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TMI Blog1975 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... aid deed was rectified by another deed on the 11th February, 1960. The subject-matter of the said deed of trust is the premises No. 10A, Chandni Chawk Street. The assessee conveyed the said premises in trust to himself and his third wife, Umasashi Dassi, for the purposes as set out in the deed as follows: " (1) To the use of the said settlor and/or his wife, Sm. Umasashi Dassi, during the natural life of the settlor and of the said Umasashi Dassi upon trust to realise the rents, issues and profits and to pay thereout the municipal taxes and other outgoings and to make necessary repairs and improvements to the properties hereby granted and to spend moneys on that account and to pay the moneys that may be due for interest to the Calcutta Improvement Trust on the charge created by the settlor in favour of the 'CIT' for exemption in respect of portion of the messuages, lands hereditaments and premises mentioned in the schedule hereunder written and also during the lifetime of the said settlor and of the said Sm. Umasashi Dassi to pay as beneficiaries the sum of Rs. 50 each per month for their maintenance and a sum of Rs. 100 (Rupees one hundred) per month to the said trustees, Babu Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liable to defray the maintenance and education expenses of such minor son or sons as to pay Rs. 100 (Rupees one hundred) monthly and every month to the son or sons who has or have attained majority likewise after the death of the settlor, the trustee or trustees shall be liable to defray the maintenance of Rs. 50 (Rupees fifty) per month to the said Sm. Umasashi Dassi till the period of distribution mentioned in clauses 8 and 9 hereof. The trustees shall further defray the marriage expenses of the settlor's unmarried daughter, namely, Kumari Annapurna Coondoo. (8) Provided also further that after and upon the death of the settlor and of his wife, the said Sm. Umasashi Dassi, the trustee or trustees shall after defraying thereout: (1)the outgoings such as, municipal taxes, costs of repairs, interest payable to the Calcutta Improvement Trust, etc., and other liabilities, if any; (2) the expenses and/or payments under clause 7 hereof make improvements to the properties hereby settled and shall hold the residue, if any, of the income for the benefit of the said two sons (Sambhu Nath and Bhola Nath) of the settlor till his said son, Sambhu Nath, attains the age of 18 years. Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of his two sons and the assessee and his third wife were the trustees. It was further urged that mistakes in the original deed of trust had been rectified by the subsequent deed. It was contended on behalf of the revenue on the other hand that the terms of the deed showed that the trust was revocable and as such the said trust came within the mischief of section 16(1)(c) of the Indian Income-tax Act, 1922. It was contended further that the subsequent deed of rectification could not be taken into account as the said subsequent deed purported to change the entire trust. The Tribunal held that the rectification in the instant case was made prior to the year of account and as such for the assessment year in question the deed of rectification was good and valid. The Tribunal found that the rectified deed of trust as it stood could not be said to be hit by section 16(1)(c) of the Indian Income-tax Act, 1922, and held that the income from the portion of the said premises as claimed should not have been included in the income of the assessee. From this order, at the instance of the Commissioner of Income-tax, the Tribunal has referred to this court the following question: " Whether, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directed to execute a deed in favour of the daughter in respect of one of the properties settled for the purpose of creating the said stridhanam. It was further provided that in case any obstruction or delay was caused to the execution of the said deed by any of the sons, the settlor would have, full right and authority to execute such a deed by selecting properties of equal value from the properties settled on the sons. On these facts the Madras High Court held that the settlement contained a provision for reassumption of power over the settled properties and was, therefore, a revocable settlement within the meaning of the proviso to section 9(1) of the Travancore-Cochin Agricultural Income-tax Act, 1950. The said section 9(1) corresponded to section 16(1)(c) of the Indian Income-tax Act, 1922. Mr. Sen next cited the decision in the case of Commissioner of Income-tax v. Jitendra Nath Mallick [1963] 50 ITR 313 (Cal). In this case, which was decided by this court the settlor had agreed to advance to the beneficiary for the purpose of conducting certain testamentary proceedings a sum of Rs. 25,000 in consideration of receiving Rs. 1,25,000 if the proceedings terminated in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the assessee, contended on the other hand that under the trust deed before the court, in the instant case, the benefit to be derived by the settlor was specifically determined and the deed did not otherwise provide for any re-transfer in favour of the settlor either specifically or by implication. Mr. Mitra contended further that none of the clauses in the said deed could be construed to mean that the settlor qua settlor could reassume power over any part of the assets or income of the said trust which he had prior to the execution of the trust. He conceded that reading the rectified deed it could not be said that in the assessment year in question any money could be paid to Sambhu Nath as one of the beneficiaries under the said trust even though he had become a major. But, according to him it, was immaterial for purposes of answering the question referred whether any money would be payable to any person apart from the settlor and his wife or whether after making specific payments to the settlor and his wife as provided the residue of the income would accumulate. He submitted that whatever be the position there was no scope for any application of section 16(1)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlor can lawfully reassume power over the income or the assets. Unless that was so, the proviso would cover every trust where a settlor has made himself trustee because a trustee acting dishonestly could always assume control over the income." Relying on this decision Mr. Mitra contended that clause 2 of the deed in the instant case which provided that the settlor would not be accountable to anybody or to render any account whatsoever in respect of his dealing with the trust property settled should be similarly construed and it cannot be construed from the deed that it provided for reassumption of power by the settlor over the corpus or the income of the trust property. It appears to us that the contentions raised on behalf of the assessee are of some substance. Section 16(1)(c) of the Indian Income-tax Act, 1922, has been construed in a number of earlier decisions including those cited before us. The basic scheme of the section read with its first proviso appears to us to be as follows. Where under a settlement any income arises to the settlor the same has to be assessed in the hands of the settlor, whether the settlement is revocable or irrevocable. If under a settlement any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of the settlor. Sikri J. on page 10 of his judgment observed as follows-See [1968] 67 ITR 1 (SC): "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 ........" In the deed before us we cannot find any clause which provides for retransfer either directly or indirectly of the assets or the income of the trust back to the settlor. It also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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