TMI Blog1988 (11) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... ution of the release deed dated August 23, 1969, which can be included in her net wealth for the assessment years 1970-71 to 1973-74 ? " A trust was created on October 4, 1945, by the late Lakshman Kashinath Kirloskar in favour of his four daughters-in-law for their life ; after their death, the interest in the trust was to pass to his four sons and after them to their progeny. By virtue of clause 5 of the said trust deed, the assessee was appointed the first beneficiary for life for the income after deducting expenses. In default of appointment, it is provided in the trust deed, that the capital and income would go to the male children of Ravi Kirloskar as tenants-in-common by succession, and in default of appointment and in case of there being no male issue, the capital and income would go for the purposes and to the persons appointed by Ravi Kirloskar. Lastly, the said capital and income would go to Ravi Kirloskar's next-of-kin ascertained as per law. By a deed of appointment dated August 23, 1969, Ravi Kirloskar appointed his son, Vijay Kirloskar, as the sole beneficiary in respect of the capital and income of the trust fund. On August 23, 1969, the assessee, as well as her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settlor in the settlement deed. He further held that the assessee could not surrender her beneficial interest during coverture and that she continued to be the beneficiary. According to the Income-tax Officer, the release effected By Ravi Kirloskar lost its significance and, therefore, he brought to tax the assessee's income from the trust fund in the hands of the assessee. He applied the same principle in regard to the assessment under the Wealth-tax Act also and included the value of the beneficial interest of the assessee amounting to Rs. 2,37,102 in the assessee's net wealth. Against this order of the Income-tax Officer, an appeal was filed before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner examined the matter from a slightly different angle and held that the Income-tax Officer had misunderstood the meaning of the words "without power of anticipation during coverture" as no settlor can compel an unwanted settlement on a beneficiary and the beneficiary has the right to release herself from the settlement by surrendering her interest. He has held that by executing the release deed, the assessee had brought to an end the beneficial interest in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power of anticipation during coverture. It was also contended that the restraint on the power of anticipation was equal to a restraint on the power of alienation. The surrender by the assessee was an alienation of property and, therefore, was invalid. Countering this argument, it was contended on behalf of the assessee that the power of anticipation was equal to the power of alienation and there was no alienation in the case at all. What the assessee had done in the case was to efface herself by executing a release or a surrender of her beneficial interest ; while an alienation requires two parties, the transferor and the transferee, in this case, it was a unilateral act on the part of the assessee and, therefore, there was no transfer involved. The argument was further developed that the legal consequences of the act of the assessee was that the surrender was a merger of a lesser interest with a higher interest and did not amount to a transfer. It was contended that if the restraint on the right of transfer by the assessee or to efface herself was absolute, the restraint would be void. On the effect of the proviso to section 58 of the Indian Trusts Act, it was stated that it d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the language of section 10 of the Transfer of Property Act and sections 56 and 58 of the Indian Trusts Act and held that the assessee had power to execute the release deed so as to accelerate the subsequent interest. The expression used in the trust deed was to give the income to the assessee during her life absolutely but without power of anticipation during coverture and after her demise to her husband, Ravindra, and after him to the male children of Ravindra, etc. The words did not indicate that the settlor intended that the interest of Ravindra should arise only on the natural death of the assessee and in no other event. Since the assessee had, under law, a right to disclaim the interest she had under the settlement disclaimed and released it and, therefore, the ulterior interests got accelerated. Thus, the Tribunal agreed with the view taken by the Appellate Assistant Commissioner and dismissed the Department's appeals. The Tribunal also took the view that the assessee had no life interest to be included in her net wealth. In this court, the contentions raised before various authorities were reiterated by both the parties. It was submitted on behalf of the Revenue th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importing the definition of the Income-tax Act to the Indian Trusts Act is fundamentally wrong and is devoid of merit. The expression "transfer" is not defined under the Indian Trusts Act. Transfer of property is governed by the provisions of the Transfer of Property Act. Even in respect of a trust, if there is any transfer of property, the expression used in the Transfer of Property Act can be looked at because the Indian Trusts Act is not a code and the preamble to the Act provides that "Whereas it is expedient to define and amend the law relating to private trusts and trustees", and, therefore, the same is not exhaustive on all the aspects relating to trusts. Now, it is a well-established principle of interpretation that if the expressions used in an enactment have acquired a legal meaning, the Legislature is presumed to be aware of the same and it must be deemed that the expression used in the prior enactments or the allied enactment or law thereof declared by courts was borne in mind by the Legislature in using the expressions in the later enactments. The use of the expression "define and amend" without the expression "consolidated" in the preamble to the Indian Trusts Act lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent rights ; and (iv) The contrary intention being expressed in the trust deed and the conditions for the application of the doctrine of acceleration not being fulfilled, there is a clog on surrender of her rights by the assessee and such relinquishment amounts to a transfer for purposes of sections 56 and 58 of the Indian Trusts Act. The settlement deed provides that the assessee shall receive the residue of such interest, dividends and other income during her life absolutely but without power of anticipation during coverture and other provisions are made to be effective after her demise. Therefore, we have to consider the effect of the expression "without power of anticipation during coverture". This very concept is dealt with in Snell's Principles of Equity (27th Edition), at page 516, and also in Cheshire's Modern Law of Real Property (11th Edition), at page 911. If property was given to a married woman by words which indicated expressly or by necessary implication that she was to enjoy it for her sole and separate use, equity removed that property from the control of the husband by regarding him as a trustee, and conferred upon the wife full powers of enjoyment and disposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment is not an alienation unless the intention to transfer is found to exist as when it is in favour of a person having no interest in it. In the present case, both the husband of the assessee and her son, Vijay Kirloskar, had already an interest as provided in the trust deed itself. Therefore, the relinquishment cannot be held to result in transfer of a right in favour of a person not having an interest merely because the relinquishment is in favour of the trustees. The trustees hold the rights arising from such relinquishment for the benefit of those mentioned in the settlement. This is a case of effacement of interest of the assessee and such effacement brings about an acceleration of interest of beneficiaries, next in succession, as provided in the trust deed. The Act does not contain any provision relating to the acceleration of subsequent interests on the failure or premature determination of a prior interest. In cases covered by the Act, the provisions of the Act govern the matter but in cases not covered by the Act, the court is entitled to apply rules of equity and good conscience, and in order to ascertain the principles of equity and good conscience, the court may rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act as a bar to the assessee's surrendering or relinquishing her rights under the trust deed in favour of her husband. It is next contended that section 9 of the Indian Trusts Act provides that a disclaimer or renunciation may be made only by the proposed beneficiary before the acceptance of the trust. A reading of section 9 of the Indian Trusts Act discloses that it prescribes only the mode by which beneficiary may renounce his interest under the trust in recognition of the possibility of a beneficiary desiring to renounce his interest under the trust. That is all and nothing more. The expression used is "may" and is only consistent with the section being construed as an enabling and not disabling provision. Therefore, independent of section 9 of the Indian Trusts Act, a beneficiary can surrender his rights notwithstanding whatever may have been stated in the trust deed or in section 9 as long as the same does not contradict sections 56 and 58 of the Indian Trusts Act. Therefore, the assessee had the power to relinquish her beneficial interest in the trust properties during coverture and, accordingly, we answer the first question in the affirmative and against the Revenue. F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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