed as part of the income of the assessee under Section 16(1)(c). Clause 3, which we have set out hereinbefore, did not, according to the Division Bench, give the settlor a control over the income. It was merely a provision limiting the rights of the beneficiary to question certain acts of the trustee. Provisions made in the deed to prevent frivolous litigation and to prevent questioning the bona fides of the trustees did not have the effect of giving the settlor a right to reassume power directly or indirectly over the income or assets. Similarly, in our opinion, in the instant case before us, the discretion give to the trustees ' to invest the property of the trust in such manner as they, in their absolute and uncontrolled discretion, may consider proper' or that this power shall not be subject to any restriction as prescribed in the Trusts Act of 1882 or anyother law pertaining te the trustees in relation to the powers of the trusteesof investment or otherwise, cannot be construed to mean that the settlorhad the right to reassume power directly or indirectly over the income orthe assets as an owner. This principle was again enunciated by theSupreme Court in the case of CIT v. S. Raghbir Singh : [1965]57ITR408(SC) . There, the assessee was allotted, besides other properties, 400 shares in acompany on the partition of the joint Hindu family of which he was amember, and was also made liable to pay the business debt of the familyamounting to Rs. 3,91,875. Shortly, thereafter, he created an irrevocabletrust in respect of 300 of those shares to pay off the debt out of the incomeof the trust, and after the discharge of the debt, to apply 80 per cent, of theincome for the maintenance of his children and grandchildren and thebalance at the discretion of the trustees on any of the other objects specified in the trust deed. It was held by the Supreme Court that the provision for the application of the income for the satisfaction of the debtswhich the respondent was under an obligation to discharge did not amountto a provision for a retransfer of the income or the assets to the assessee orto his being invested with a power to reassume the income or the assets.The income or the assets were unmistakably impressed with the obligationsarising out of the trust deed. The assessee-settlor did not obtain anybenefit from the trust but on that account the first proviso to Section 16(1)(c) ofthe Indian I.T. Act, 1922, was not attracted, and the income from theshares could not be deemed to be the assessee's income or included in histotal income. The case in which there was a settlement, but there was noprovision in the settlement for a retransfer or right to reassume power, didnot fall within the first proviso to Section 16(1)(c) even if as a result of the settlement, the settlor obtained a benefit. At p. 413 of the report, the SupremeCourt reiterated that the terms of Section 16(1)(c), first proviso, were reasonablyplain. The settlement or disposition was deemed to be revocable if therewas a provision therein for a retransfer of the income or assets or whichconferred a right to reassume the power over the income or assets. Theprovision might even be for a retransfer indirectly or might have beenconferred the power to reassume indirectly over the income or the assets.But the actual retransfer or exercise of the power to reassume was notnecessary. At p. 414 of the said report, the Supreme Court observed, interalia, as follows: .

' We are unable to accept the argument of counsel for the revenue that by the use of the expression 'indirectly' in the first proviso the legislature sought to bring within the purview of Clause (c) cases where the settlor was under the guise of a trust seeking to discharge his own liability. The proviso contemplates cases in which there is a provision for retransfer of the income or assets and such provision is for retransfer directly or indirectly. It also contemplates cases where there is a provision which confers a right upon the settlor to reassume power over the income or assets directly or indirectly. It is the provision for retransfer directly or indirectly of income or assets or for reassumption of power directly or indirectly over income or assets which brings the case within the first proviso. Cases in which there is a settlement, but there is no provision in the settlement for retransfer or right to reassume power do not fall within the proviso, even if as a result of the settlement, the settlor obtains a benefit.'

