TMI Blog1967 (10) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... Under the said trust deeds the assessee was receiving the income from the assets being one-fourth of the properties transferred by Mrs. Bhikhaiji and that income was being assessed as his individual income. On the 10th August, 1954, the said Dadabhoy executed a document entitled "assignment of life interest". By this document Dadabhoy purported to assign his right, title, and interest in the trust fund known as the Dadabhoy trust fund and in the net income which may accrue or arise or may become payable from that trust fund. From the recitals of this document the terms of the earlier trust deeds, which for the sake of convenience we shall hereafter refer to as the "Bennet Trusts", appear with reasonable clarity. Under the Bennet trusts, Mrs. Bhikhaiji as the settlor created four different trusts in favour of her four children, each trust to be called by the name of that child. We are not here concerned with the trusts in favour of the other children. We are concerned only with the trust in favour of her brother, the assessee, Dadabhoy Cursetji and her children and children's children. By the trust in favour of Dadabhoy she created the "Dadabhoy's trust fund" and among other terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be hereby executed will come to Rs. 1,80,000. Now this indenture witnesseth as follows : 1. In consideration of the premises and of the natural love and affection which the assignor bears to the assignees and for diverse other good causes and considerations him thereunto moving HE the assignor doth hereby release surrender assign and transfer by way of absolute gift unto the assignees ALL that the share right title and interest of the assignor in the net income of the said trust fund known as Dadabhoy's trust fund forming part of the trust fund settled by the said indenture of trust dated the 18th day of December, 1940, at present consisting of the securities and shares more particularly described in the schedule hereunder written or the proceeds thereof the investments for the time being representing the same and which net income may accrue or arise or may become payable from and after the first day of September, 1954, during the lifetime of the assignor for or in respect of the said trust fund forming part of the securities more particularly described in the schedule hereunder written or the proceeds thereof or the investments thereof together with full power to demand sue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer which are other expressions used in the document, would operate. In our view, the document is merely a surrender or release and the expression 'transfer' or 'assign' are merely surpluses (surplusages). It is well settled that if a person merely surrenders or releases any interest he does not effect any transfer of property. It is merely a falling of a lesser interest or estate into a greater. By reason of the document dated August 10, 1954, it is only an interest of the beneficiaries who are named or for whom provision has been made under the earlier documents referred to therein that gets accelerated. They derive their interest not by reason of the assignment or transfer but by reason of their own rights existing in the documents dated October 12, 1941, and November 13, 1941. In our opinion, no assets have been transferred so as to bring into operation the provisions of section 16(3)(a)(iii) or (iv) as the case may be, as there was merely a surrender of life interest. It follows that the inclusion in the assessee's income of the income from the said trust received by the wife and minor children is not proper." On behalf of the department Mr. Joshi has attacked this findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hild, not being a married daughter, by such individual otherwise than for adequate consideration ; . . ." What Mr. Kolah emphasises are the words in both the sub-clauses (iii) and (iv) income "from assets transferred" to the wife in one case or to the minor child in the other case. He points to the provisions of the deed of assignment and urges that all that Dadabhoy did by this deed of assignment was to assign or transfer his income which he was receiving from the Bennet trusts and the income being directly assigned or transferred to his children upon the terms mentioned in the document, there was no income "from assets transferred" but the income itself was transferred. To that extent, therefore, neither sub-clause (iii) nor sub-clause (iv) would be attracted in the present case. This is an alternative argument which he has urged assuming that the first point was not correctly decided by the Tribunal and that there was really a transfer or an assignment. It would be convenient to discuss the latter point first, for if the contention succeeds then it is unnecessary to go into the first point as to whether there was in this case a surrender or relinquishment of his interest by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of September, 1954". Thus the document refers to the life interest of Dadabhoy or the right to receive the income from the Dadabhoy's trust fund and in contradistinction the income itself and what is being clearly assigned is not only the right to receive the income but such income as has accrued or will, accrue in future. The distinction is clear and palpable. Now it seems to us clear that the life interest or the right to receive the income from the Dadabhoy's trust fund was itself property or assets in the hands of Dadabhoy. If authority were wanted for such a proposition the question is settled by the decision of the Privy Council in M. E. Moolla v. Official Assignee of the High Court of Judicature at Rangoon. In that case the question was whether the right to receive interests under a settlement was immoveable property for the purpose of section 17 of the Registration Act. The Privy Council held that the interest in that case of the son under his father's settlement was immovable property within the meaning of the Transfer of Property Act, because in that case it was a benefit to arise out of land. In describing the rights to receive income the Privy Council accepted the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the life interest or the right to receive the income was distinct and apart from the income itself. Mr. Kolah referred to two decisions, one in Commissioner of Income-tax v. Keshavlal Lallubhai Patel and the other in Sevantilal Maneklal Sheth v. Commissioner of Income-tax. So far as the first decision is concerned, he only relied upon the remark in that decision that section 16(3) created an artificial income and for that reason should be construed strictly. We are in respectful agreement with what is laid down there, but giving the section the strictest construction we cannot see how it will not apply in the present case. We need not reiterate the ground we have already stated for so holding. So far as Sevantilal's case is concerned, again the decision is upon the facts completely inapplicable to the present case, but Mr. Kolah relied upon the remarks at page 57 in the judgment of the Division Bench delivered by my learned brother that what is contemplated in section 16(3)(a)(iii) is "income which arises directly or indirectly from assets transferred and it was not income from income". That remark was made in the special circumstances of that case where the department had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document says that during the lifetime of the assignor (Dadabhoy) his wife and children are to enjoy the property in equal shares. In the first place, nothing is said regarding the corpus. We have already shown that under the Bennet trust the provisions which were to take effect after the lifetime of Dadabhoy were quite different. There Dadabhoy's trust fund was to be divided into as many parts as there were surviving children or if any of them had pre-deceased Dadabhoy, as there were grandchildren and the wife, and separate trusts were to be created for the benefit of each one of these surviving children, grandchildren or wife. There is no such provision here and in fact the document itself indicates that the equal shares are to be enjoyed only during the lifetime of the assignor. Secondly, we have already shown that great anxiety was shown by the settlor of the Bennet trusts, Mrs. Bhikhaiji, that none of her children or children's children should marry a non-Zoroastrian or a non-Parsee spouse or themselves give up the Zoroastrian religion or cease to be Parsees, but the deed of assignment has no reference to this important wish of the settlor of the Bennet trusts, nor is it show ..... X X X X Extracts X X X X X X X X Extracts X X X X
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