P.B. Mukharji, Actg. C.J.
1. In this income-tax reference under Section 66(1) of the Indian Income-tax Act, 1922, the main controversy is about the validity of a certain trust and its claim to exemption from tax. Two questions raised are as follows :
' 1, Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that a valid trust came into existence under the deed of trust dated October 11, 1939 ?
2, If the answer to the first question is in the affirmative, whether the Tribunal was right in holding that the said trust was not a revocable trust within the meaning of Section 16(1)(c) of the Income-tax Act, 1922, and, as such, its income was exempt from tax under Section 4(3)(i) of the said Act ?'
2. The following facts give rise to the above questions. The assessee is a charitable and religious trust represented by the trustees of Sreeram Surajmull Charity Trust. This charitable and religious trust is proved by a deed dated October 11, 1939. It is a duly attested and registered deed on the records of this case. According to the assessee, certain steps had already been taken from a period prior to June 24, 1928. The Income-tax Officer came to the conclusion that the trust came into existence only on October 11, 1939, on the execution of the trust deed. This finding was upheld by the Appellate Assistant Commissioner. The Tribunal expressed the view that it was not necessary to discuss whether there was a valid trust prior to October 11, 1939.
3. The trust deed sets out that on March 29, 1939, the corpus of the trust would consist of: (1) the house at Benares, (2) twenty preference shares in the Chitavalsah Jute Mills Co. Ltd. bearing Nos. 4400/4420 of the aggregate face value of Rs. 2,000, and (3) Rs. 47,336-1-0 deposited with the settlor's firm of Surajmull Chhotaylal of Calcutta, carrying interest at the rate of nine annas per centum per mensem compoundable once a year.
4. The Income-tax Officer found almost on every point against the assessee. He found that on October 11, 1939, the cash book of the firm showed only a cash balance of Rs. 11,267-15-3 and as such there could be no proper divestment of a sum of Rs. 47,336-1-0. He also found that the dividend income from 20 preference shares of Chitavalsah Jute Mills Co. Ltd. was also credited to the same account in which the sum of Rs. 47,336-1-0 was credited and so there was no divestment in respect of those 20 shares. Thirdly, he came to the conclusion that the house property at Benares was purchased in the name of the settlor and continued to be so. The Income-tax Officer also discussed different clauses of the trust deed and came to the conclusion that there was no valid trust. He went further to say that even if there was a valid trust, such trust was to be regarded as a revocable one within the meaning of Section 16(1)(c) of the Income-tax Act, and, therefore, the trust was not entitled to a separate assessment or to the exemption of its income.
5. On appeal, the Appellate Assistant Commissioner held that the Income-tax Officer had misdirected himself in law in coming to the conclusion that the trust was illusory or that the settlor did not divest himself properly of the properties that were the subject-matters of the trust or that the transfer could be deemed to be revocable in terms of Section 16(1)(c) of the Income-tax Act. On that finding, the Appellate Assistant Commissioner cancelled the order of the Income-tax Officer and directed the Income-tax Officer to allow refund to the assessee as may be admissible under the law.
6. Against that order, the department went on appeal before the Tribunal. The Tribunal substantially endorsed the findings and conclusions of the Appellate Assistant Commissioner and dismissed the appeal of the department. The Tribunal holds that there was a valid and genuine trust which came into existence under the trust deed dated 11th October, 1939, and that the provisions of Section 16(1)(c) were not attracted to this trust and that the trust was entitled to exemption under Section 4(3)(i) of the Income-tax Act.
7. The primary question whether the trust deed dated October 11, 1939, is proof of a valid trust must essentially and basically be answered by the analysis and scrutiny of the specific clauses of that trust deed. Cases and authorities interpreting other words or similar words in other trust deeds can never be a precedent binding in this respect and in fact may be misleading. That is a well-settled principle of construction.
8. Now, this trust deed in its recitals make certain facts very plain and beyond doubt. The settlor is one Chhotaylal Kanoria. By this trust deed he is transferring the said properties to three trustees, viz., (1) himself, (2) Dwarkadas Jhunjhunwala, and (3) Radhakissen Almal. There is in the operative clause a transfer of these properties by the settlor to the trustees of ' all the right, title, interest, property, claim and demand .whatsoever of the settlor .... to have and to hold the same unto the trustees ' declared in the trust deed. The operative part, so far as relevant, may be quoted as follows:
'Now THIS INDENTURE WITNESSED that in consideration of the premises the settlor doth hereby grant, convey, transfer, assign and assure unto the trustee, firstly, the said house at Benares more particularly described in part I of the schedule . . . . secondly, the said 20 preference shares of Rs. 100 each of the said Chitavalsah Jute Mills Co. Ltd. ... of the face value of rupees two thousand; and thirdly, the said sum of Rs. fortyseven thousand three hundred and thirty-six and anna one . . . and all the right, title, interest, property, claim and demand whatsoever of the settlor in or upon or in respect of the said several properties hereinafter collectively referred to as the TRUST PROPERTIES TO HAVE AND to HOLD the same unto the trustees for the uses and trusts and subject to the terms and conditions mentioned in part II of the schedule hereunder written. '
9. There is a schedule to the trust deed divided into two parts. Part I of the schedule describes the particulars of the Benares house. Part II of the schedule sets out the objects, rules and regulations of the trust which is named as ' Sreeram Surajmull Charity Trust '. We shall consider the relevant objects, rules and regulations of this trust later on in the judgment. This trust deed was witnessed by a learned advocate and solicitors of this court apart from the signature of the settlor. It was registered in book No. I, volume No. 96, pages 233-244, being numbered 3,390 for the year 1939. There was nothing secret about this trust. It was openly done, witnessed by advocates and solicitors and duly registered.