19. In the case of CIT v. Jayantilal Amratlal : [1968]67ITR1(SC) , the Supreme Court was dealing with the case of a settlor, who had executed a trust deed, whereby he had created a trust of certain shares of a company for charitable purposes. The deed was registered under the Bombay Public Trusts Act, 1950. Under Clause 4 of the deed the settlor could direct the trustees to set aside any port ion of the income of the trust for certain temples. Clause 6 enabled the settlor at any time to direct that any specific fund or investment or property that formed a part of the trust and/or income thereof should be utilised and applied exclusively for any one or more of the charitable objects. Under Clause 8 the settlor had power to direct the trustees to hand over the income of the trust or any part thereof to any institution, association or society to be applied for all or any of the charitable purposes without being bound to see to the application thereof. Under Clause 10 the settlor had power to direct the trustees to invest the trust fund in shares of companies or any debentures or in giving loans to any public company or firm of good standing and reputation. Under Clause 11 the settlor could direct the trustees to vary the investment. Clause 21 provided that ' all questions arising in the management and administration of the trusts or powers hereof and all differences of opinion among the trustees shall be disposed of in accordance with the opinion of the settlor during his lifetime...' The question was whether the income of the trust could be assessed in the hands of the settlor on the ground that he had a right to reassume power over the trust funds or the income thereof as contemplated by the first proviso to Section 16(1)(c) of the Indian I.T. Act, 1922. It was held that none of the clauses of the trust deed came within the purview of the first proviso to Section 16(1)(c) and that the income of the trust could not, therefore, be assessed in the hands of the settlor. The power under Clause 4 to direct the application of income of the trust to a particular charitable purpose or the power (under $1. 6 to nominate the charitable object and the fund or investment which should be utilised for that object was in no sense the power to reassume control over the asset of the trust or the power under Clause 8 to direct the trustees to hand over the income of the trust or any part thereof to any institution or society or association to be applied for all or any of the charitable purposes without being bound to see to the application thereof was the power to reassume control over the asset or income of the trust. Clauses 10 and 11 which enabled the settlor to give directions regarding the investments had to be read according to the Supreme Court, subject to the provisions of the Bombay Public Trusts Act and the general principles of law relating to trusts. The settlor could not legally direct to give a loan to himself and any loan to the business in which the settlor was interested. The settlor did not have the power to give such a loan by virtue of Section 16(1)(c) of the Act. Clause 21 which provided that all questions arising in the management and administration of the trust and all differences among the trustees should be disposed of in accordance with the opinion of the settlor gave a wide power which the settlor had reserved to himself. None of these clauses came within the purview of the first proviso to Section 16(1)(c) of the Act. The first proviso contemplated only the case where the settlor could lawfully reassume power over the income or the assets of the trust. The latter part of the first proviso contemplates that the settlor should be able by virtue of something contained in the trust deed to take back the power he had over the assets or income previous to the execution of the trust deed. A provision enabling the settlor to give directions to the trustees to employ the assets or funds of the trust in a particular manner or for a particular charitable object contemplated by the trust deed could not be said to confer a right to reassume power within the meaning of the first proviso to the Act, otherwise the settlor could never himself become the sole trustee. Learned advocate for the revenue sought to urge that this decision was given in view of the provisions of the Bombay Public Trusts Act which contained an express prohibition against investment to the settlor of the loan to the settlor of the funds belonging to the settlor. According to the learned advocate for the revenue, if this aspect is not borne in mind then the true ratio of the decision could not be appreciated.

20. Learned advocate for the revenue also drew our attention to the observation of the Supreme Court at pp. 8 and 9 of the report where the Supreme Court reiterated the importance of the prohibition by the Bombay Public Trusts Act. But at p. 10 of the report, the Supreme Court observed that if the court did not ignore the relationship of the Bombay Public Trusts Act and the general principles of the Public Trusts Act then two interpretations of the first proviso of the Act would arise : whether the powers were reserved by the settlor or the trust deed came within the mischief of the Act. But the Supreme Court after expressing the view, at p. 10 of the report, observed as follows ;

'What then is the fair meaning of Section 16(1)(c), proviso (i)? It seems to us that the words 'reassume power' give indication to the correct meaning of the proviso. The latter part of the proviso contemplates that the settlor should be able, by virtue of something contained in the trust deed, to take back the power he had over the assets or income previous to the execution of the trust deed. A provision enabling the settlor to give directions to trustees to employ the assets or funds of the trust in a particular manner or for a particular charitable object contemplated by the trust cannot be said to confer a right to reassume power within the first proviso. Otherwise a settlor could never name himself a sole trustee. It seems to us that the latter part of the proviso contemplates a provision which would enable the settlor to take the income or assets outside the provisions of the trust deed. Mr. Desai says that if a settlor can derive some direct or indirect benefit under a trust deed, the trust deed would fall within the first proviso. But the first proviso does not use these words. The words ' direct or indirect benefit' occur only in the third proviso. This court held in Commissioner of Income-tax v. S. Raghbir Singh : [1965]57ITR408(SC) , that although the settlor in that case obtained a benefit from the trust--payment of his debts--the first proviso was not attracted.'

