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Interpretation of Section 16(1)(c) of the Indian Income Tax Act. Tax liability on income derived from revocable trust and settlement. Applicability of the amendment act to income accrued before its enactment. Analysis: The case involved a dispute regarding the tax liability of an assessee on the income received by his daughters from immovable properties settled in trust for them. The deeds of trust and settlement were revocable, with the assessee retaining the power to revoke or make fresh dispositions. The Income Tax Officer, relying on Section 16(1)(c) of the Indian Income Tax Act, held the assessee liable to be taxed on the income received by his daughters. The assessee contended that the Officer wrongly applied the amended provision retrospectively. The key provision in question, Section 16(1)(c), states that income arising from a settlement or disposition, whether revocable or not, shall be deemed the income of the settlor or transferor. The Court emphasized that the plain wording of the clause and the scheme of the Income Tax Act supported the taxation of income derived from revocable transfers. The Court rejected the argument that income accrued before the amendment act should not be taxed under the revised provision. The Court held that the law in force at the time of assessment governs the tax liability, not the law in place when the income was earned. The Court cited a similar opinion from the Patna High Court to support its decision. Ultimately, the Court agreed with the Commissioner of Income Tax and held that the income from the revocable trust must be deemed the income of the transferor, i.e., the assessee. The reference was answered in the affirmative, and the Commissioner was awarded costs.
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