10. The recitals in the trust deed so far as relevant indicate the following facts. First, it is stated that until about the 12th March, 1929, the settlor along with Chandmull Kanoria, since deceased, and Ramnath Kanoria carried on business in partnership under the name and style of Sriram Lachminarayan at Benares and other places, the settlor having four annas share therein. Secondly, the said firm of Sriram Lachminarain from out of its profits 'set apart ' from time to time various sums for certain charities and on the 30th April, 1927, 'set apart' a sum of Rs. 1,00,000 for certain charities. Thirdly, on the 1st January, 1928, the said firm of Sriram Lachminarain purchased out of the sums 'set apart' for charities as aforesaid 100 debentures of Rs. 1,000 each of Chitavalsah Jute Mills Co. Ltd. of the total face value of Rs. 1,00,000 bearing interest at the rate of 7 per cent. per annum. Fourthly, on the 24th June, 1928, the settlor out of his own share of the assets of the said firm of Sriram Lachminarain ' set apart' a sum of Rs. 25,000 for certain charities and purchased out of the said sum 240 preference shares of Rs. 100 each of Chitavalsah Jute Mills Co. Ltd., at the rate of Rs. 102 per share, the total purchase price thereof being Rs. 24,480 Fifthly, the sums 'set apart' for charities by the said firm of Sriram Lachminarain and the income thereof were duly applied to the charities for which they were 'set apart' but there was no regular trust deed for any of them. Sixthly, on the 12th March, 1929, the said firm of Sriram Lachminarain was dissolved and some time thereafter the settlor received from the firm of Sriram Lachminarain, (1) 25 debentures of Rs. 1,000 each of the total face value of Rs. 25,000 in the said Chitavalsah Jute Mills Co. Ltd., and the sum of Rs. 352-3-6 in cash being 1/4th share in the debentures and amounts then lying in the firm of Sriram Lachminarain on account of the amount 'set apart' by the said firm for charities to be utilised by the settlor for the said charities, and (2) the said 240 preference shares of Rs. 100 each in Chitavalsah Jute Mills Co. Ltd., and the sum of Rs. 1,426-8-0 in cash being the amount then lying with the firm of Sriram Lachminarain on account of ' the charity fund set apart by the settlor as aforesaid '. Seventhly, after the dissolution of the firm the settlor started two firms of his own, one under the name and style of Sriram Surajmull at Benares, and the other under the name and style of 'Surajmull Chotelal' at Calcutta, and the settlor opened two accounts in the books of the said two firms, one in the name of 'Surajmull Charity Account', and the other in the name of ' Sriram Surajmull Charity Account '. Eighthly, the moneys, shares and debentures received by the settlor on dissolution of the firm of Sriram Lachminarain as aioresaid were 'set apart 'by the settlor for the said charities and the accounts in respect thereof were entered by him in either of the said charity accounts in the books of the said firms of Sriram Surajmull and Surajmull Chotelal. Ninthly, the said two chanty recounts were amalgamated and there is now only one charity account in the name of 'Sreeram Surajmull's Charity Account' in the books of the said Calcutta firm of Surajmull Chotelal, and the Benaras firm of Sreeram Surajmull. Tenthly, the settlor has all along been utilising the said sums and income thereof for charitable purposes for which they were 'set apart'. Eleventhly, in the year 1933, Smt. Mahadevi, the mother of the settlor, paid to the settlor a sum of Rs. 2,000 to utilise the income thereof for the seva of an idol of Shree Ganeshji, and purchased from the said sum 20 preference shares of Rs. 100 each of Chitavalsah Jute Mills. Twelfthly, the account in respect of the said sum of Rs. 2,000 is also kept by the settlor in the account standing in the books of his firm under the name, of Sreeram Surajmull's Charity Account. Thirteenthly, the settlor has from time to time changed the investments belonging to the said charity accounts. Fourteenthly, on or about the 5th May, 1932, the settlor out of the said ' charity estate ' in his hands purchased at court sale a house at Benares in his own name bearing No. CK9/28 near Nil Kanta Mahadeb for Rs. 19,025 and incurred various other expenses in connection with the said sale amounting to Rs. 530-7-0 Fifteenthly, the said house at Benares though purchased in the name of the settlor really belongs to the said ' charity estate ', the settlor being merely a benamidar for the charities and the settlor has all along been treating the same as a part of the ' charity estate '.