21. It is important, therefore, to bear in mind that the Supreme Court emphasised that the trust deed contained a power reserving to the settlor ' to take back the power he had ' before the execution of the settlement. Now, the power ' to take back the power he had ' indicates that the trust deed contained a power reserving to the settlor to assume control in the same capacity to the extent, that is to say, qua a owner that he had before the settlement or the transfer. That is the fair meaning of Section 16(1)(c) of the 1922 Act, according to the Supreme Court.

22. It was in this light that the Division Bench of this court understood this decision in the case of CIT v. Trustees of Sreeram Surajmull Charity Trust : [1971]79ITR649(Cal) . We are not concerned with the various other clauses of the trust deed with which this court was concerned. It will be instructive to refer to the observation on this section by this court by P.B. Mukharji C.J., on the construction of Section 16(1)(c) and the first proviso, appearing at p. 666, where it was observed as follows :

' Without first looking at the authorities and on the basis of the interpretation of Section 16(1)(c) and its first proviso just stated, it is essential to correlate the following facts. In the first place, the registered deed of trust in this case, which is said to create a revocable trust, does not itself contain any provision for ' retransfer ' or for ' reassuming ' within the meaning of the first proviso to Section 16(1)(c). We emphasize the language in the first proviso 'if it contains any provision'. That means that the settlement, disposition or transfer itself must contain such provision. We hold there is none in this case. The second point which we emphasize is about the two words of significant importance : 'retransfer' and 'reassume'. The prefix 're' plainly indicates that it must be a' transfer' to himself as himself and not in any different capacity or it must have to 'reassume', which means to assume for himself as himself and not in a different capacity. Looking at the relevant clause of the trust deed quoted, on which reliance was placed for the revenue, there is no provision which can be treated or construed even remotely as a case of ' retransfer' or giving a right to 'reassume'. A refinement of this branch of the argument was made by Mr. Sen for the revenue by saying that, although there is no clause for re-transfer or reassuming within the meaning of the first proviso to Section 16(1)(c) directly, these clauses may be interpreted as creating a right to ' retransfer' or a right to 'reassume' indirectly. In other words, he tried to shift the emphasis from the words ' retransfer' and ' reassume' to the word ' indirectly'. But the fact remains that the words ' directly or indirectly' appearing in the first proviso to Section 16(1)(c) must necessarily mean and qualify the words ' retransfer ' or ' reassume '. Even if it is to be indirectly, then it has got to indirectly retransfer or reassume. Reading the above clauses of the trust deed set out above, it is impossible in our view to read them as a provision which ' retransfers ' the legal title from the settlor to himself as owner or which gives him a right to ' re-assume ' as owner. These clauses, in our view, are clauses of control and regulation of the administration of the trust by the trustees. They appear under ' powers of the board of trustees', 'the number of trustees' and 'appointment, retirement and removal of trustees'. The language of these clauses and the context in which they appear do not give any right to the settlor to 'retransfer' the trust properties to himself as owner or to ' reassume' these trust properties for himself either directly or indirectly. Clause 12 quoted, above is a clause relating to investment and the power of investment by the trustees. It is not a power to retransfer the trust properties or to reassume the trust properties for the settlor himself personally. Clause 12(e) relates to framing of schemes, rules and regulations for managing the affairs of the trust and for giving effect to the objects of the trust as that clause expressly says. The concluding words in clause 12(e) 'to vary the same' is not varying the trust but varying the schemes, rules and regulations which may have to be made from time to time. Clause 20 does not mean any right to retransfer the property or to reassume the property directly or indirectly for the settlor himself. That clause only deals with the compensation money when the trust properties are acquired by statutory bodies under statutory authorities and expressly says that the 'compensation money will be invested in such manner as the trustees will think fit'. The language is 'invested' and not' retransfer ' or ' reassume' the money by the settlor personally.'

23. Reliance was placed, in aid of this conclusion, on the observations of Sikri J., as the learned Chief Justice then was, in the decision of the Supreme Court, which we have set out hereinbefore, at p. 669 of the report.

