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Issues Involved:
1. Whether the income arising to Freny under the trust deed is income from a revocable trust within the meaning of Section 16(1)(c). 2. Whether the income Freny received from the property originally earmarked for Phiroz can be deemed to be the income of the assessee under Section 16(1)(c). Detailed Analysis: Issue 1: Income Arising to Freny Under the Trust Deed The first issue is whether the income arising to Freny under the trust deed dated 15th January 1936, is income from a revocable trust within the meaning of Section 16(1)(c) of the Income-tax Act. The trust deed provided that the properties belonging to the settlors should be divided into three parts, one for each of their three children, and during the lifetime of the settlors, the trustee should hold these properties in trust and give the income for the maintenance of the three children. The property was to be handed over to the beneficiaries after the death of the survivor of the settlors. Clause 10 of the trust deed contains a power of revocation exercisable by the assessee with the consent of his wife and any two of the three children. The court held that the trust deed is capable of being revoked, even if the revocation is contingent upon obtaining the consent of the beneficiaries. The section does not specify that the power of revocation must be absolute or unqualified. Therefore, the deed remains a revocable deed of trust, and the income arising to Freny under this deed must be deemed to be the income of the assessee under Section 16(1)(c). Issue 2: Income From Property Originally Earmarked for Phiroz The second issue concerns whether the income Freny received from the property originally earmarked for Phiroz, which is now held by the trustees absolutely in trust for Freny and Feroza, can be deemed to be the income of the assessee. Clause 4(d) of the trust deed provided that if Phiroz died without leaving a widow or issue, the property coming to him should be divided between Freny and Feroza. Since Phiroz died a bachelor, the trustees held the property absolutely for Freny and Feroza in equal shares. The court agreed with the contention that the trust had come to an end with regard to this particular property, and the trustees were merely bare trustees holding the property for Freny and Feroza, who are absolutely entitled to it. Therefore, the income Freny receives from this property no longer arises by virtue of the trusts made by the settlors but because she has become absolutely entitled to the property. Consequently, Section 16(1)(c) does not apply to this income. Conclusion: - The first question was answered in the affirmative: the trust deed is a revocable deed of trust under Section 16(1)(c), and the income arising to Freny under this deed must be taken to be the income of the settlors. - The second question was answered in the negative: the income Freny received from the property originally earmarked for Phiroz, now held absolutely for her, is not deemed to be the income of the assessee under Section 16(1)(c).
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