11. Each one of these recitals states a fact and is relevant for the determination of the main controversy in this reference. The significant point which needs emphasis is that from 11th October, 1939, it has consistently been recognised as valid and exemption granted by the income-tax authorities, for these about 20 years. This will be plain from the finding of the Appellate Assistant Commissioner where he stated in paragraph 15:
' It might appear redundant but is certainly not irrelevant to point out that this trust deed was examined in the past by the Income-tax Officer, Central Circle-II, Calcutta, in the course of the assessment of the settlor himself for the assessment year 1940-41, when he came to the following conclusions (vide his assessment order dated April 12, 1943):
'Interest was only disallowed as there was no trust in respect of it and as the ownership of the fund remained vested in the assessee. That drawback has now been set right by the execution of a trust deed which transfers both the corpus as well as the usufruct of the charity account to a body of trustees including the assessee as one of them.' The question of the exemption from tax of the income of the trust under Section 4(3Xi) of the Act of 1922 was also gone into in appeal before the learned Appellate Assistant Commissioner, Range-A, Calcutta, at that time and he held that this income was so exempt. Thereafter, the trust enjoyed this exemption right up to the assessment year 1958-59.'
12. It is now being contended after so many years, in the assessment year 1959-60, that what was decided to be a valid trust for 20 years is today said to be an invalid trust. We are aware that the doctrine of res judicata has not a free run in the law of income-tax where assessment is supposed to be annual and seasonal like the measles. Recently, we are also aware that there has been a trend in the courts to draw a limit to the unqualified doctrine that there is no resjudicata at all in the field of income-tax. No doubt the assessment is annual; no doubt the income is annual; and no doubt the proceedings are annual by which the tax is determined ; but in spite of all these annual features which may vary from year to year militating against the application of the doctrine of res judicata, the fact still crops up whether a basic deed like this--a trust deed--construed by the taxing authorities themselves and held to be a valid trust and on the basis of which tax exemption has been granted for about 20 years, can be all on a sudden challenged and held by the Income-tax Officer as an invalid trust which failed to create a lawful trust or divest the properties involved. See the decision in Durga Prasad More v. Commissioner of Income-tax,  71 I.T.R. 33, 36. But anyhow we will not apply the doctrine of res judicata but will deal with the question on its merits in this reference.
13. After the recitals summarised above, the deed proceeded to set out the three trust properties mentioned above followed by the operative clause which also we have quoted.
14. The first attack on the Tribunal's order made by Mr. Sen, appearing for the revenue, is with respect to the trust property of Rs. 47,336-1-0 deposited witb the settlor's firm, Surajmal Chotteylal, carrying interest at the rate of nine annas per cent. per month compoundable once a year. He criticizes this property as being non-existent on the ground that on the date of the deed of trust, viz., October 11, 1939, the cash book of the settlor's firm showed only a sum of Rs. 11,267-15-3. The inspiration for this point is drawn by the revenue authorities from paragraph 6 of the finding of the Income-tax Officer, where he said :
' On the date of the creation of the trust, therefore, it is necessary that the settlor should have in his cash the requisite amount. The cash book on that date, however, only shows Rs. 11,267-15-3 It is impossible to find out what constituted the fund of Rs. 47,336-10-0 in the absence of sufficient cash. Unless the constitution of this fund of Rs. 47,336 is ascertained, it is impossible for the settlor to divest himself of that property.'
15. We have no hesitation in holding that the Income-tax Officer on this point misdirected himself entirely both on facts and in law. The sum of Rs. 11,267-15-3 was only the cash balance left at the end of a particular day. This point of fact is cleared up in the order of the Appellate Assistant Commissioner in paragraph 6 of his order where he rightly points out that this was only a cash book figure and wtiich cash book ' showed only a balance of Rs. 11,267-15-3 '. In fact, he finds that even 'subsequent to the execution of the trust, the funds of the trust lying in deposit with the firm were at one stage completely withdrawn which affirms the bona fides of the transactions ' and comes to the finding that ' this was on April 20, 1945, when the account of the firm in the books of the trust showed a credit balance of Rs. 2,881-4-6 as against the previous debit balance of Rs. 23,731-10-6 on April 1, 1944 '. The fact remains that this was a credit entry as found by the Appellate Assistant Commissioner showing that the assessee had the money. This was not a question whether on a particular day there was enough cash or cash balance in the pocket or drawer of the assessee.
16. The question thereafter turns into a question of law. That question is: Could a credit in the books of account be property with regard to which a trust can be created. Immediately, Mr. Sen for the revenue took the point that a mere book entry will not create a trust. A mexe book entry may not and we agree with the statement of the law in the Hindu Law of Religious and Charitable Trusts by Dr. B.K. Mukherjea, 3rd edition, at page 323, supported by the three Privy Council decisions in Sooniram Ramniranjandass v. Alagu Nachiyar Koil , Chambers v. Chambers and Abhiram Goswami v. Shyama Charan Nandi,  I.L.R. 36 Cal. 1003 (P.C.). But the difficulty for the department here is that this is not a ' mere ' book entry but a book entry followed by a formal solemn registered deed of trust transferring this credit entry to the trustees upon the trusts declared in that deed. The particular passage on which Mr. Sen for the revenue relied in that book lays down the law to be ' an entry in the account book to the credit of a charity or of a temple without earmarking and appropriating the sum credited will not create an endowment or a trust or even any other legal obligation '. We accept that statement of the law. But the point is that here there are both 'earmarking' and 'appropriation'. We have extensively quoted for this purpose from the recitals pointing out the facts where the setting apart is plain in every line. Apart from setting apart, which crates the divesting, there is the deed which formally divests and transfers the legal title of the settlor to the trustees.