24. This question was again considered by this court in the case of CIT v. Brojendra Nath Kundu : [1977]110ITR326(Cal) , and also in the decision in the case of CIT v. Shyamlal Bhuwalka : [1978]113ITR127(Cal) . Learned advocate for the revenue sought to urge that this decision was rendered on a misreading of the decision of the Supreme Court referred to hereinbefore. According to the learned advocate for the revenue, this court in the last-mentioned decision failed to appreciate that the decision in Jayantilal Amratlal's case : [1968]67ITR1(SC) , was rendered in view of the express provisions of the Bombay Public Trusts Act. We are unable to accept this contention. The Division Bench of this court in the case of CIT v. Shyamlal Bhuwalka : [1978]113ITR127(Cal) had set out the observations of the Supreme Court as to what is the fair meaning of Section 16(1)(c) and the first proviso and, relying on the said observations, the Division Bench of this court came to the conclusion in that case.

25. Learned advocate for the revenue strongly relied on the Bench decision of this court in the case of CIT v. Jitendra Nath Mallick : [1963]50ITR313(Cal) , where the Division Bench observed that where the deed of settlement itself provided that a person other than the settlor should get the income or the assets, and there was a direction for the transfer of the income in certain events or after a certain date, then that would be a provision for retransfer within the meaning of the first proviso to Section 16(1)(c) of the Indian I.T. Act, 1922. Such a direction would be a provision for a retransfer within the meaning of the proviso and no independent deed was contemplated by the proviso as necessary for the retransfer. The proviso covered a contingent claim arising under the settlement.

26. In that case, however, the deed itself contained a power whereby the settlor would reassume control over the income or the assets. For instance, under Clause 1, it was provided that the settlor would be given out of the income of the trust a sum of Rs. 400 per month. Similarly, Clause 5 of the deed, with which the court was concerned, stipulated that the trustees or trustee for the time being should, out of the trust properties, pay to the settlor a sum of Rs. 60,000 land a charge was created in respect of the trust properties for payment of that sum within 12 months. Clause 13 also provided for substantial benefit to the settlor for financing a litigation out of the trust fund. At p. 319 of the report, the Division Bench observed that the word 'revocable' had been given a special meaning by the first proviso which was divisible, into two parts. By the operation of the first part a settlement or transfer was to be treated as revocable if there would be any provision in it for a direct or indirect retransfer of the income or the assets to the settlor. In other words, it meant that if the income of the properties, the subject-matter of the settlement, accrued to some third person, but there was a provision for the same being made over to the settlor either directly or got at by him in any manner indirectly, the settlement came within the mischief of that section. Relying on this observation, learned advocate for the revenue sought to urge that if the deed contained any provision which permitted such construction as for a benefit enjoyed by the settlor that itself would be sufficient to bring it within the mischief either of Sub-clause (i) or Sub-clause (ii) of Clause (a) of Section 63. But what the Division Bench, in our opinion, meant was that if by the operation of the settlement the transferor got back the property in the same capacity as he had before is the transfer, the same would come within the mischief. That made clear where the court observed that the second part of the proviso was aimed at preventing a transferor from being able to exercise a right over the income or the assets ' which he would have had but for the transfer '. A right which a transferor has or had but for the transfer would be only a right which the transferor had as an owner before he effected the transfer. It was, in this light, that the Division Bench observed (pp. 319, 320):

' In substance the effect of the whole proviso is that to be out of the mischief of the section the settlor must divest himself from the income of the subject-matter of the trust or the beneficial enjoyment of the ownership thereof unreservedly.'

27. The Division Bench was emphasizing the importance of having the property taken back as an owner. In that view of the matter, we are of the opinion that this decision does not, in any way, militate against the view which was taken by the Supreme Court or the other Division Benches of this court as referred to by us. This Division Bench, however, on some other aspect took a view agreeing with Chagla J., in a subsequent decision of the Bombay High Court, about the revocable nature of a trust, an aspect with which we are not directly concerned. But presently we shall deal with that question later.

28. This decision of the Division Bench of this court was considered by the Supreme Court in the case of Hrishikesh Ganguly v. CIT : [1971]82ITR160(SC) . There, the assessee had created a trust in respect of two of the houses belonging to him and had provided in the trust deed that the trustees should pay a sum of Rs. 200 per month to him for life for his own absolute use and benefit out of the income of the trust estate remaining after payment of taxes. The total annual income of the trust properties had come to over Rs. 19,000. The question was whether the entire income from the two houses was assessable in the hands of the assessee on the ground that the trust was revocable within the meaning of Section 16(1)(c) of the Indian I.T. Act, 1922. It was held that the trust as a whole did not come within the mischief of Section 16(1)(c): the revocability related only to a part of the income and only that part of the income which accrued to or was received by the assessee under the trust could be assessed as his income. The income accruing to the other beneficiaries could not be included in the total income. Where a settlement or disposition, the Supreme Court further reiterated, contained a provision for the retransfer of only a part of the settlement or disposition to the settlor, the effect of the third proviso to Section 16(1)(c) of the Indian I.T. Act, 1922, was not to render the whole of the income from the settlement' chargeable in his hands provided the other provisions contained in the proviso were satisfied. In other words, the proviso came to the rescue of the settlor in that the portion of the income from the trust properties which were settled on a third person was to be assessed in the hands of that third person and not in the hands of the settlor if the latter did not retain any power to deflect that sum for a period exceeding six years or during the lifetime of the donee. On this aspect, the observations of the Division Bench of this court in the case of CIT v. Jitendra Nath Mallick : [1963]50ITR313(Cal) , was approved of.

29. Reliance was further placed by the learned advocate for the revenue on a decision of the Madras High Court in the case of CIT v. E.M. Gopalakrishna Kone : [1965]57ITR569(Mad) , where the Division Bench of the Madras High Court reiterated that a right to reassume power within the meaning of prov. 1 to Section 16(1)(c) should mean that there was such a power lawfully given under the deed of trust. It was not necessary for achieving the object of Section 16(1)(c) that the trustee should be left with no power for exercising his function as a trustee consistently with the terms of the trust.

30. There, the trust deeds were entirely different. In that context, the observation of the Division Bench at p. 577 should be understood and, understanding in that context, in our opinion, the said observation cannot be of much assistance in support of its contention to the revenue.

31. Reliance was also placed in another decision of the Madras High Court in the case of Manickavasagam Chettiar v. CIT : [1964]53ITR292(Mad) , where in the context of Section 16(1)(c) of the Indian I.T. Act, 1922, the Madras High Court observed that the characteristic of a benefit was that it was real and not notional, concrete and not abstract, certain and not conjectural. In normal and popular conception an advance of loan on commercial terms would not amount to a conferment of benefit. Where a company borrowed, the borrowing would not rebound to the benefit of the shareholder. The ' benefit ' to the shareholder under such circumstances would be illusory.

32. There, the Madras High Court was concerned with the facts which were entirely different. In that context, the observation of the court appearing at p. 296, as we have understood, was that a potential right or power to enjoy the transferred income by the transferor in future was destructive of a complete and unalterable divestiture requisite to free the transferor from the burden of paying tax on the said income. We must emphasise on this aspect that a potential right or power to enjoy the transferred income by the transferor in the same capacity is inherent for the use of the power both in Sub-clause (i) and Sub-clause (ii) of Clause (a) of Section 63 of the Act.

33. It was, however, argued before us that there was a power of revocation reserved and on this context particular emphasis was laid on Clause 13 of the present deed of transfer, which we have already set out, as also on Clause 23, which also we have set out. In this context, we must also emphasise that the learned advocate for the assessee drew our attention to Clauses 12, 10 and 11 as also on Clause 6 of the present deed of transfer, in the context of the recital of the deed of transfer. Relying on the observation of the Division Bench of the Bombay High Court in the case of Keshavlal Punjaram v. CIT : [1944]12ITR185(Bom) , where the learned Chief Justice observed that the argument of the assessee was that the assets had been transferred to the trustees, and under the limited power of revocation contained in the second deed there was no power to alter the destination of the assets, nor had the settlor any power to acquire for himself any interest in the income. The learned Chief Justice went on to observe that having regard to the fact that the court was dealing with an Act which imposed a tax on income, it was no doubt relevant to notice that the settlor could not, at any rate directly, reassume for his own benefit any income of the settled funds. But the words of the second deed, in their opinion, amounted to a revocable transfer of assets, or rather one would say that the two deeds together involved a revocable transfer of assets. There, the deed itself contained Clause 4, which was in the following terms :

'By Clause 10 of the Harshadrai Trust, and Clause 12 of the Kanta-gauri Trust, the settlor-assessee expressly reserved to himself the power of revocation of the trusts, wholly or partially, and to declare new trusts for the benefit of himself and his heirs, executors, administrators or any other person or persons as he may think fit.'