17. There are direct authorities on this point of credit entry or book debt. The Madras High Court in Dalooram Jayanarain v. Commissioner of Income-tax : 44ITR379(Mad) came to the conclusion that 'the debt due from the assessee could lawfully constitute the subject of a trust. The interest credited in the assessee's accounts was, therefore, a permissible deduction.' The corpus of the trust in that case was a debt due from an assessee. The ratio of that decision is that such a corpus could lawfully constitute the subject o! trust and, at page 384, the learned judges observed significantly :
' The Tribunal overlooked the essential difference between the two cases, that the trust in this case was evidenced not by the credit entry alone in the account books of the assessee but by the registered deed of trust.'
18. Here, in the instant reference before us, the trust is not merely evidenced by the credit entry alone, but by a solemn formal registered deed of trust reciting a.,long treatment as trust property and the existence of a trust even before the execution of the trust deed.
19. The Allahabad High Court in Juggilal Kamlapat v. Commissioner of Income-tax : 52ITR811(All) lays down the principle that it cannot be said ' as a general legal proposition that because a person has not with him ready cash he cannot create a trust or that he cannot create one in excess of the amount which he has....'
20. Again, the Bombay High Court in Chimanbhai Lalbhai v. Commissioner of Income-tax : 34ITR259(Bom) decided that:
' it was not necessary for the assessee to have drawn the cash amounts from the banker and handed them over to his son and daughter, and the gift was complete by the issue of the directions by the assessee and the firm making the transfers in its account books ' and
' that there was not enough money to the assessee's account and the firm chose to allow overdraft facilities to the assessee was not relevant and did not affect the validity of the gift. '
21. It also further emphasised the principle that it was not necessary that the firm should have had on the date of the transfers in its accounts sufficient fund to carry out the directions of the assessee and the transfers made in the firm's books were in accord with the normal banking practice. It was held also in that case that the fact that it was a joint Hindu family that was functioning as a banker was not relevant and did not affect the validity of the transaction.
22. Mr. $ln for the revenue made an attempt to distinguish a credit entryon a bank overdraft or loan arrangement with bankers from other creditentries but having regard to the authorities that distinction in effect cannotmake any difference to the proposition that a credit entry can be a propertyin respect of which a trust could be created. The second attempt of Mr. Senfor the revenue to get out of this authority was to suggest that in thisinstant reference the settlor was the sole proprietor of the firm and therefore he was really transferring property from himself to himself. That, inour opinion, is clearly wrong. The transfer in this case by the trust deedwas not from self to self. The transfer was in different legal capacities. The transfer was by self as the owner of those properties to self as trustees. If one were to accept Mr. Sen's submission then it will mean that no individual could transfer his own property to himself as a trustee and create a trust. The argument of Mr. Sen for the revenue on this branch suffers from the fallacy of confusing two different legal capacities of the settlor--one as a settlor and the other as a trustee. Finally, Mr. Sen relied on the decision of the Bombay High Court in Hanmantram Ramanath v. Commissioner of Income-tax : 14ITR716(Bom) . This case has no application to the facts of the instant reference before us. The ratio of that case is that as there was no setting apart of ascertained property and no evidence to show that the settlor had divested of the ownership, the entries in the account books did not create a valid trust and the assessee was not entitled to claim a deduction of interest credited in the books of the trust account from his income under Section 10 of the Indian Income-tax Act. Here, on the facts as we have shown from the recitals and other facts, there was definite setting apart of ascertained property. The divesting is not only by mere book entry or credit entry but by a registered trust deed which was recognised as a valid trust for about 20 years by these very taxing authorities. Again there the fact was that the amount was not set apart or credited to any account in the assessee's books on the date of the declaration but the amount was utilised along with the other family property in carrying on the family business. There was no registered document in that case. We are, therefore, bound to hold that the decision in Hanmantram Ramanath v. Commissioner of Income-tax cannot help the contention of the revenue in any manner.
23. Before we conclude this branch of the case on credit entry and book debts it will be appropriate to refer briefly to the nature of book debt. A book debt can be assigned ; it can give a cause of action. That is well-settled law. Mr. Sen at one stage of the argument suggested that, as the settlor was transferring the property from himself to himself, a point which we have already rejected, he could not enforce this credit as there could not be a suit by himself against himself. Here again this argument suffers from a fallacy. When a trust is created the other party is not the self who can enforce, but the beneficiary. If a valid trust is created, the beneficiary can always sue a trustee even though the trustee is himself the settlor for enforcing the trust. The beneficiaries in this case are the charities and the charitable objects mentioned in the trust deed.