34. This was a clear deed for power of revocation. In the present case, learned advocate for the revenue sought to rely mainly, as we have said, on Clause 13 and Clause 23.

35. So far as Clause 13 of the present trust deed is concerned, it provided that after at least two beneficiaries had attained the age of eighteen years, the trustees might extend the scope of objects of the trust and add to the number of beneficiaries in such manner as they thought fit, provided, however, that alterations in that behalf should be made on a unanimous decision of the trustees and with the consent in writing of all the major beneficiaries and of the guardian of the minor beneficiaries, if any.

36. It is well known that under Section 77, read with Section 78 of the Trusts Act, a trust can be extinguished with the consent of the beneficiaries. Similarly, Clause 23 of the present trust deed provided that in case there was no beneficiary to the income or property of the trust and there was no will of the founder, the corpus of the trust and all income of the same would be the property of E.M.C. Trust of Research and Technology. It was, therefore, sought to be urged on behalf of the revenue that it reserved a power to make a will by the settlor. But the contingency in which the will of the settlor was spoken of was a contingency where there was a complete fulfilment of the trust, that is to say, there was no beneficiary under the trust. In such a case, under the express provisions of law, the trust property would naturally revert back to the settlor. But that would not be by virtue of the reservation of a right to the settlor or to reassume the power over the income or the assets of the trust property. The clause merely stipulated and anticipated what would be the effect of the law otherwise. We are, however, unable to accept the contention urged on behalf of the assessee that the will of the testator did not mean a testamentary will, but was sought to convey the wishes of the settlor. In a formal document, in our opinion, the expression ' will ' must be construed in a formal legal manner.

37. Reliance was further placed on a decision of the Bombay High Court in the case of Behramji Sorabji Lalkaka v. CIT : [1948]16ITR301(Bom) . There Clause 10 of the deed provided as follows :

' The said Behramji Sorabji Lalkaka may at any time or times with the consent of the said Goolbanu Behramji Lalkaka, Freny Behramji Lalkaka, Phiroz Behramji Lalkaka and Feroza Behramji Lalkaka or any two of them alter or revoke by deed all or any of the trusts hereby made or declared and by the same or any other deed make or declare such new or other uses trusts and estates of or concerning all or any of the said moneys and investments as he shall think fit and either with or without any power of revocation and new appointment.'

38. Naturally, in the context of the terms of the clause, the court observed that it was a power of revocation. We are not concerned with the clause similar, directly or indirectly, to that one with which the Bombay Division Bench was concerned. There the Bombay Division Bench also expressed the view that to be a revocable trust for assumption of the power, no two separate deeds were necessary to be executed by the settlor again re transferring the property to the settlor. On this aspect concurrence was expressed by the Division Bench of the Patna High Court in the case of CIT v. Rani Bhuwaneshwari Kuer : [1962]45ITR357(Patna) , at p. 362, and an aspect with which concurrence was also expressed by the Division Bench of this court in the case of CIT v. Jitendra Nath Mallick : [1963]50ITR313(Cal) , the decision which we have already referred to, where at pp. 321 and 322, G.K. Mitter J. expressed his preference for the views expressed by Chagla J.

39. Learned advocate for the revenue also sought to rely before us on the decision of the King's Bench Division of England in the case Glyn v. IRC [1948] 30 TC 321 (KB), where at p. 329 of the report, Singleton J. had observed that a power given to the settlor to be used in conjunction with others made the confirment of the power a revocable power. But we must, in this context, forewarn ourselves that relying on, as was observed by G.K. Mitter J., in the case of CIT v. Jitendra Nath Mallick : [1963]50ITR313(Cal) , the relevant provisions of the English statutes were not in pari materia with our provisions and consequently an examination of the English authorities would hardly be helpful.

40. However, we are not concerned in this case with the question whether the very fact that the trustees could put an end to the trust with the concurrence of the major beneficiaries made the power revocable or not, in view of the nature of the power given in the present trust deed. For the reasons aforesaid we must, therefore, say that on both aspects we are not able to accept the contention of the revenue that the trust deed contained such provision which would make it a revocable trust in terms of Sub-clause (i) or Sub-clause (ii) of Clause (a) of Section 63 of the I.T. Act, 1961.

41. In the premises, the question must be answered in the negative and in favour of the assessee.

42. In the facts and circumstances of the case, parties will pay and bear their own costs.

Sudhindra Mohan Guha, J.

I agree.


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