24. The words ' book debt ' denote a concept which is difficult to define legally. In Robertson v. Grigg,  47 C.L.R. 257, it was held by the Australian court:
' It (i.e., the words 'book debt' in a definition ' chattels shall 'includebook debts') points to debts owing to a business of any kind usually entered in the books of account by the business and in fact so entered. In the celebrated case of Shipley v. Marshall,  14 C.B.N.S. 566 Erle C.J., in interpreting book debts in the Bankruptcy Acts, expressed the view :
' By ' book debts ' the legislature doubtless intended to describe debts in some way connected with the trade of the bankrupt. '
' Book debts ' of the bankrupt mean all debts contracted by him in the course of his trade. To constitute the debt a ' book debt' it cannot to my mind be necessary that the transaction should be entered in a book.'
25. This started many speculations in the world of law on the point whether a book debt could be a debt without being entered in a book. At the same time Byles J., in Shipley v. Marshall quoted above expressed the view :
' They must be such debts as are commonly entered in books. '
26. Buckley J., in a recent decision in Independent Automatic Sales Ltd. v. Knowles & Foster,  1 W.L.R. 974;  3 All E.R. 27. 34; 32 Comp. Cas. 1090, 1099 (Ch.D.), noticed these previous decisions and subscribed to the view that a book debt could exist without the debt being entered in a book when the learned judge observed at page 34 :
' So far as I am aware, no more precise definition of the meaning of the term ' book debts ' has ever been attempted judicially and I shall not attempt one. Shipley v. Marshalll, I think, establishes that, if it can be said of a debt arising in the course of a business and due or growing due to the proprietor of that business that such a debt would or could in the ordinary course of such a business be entered in well-kept books relating to that business, that debt can properly be called a book debt whether it is in fact entered in the books of the business or not. '
27. We shall not commit the indiscretion to invite the opprobrium of being described as the persons who rush in where angels fear to tread. We also, therefore, will not make an attempt to precisely define a book debt or a book entry. We are satisfied for the purpose of this case in holding that this is a credit entry and actionable claim and good enough to be subject of a trust and in respect of which we hold that a valid trust was created.
28. Reverting back to the trust deed dated October 11, 1939, we hold that a valid tru^ is not only created by it but it records the existence of a good and valid trust. It answers the three certainties of a charitable trust. The objects of the trust are to be found in part II, Clauses 3, 4, 5, 6, 7, 8, 9, 10 and 11. They relate to the subjects which are as follows:
' 3. (a) The spread of education generally and particularly the teaching of Sanskrit at Benares.
(b) Stipends, scholarship and help to students generally and cpecially to Brahmin students learning Sanskrit at Benares.
4. (a) Feeding of poor Brahmins and other members of the Hindu community by giving sababrat and other means.
5. Help to the widows and orphans of the Hindu community in general and of the Marwari Agarwal community in particular.
6. Provision for accommodation of Hindus in general and the Marwaris in particular at Benares and other places.
7. Provision for food and shelter to pilgrims and other persons visiting Benares.
8. Help to the sick, distressed and needy people of all communities generally.
9. Seva and pnja of Shree Ganeshji and other Hindu deities and spread of Hindu religion and culture.
10. Help and aid to any institution or fund having all or any of the objects aforesaid.
11. Other charitable religious and public purposes as the trustees may in their discretion think fit and proper.'
29. The above objects, in our view, answer the test of 'charity' as laid down in leading authorities. They come within the letter and spirit of the law of charities and it is not necessary to invoke the doctrine that the court leans in favonr of charity: see Tudor on Charities, 6th edition, page 188. The transfer of the properties have been validly made by a registered deed. The terms of the deed quoted above and specially its operative part clearly show there is complete divestiture of all title and interest of the settlor in such properties and that in favour of the trustees. The trust properties are sufficiently specific in the trust deed and they leave no scope for uncertainty or vagueness. At one stage, Mr. Sen for the revenue tried to submit that it is not wholly for religions or charitable purposes, a point which was never urged before at any stage. The objects of the trust, as adumbrated in Clauses 3 to 11 quoted above, leave no room for doubt that the objects are wholly religions or charitable. The purpose and objects declared in the trust all enure for the benefit of the public.
30. In the view that we are taking, it is unnecessary to discuss or deal with in any detail a submission made by Mr. Sen for the revenue that the treatment of the properties and the income of the trust have been such which disprove the trust. The task for Mr. Sen in this respect was uphill throughout. In the first instance, there is no proof to say that the trust was not treated as trust. In the second instance, if the trustees had not performed their duties as trustees then that may raise a question of breach of trust but cannot make the trust invalid. Mr. Sen submitted that the properties nave remained as if they are properties of the settlor. But there is again no proof or justification for holding so. With regard to the Benares property, he has said that there has been no mutation. The Income-tax Officer in paragraph 9 of his order speaking of this Benares property says:
' The property at Benares was purchased in the name of the settlor and continues to be held in his name. Merely by stating that the property has been assigned to the trustees the property will not become that of the trustees unless there is a real divestment of the property. Having regard to the fact that there is no real divestment in respect of the other two properties and having regard to the fact that there is no real divestment in respect of the other house property at Benares which continues to be in the name of the settlor and is not yielding any income, it is clear that there has been no divestment of any of the property alleged to have been transferred to the trust. This conclusion is reinforced by the subsequent application of the funds alleged to be held in trust.'
31. The Income-tax Officer misdirected himself again on this point. He failed to realise that in the registered trust deed formally signed and executed there was a clear declaration by the settlor that ' the house at Benares though purchased in the name of the settlor really belongs to the said charity estate, the settlor being merely a benamidar for the charities and the settlor has all along been treating the same as a part of the said charity estate '. Therefore, that registered declaration of the settlor is a significant fact which the Income-tax Officer failed to note and realise the significance thereof. In addition, in the operative part of this deed there was a transfer of this Benares property along with two other properties to the trustees upon the trust declared in the trust deed. But this is not the end of the story on the point. The Appellate Assistant Commissioner in criticising the Income-tax Officer's order on this point found :
' He (Income-tax Officer) mixes up this discussion with the question of the divestment of the two other properties that had been purchased from out of the funds of the trust lying in the books of the firm. Apart from the fact that such linking is unwarranted, it must be said that there was nothing in buying and holding the property at Benares in his own name by the settlor. The Income-tax Officer forgets that under the trust deed the settlor Himself was a trustee and could hold property in his own name. It would nevertheless belong to the trust in view of the execution of the registered deed of trust. As for the other two houses the mutations thereof as recorded In the municipal records themselves show that the properties stood in the names of the trustees jointly. Certified reports of assessment covering the period of April, 1951, up to 1957 have been placed on the record. The name and address of the owner in respect of the three properties is given as Sheeratn Surajmull Charity Trust--Seth Chotey-Lal Kanoria, Seth Dwarkadas Jhunjhunwalla and Seth Radhakissen Agarwalla.'
32. It will appear, therefore, that the Income-tax Officer misled himself even on the question of name and mutation in respect of this Benares property. On those facts--and the Tribunal has also proceeded on those facts--we cannot accept the argument of Mr. Sen for the revenue that the Benares property has been treated as though it was not a trust property but a property personally belonging to the settlor himself as owner. With regard to the two other properties of the trust, namely, the sum of Rs. 47,336-1-0 and the 20 preference shares with the dividends thereon the recitals stating .the facts in respect of them have already been set out which speak for themselves. The facts stated in the recitals do not stand refuted on the record and, therefore, must be taken as correct. Therefore, even with respect to these two other trust properties, namely, the sum of money and the 20 preference shares, it cannot be said that they still belong to the settlor himself personally and not the subject of the trust property.
33. For these reasons, we answer the first question in the affirmative and in favour of the assessee and hold that, in the facts and circumstances of the case, the Tribunal was right in holding that a valid trust came into existence under the deed of trust dated the 11th October, 1939, as mentioned in the said deed of trust.
34. The next question raises the point of revocability of the trust under Section 16(1)(c) of the Income-tax Act. The contention for the revenue is that this is a revocable trust and therefore this income was not exempt from tax under Section 4(3)(i) of the Income-tax Act, 1922.
35. In support of this contention Mr. Sen for the revenue has relied on two clauses on the powers of the board of trustees appearing in the schedule to the trust deed. These two clauses according to Mr. Sen are Clauses 12(a), (b), (c) and (e) and Clause 20. In order to appreciate Mr. Sen's argument it will be appropriate to set out these two clauses at the outset. They are as follows:
'12. (a) To invest the corpus and/or the income of the trust properties not immediately required for the purpose of the trust in such manner in such investments and with such persons and firms including themselves and their own firms as the trustees may think proper, without confining themselves to trust securities and without any security whatsoever.
(b) To apply the trust properties and/or the income for the objects mentioned above provided always that the trustees shall not spend the corpus except with the consent of all of them.
(c) To vary the investments from time to time as the trustees may think fit with power to sell or otherwise deal with the corpus and/or the income thereof. The trustees however shall not except with the consent of all of them change the investments in which the trust properties are at present invested.
(d) To frame schemes and rules and regulations to carry out the objects and for managing the affairs of the trust and as otherwise giving effect to the objects of the trust and to vary the same from time to time the trustees may in their discretion deem fit and proper. ' The other Clause 20 reads as follows: 'In case any property of the trust or part thereof be acquired by the Government or corporation or improvement trust or any public body the compensation money shall be paid to the trustees or in accordance with the resolution of the board of trustees and the same will be invested in such manner as the trustees will think fit. '
The Income-tax Officer, however, also uses two other Clauses 13 and 15 for holding that this was not a trust but a device. These two clauses are :
' 13. The number of the trustees shall not be less than two or more than five.
15. The settlor alone shall have the power during his lifetime to fill up the vacancies in the office of the trustees and to appoint additional trustees but so that the total number of trustees shall not exceed the maximum number fixed as aforesaid; after his death the trustees for the time being shall have power from time to time to fill up such vacancies or to appoint any other person or persons to be the trustees but so that the total number of trustees shall not at any time exceed the maximum number fixed as aforesaid. In making appointment the settlor or the trustees may fix the period for which any trustee or trustees will hold the office. pROVIDED ALWAYS that as long as any adult member of the family of the settlor shall be willing to act as a trustee one of the trustees shall always be such a member.'
36. The main reasons of the Income-tax Officer ou this point can be summarised briefly. According to him the settlor has appointed himself as one of the trustees. Clause 12(b) and (c) provided that the corpus of the trust could be spent with the consent of all the trustees but the settlor has appointed himself as the managing trustee under Clause 19 and was in effective control over the corpus and that Clauses 13 and 15 further indicated that the trust deed was a device to keep the property under the effective control of the settlor. Mr. Sen appearing for the revenue has used these reasons in support of his submissions on this point. The taxing authorities, for about 20 years as indicated above, did not discover that this solemn registered deed of trust was a device but treated it as a valid trust and it was left to the Income-tax Officer for the year under consideration to make his discovery on this point. The Appellate Assistant Commissioner had little hesitation in dismissing these reasons of the Income-tax Officer by saying :
' His (Income-tax Officer's) objections with regard to the powers of the trustees contained in Clauses 12(a), (b) and (c) of the deed and discussed by the Income-tax Officer in paragraph 10 of his order cannot be taken seriously for these are normal powers which the trustees could enjoy. In fact the Income-tax Officer docs not seem to appreciate that the settlor could appoint himself as sole trustee in law. '
37. The Appellate Assistant Commissioner then criticises the logic of the Income-tax Officer with regard to Clauses 13 and 15 and says:
' In the first place the deed fixes the minimum number of trustees as two, and the maximum as 5. There is thus no unfettered power with the settlor to appoint any number of trustees. Secondly, it is wrong to assume that by appointing any one as a trustee, the settlor would be conferring a benefit or privilege on him so as to make him obliged to the settlor and work as mere hand-maid or dummy to him. No such privilege is conferred and if they function, they do so only as trustees including the settlor himself. That means that they are bound to promote and abide by the objects for which the trust is made. Even if the settlor were the sole trustee in terms of the trust deed it would have been in.order. '
38. We associate ourselves with the reasons given by the Appellate Assistant Commissioner on this point and which reasons also were upheld by the Tribunal.
39. The contention of the revenue on this point is based on a misconception and misinterpretation of Section 16(1)(c) of the Income-tax Act, 1922, and was primarily inspired by the decision of the Bombay High Court in Commissioner of Income-tax v. Kikabhai Premchand  16 I.T.R. 207 (Bom.). We shall now proceed to examine this particular section. Section 16(1)(c) of the Income-tax Act, 1922, in its relevant portion, appropriate for the determination of the question in this reference, reads, inter alia, as follows :
' 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, .... 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: Provided that for the purposes of this clause a settlement, dispositionor transfer shall be deemed to be revocable if it contains any provision forthe retransfer directly or indirectly of the income or assets to the settlor,disponer or transferor, or in any way gives the settlor, disponer ortransferor a right to reassume power directly or indirectly over the incomeor assets:....'
40. This is the first proviso to Section 16(1)(c) on which the answer to the second question of this reference depends. Before we proceed to an interpretation of this section, we shall only quote the third proviso in Section 16(1)(c), which reads as follows :
' 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.'
41. Certain broad features of this statutory provision must be borne in mind in order to properly interpret Section 16(1)(c) of the Income-tax Act and its first proviso in relation to the questions raised in this reference. The first point is that Section 16(1)(c) uses the words that the income arising by virtue of a settlement or disposition ' must be from assets remaining the property of the settlor or disponer '. In other words, the first test is that the assets must remain ' the property of the settlor or disponer '. The second point to emphasize is that the income arising to the person must be by virtue of a ' revocable transfer' of assets. That is the reason why such income would be ' deemed ' to be the income of the settlor or disponer in spite of the fact that there is a settlement or disposition and because of the fact that notwithstanding such settlement or disposition, what has remained the property of the settlor or the income is arising therefrom by reason of a ' revocable transfer '. That is the real interpretation in our view of Section 16(1)(c). In the light of this interpretation, the first proviso of Section 16(1)(c) must now be examined. This first proviso tries to set out when a ' settlement, disposition or transfer shall be ' deemed ' to be revocable '. It will be deemed to be revocable, according to the first proviso, in the first place when the settlement, disposition or transfer itself contains ' any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor ' ; and, in the second place, if it ' in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or assets '.
42. Withbut 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 ' reassurnirg ' 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 retransfer or reassuming within the meaning of the first proviso of 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 'retiansfer' 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 ' reassume ' as owner. These clauses, in our view, are clauses of control and regulation of the administration of trust by trie 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 retransier 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 rstransfer 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 lit', The language is ' invested ' and not ' retransfer ' or ' reassume ' the money by the settlor personally.
43. Having given our interpretation, it will now be necessary to notice the Bombay decision in Commissioner of Income-tax v. Kikabhai Premchand,  16 I.T.R. 207 (Bom.), on which learned counsel for the revenue relied. There, under a trust deed executed for the purpose of establishing a sanatorium, the trusts declared were to remain in force and irrevocable for a period of six years and three months from the date of execution of the deed. It was held there that ' until the settlor had appointed trustees other than himself, he had practically retained all the shares in his own hands.' It was also a fact in that case that a clause in that deed, dealing with investment, gave power to the settlor to make loans to any person including himself with or without security or howsoever as the settlor determined ' as if he were entitled to such monies'. Incidentally, it must be noted here that in the instant reference before us there is no power to the settlor to make loans. On those facts, it was decided that ' under the deed, the settlor derived an indirect benefit' within the meaning not of the first proviso of Section 16(1)(c) but within the meaning of the third proviso of Section 16(1)(c) which we have quoted. At page 212 of that report, the learned judges expressly made it clear: ' Then we come to the third proviso with which we are concerned. . . ' We are not concerned with the 3rd proviso in the instant reference. Before going further with this authority, a glance at the 1st and 3rd provisos will make it plain that the word 'benefit' occurring in the 3rd proviso does not occur in the Ist proviso of Section 16(1)(c). Then again the facts in that case and the clauses of the trust deed considered by the case were entirely different. It cannot be over-emphasised that the interpretation of a trust deed in one case cannot be a guide to the interpretation of a trust deed in another case specially where the cases are different. At page 212 of that report and under Clause 7 of the trust deed considered by that decision, power was given to the settlor even to purchase the trust property himself whether the property was movable or immovable notwithstanding that he was a trustee and notwithstanding any rule of law or equity to the contrary. There is no such power in the instant reference under the present trust deed which we are construing and considering. We have already indicated that there is no power to make a loan in the instant reference as there was in the Bombay case. Finally, of course there was a revocation clause after a certain period for which the third proviso was applicable. The trust deed in the instant reference before us does not make any stipulation that it is revocable after a period of years but on the face of it remains an irrevocable trust deed.
44. We shall refer briefly to some of the cases cited at the Bar on thispoint. The Madras High Court decision in Manickavasagam Chettiar v.Commissioner of Income-tax : 53ITR292(Mad) is again an authority on the third proviso of section 16(1)(c). It was pointed out in that case at page 296: 'The repeated use of the word 'indirectly' indicates that the substance of the matter should be looked into by careful scrutiny and scanning, and that tile assessee cannot keep the department off the tax by a clever manipulation of a circuitous chain of transactions.' There is no doubt about that proposition.
45. The next case is the Supreme Court decision in Commissioner of Income-tax v. Rani Bhuwaneshwari Kuer, : 53ITR195(SC) . This also was a case on the third proviso of Section 16(1)(c) and therefore distinguishable from the facts of the instant reference before us. It was, however, held there that the third proviso to Section 16(1)(c) did operate in respect of settlements, dispositions or transfers which were by the first proviso revocable for the purpose of that clause. But there is no such question in the instant reference before us. The ratio of that decision was that the scheme of Section 16(1)(c) was that, although in fact a transfer was revocable under Section 16(1)(c) read with the first proviso thereto, the income derived from such a settlement would still not be considered to be the income of the settlor if the settlement was not revocable for a period exceeding six years or during the lifetime of the person for whom the income was settled and the settlor derived no direct or indirect benefit from the income.
46. The next in the citation was the decision of the Gujarat High Court in Commissioner of Income-tax v. Jayantilal Amratlal : 55ITR214(Guj) . This was a case on tike first proviso under Section !6(lXc) of the Income-tax Act, 1922. The Tribunal in fact relied upon this case. It was pointed out in that case that the right to reassume power over assets contemplated by proviso 1 to Section 16(1)(c) was a lawful right which could be lawfully exercised and that such a right to reassume power given to the settlor must be dependent on his own volition alone. A further question of the Bombay Trusts Act also came under consideration by the Gujarat High Court. This decision of the Gujarat High Court came up before the Supreme Court reported as Commissioner of Income-tax v. Jayantilal Amratlal, : 3SCR946 . This case, in our opinion, supports the view that we are taking and we can do no better than quote the observation of Sikri J., delivering the judgment of the Supreme Court, at page 10, as follows:
' What then is the fair meaning of Section 16(1)(c), proviso 1 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 as 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, : 57ITR408(SC) that although the settlor in that case obtained a benefit from the trust--payment of bis debts--the first proviso was not attracted.'
47. On the principles so laid down by the Supreme Court the arguments advanced by Mr. Sen for the revenue must fail.
48. The Supreme Court in Commissioner of Income-tax v. S. Raghbir Singh made some observations which are relevant on this point and Shah J., delivering the judgment for the Supreme Court, observed, at page 414, 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.'
49. For the reasons stated above, we answer question No. 2 in the affirmative in favour of the assessee a, we hold that the Tribunal was right in holding that the said trust was not a revocable trust within the meaning of Section 16(1)(c) of the Income-tax Act, 1922, and we hold further that the Tribunal was right in holding that its income was exempt from tax under Section 4(3)(i) of the said Act.
50. Both the questions, therefore, are answered in favour of the assessee, The Commissioner will pay the costs of this reference.
T.K. Basu, J.
51. I agree.