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TMI Blog1967 (5) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ct for the assessment years 1955-56 and 1956-57 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income of the trust should be considered in the assessment of the trustees and that they were entitled to the benefits of the refunds attached to the dividends from the trust properties for the assessment years 1958-59 and 1959-60 ?" The answer to these questions depends on the true interpretation of section 16(1)(c) of the Indian Income-tax Act, 1922, and the interpretation of the trust deed dated June 19, 1947, and to appreciate the points fully it is necessary to give a few facts which are stated in the statement of the case. Jayantilal Amratlal, individual, hereinafter referred to as "the settlor", executed a trust deed whereby he settled 80 ordinary shares of M/s. Jayantilal Amratlal Ltd. on trust and created a trust known as "Jayantilal Amratlal Charitable Trust" to carry out the following various objects set out in the trust deed : "For the relief of poor, for the education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind." This tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of the trustees but would be computed in the hands of the settlor under section 16(1)(c). For the assessment year 1959-60 he passed a similar order on the same date. On the same day he also dealt with the assessments of Jayantilal Amratlal, individual, for the years 1955-56 and 1956-57. Following his reasoning he included the relevant income of the trust in the hands of Jayantilal Amratlal. Four appeals were taken to the Appellate Assistant Commissioner who, by his two orders dated November 8, 1960, dismissed the appeals. Before him the settlor relied on section 35 of the Bombay Public Trusts Act, 1950, but the Appellate Assistant Commissioner held that this did not assist the settlor because the income-tax law did take into consideration income derived directly or indirectly by illegal means. He felt that the settlor "could not be precluded from utilising funds of the trust directly or indirectly to his benefit since he had a right under the settlement to do so and the Bombay Public Trusts Act did not hold any fear for him as the penalties leviable were not of a deterrent nature, compared to the advantages that he could gain directly or indirectly by reassuming control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a right to reassume power over the trust assets or the income thereof, as contemplated by proviso (i) to section 16(1)(c). A loan, by the very nature of it, cannot be said to amount to an exercise of dominion or control over its subject-matter. It is repayable and is given on conditions as to the time of repayment and interest, if any. By taking a loan, a settlor does not exercise over its subject-matter power or dominion which, but for the trust or the settlement, he would have been able to exercise." Section 16(1)(c) reads as follows : "16. Exemptions and exclusions in determining the total income. --- (1) In computing the total income of an assessee --- . . . (c) all income arising to any person by virtue of a settlement or disposition whether revocable or not, and whether effected before or after the commencement of the Indian Income-tax (Amendment) Act, 1939 (VII of 1939), from assets remaining the property of the settlor or disponer, shall be deemed to be income of the settlor or disponer, and all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income of the transferor : Provided that for the purposes of this clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other trust properties and income in the trustees. Clause 2 gives the name of the trust. Clause 3 obliges the trustees to get and collect income of the trust properties and pay expenses, etc. Clause 4 creates the trust for the relief of poor, and for education, medical relief, etc. It further provides : "The trustees shall at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya. In applying the income of the trust premises for all or any of the objects hereinbefore specified the trustees may consider the claims of any needy or poor person belonging to the Visa Porwad community." Clause 5 enables the settlor to give direction to the trustees to accept contributions or donations to the trust from other persons. Clause 6 provides as follows : "The settlor may at any time or times by writing direct that any specific funds or investments or property forming part of the trust premises and/or the income thereof shall be utilised and applied exclusively for any one more of the aforesaid charitable objects an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a matter of fact the Income-tax Officer did find that the settlor has been utilising these powers for his own benefit. There is no doubt that under the trust deed the settlor has very wide powers and the settlor could direct the trustees to grant loan to him. The trustees could even grant loan to a firm in which he was interested. But this would be contrary to the provisions of the Bombay Public Trusts Act. Section 35(1) of the Bombay Public Trusts Act provides : "35. Investment of public trust money. --- (1) Where the trust property consists of money and cannot be applied immediately or at an early date for purposes of the public trusts the trustee shall be bound (notwithstanding any direction contained in the instrument of the trust) to deposit the money in any schedule bank as defined in the Reserve Bank of India Act, 1934, in the Postal Savings Bank or in a co-operative bank approved by the State Government for the purpose or to invest it in public security : . . . Provided further that the Charity Commissioner may by general or special order permit the trustee of any public trust or classes of such trusts to invest the money in any other manner." Mr. S. T. Desai submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disposal by the taxpayer of part of his property in such a way that the income should no longer be receivable by him, while at the same time he retained certain powers over, or interests in, the property or its income. The legislature's counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should, notwithstanding, be treated as still his income and taxed in his hands accordingly." This court held in that case that these observations applied also to the section under consideration, and the Indian provision is enacted with the same intent and for the same purpose. But even so, Lord Simonds observed while construing a similar provision in Wolfson v. Commissioners of Inland Revenue : "It was urged that the construction that I favour leaves an easy loophole through which the evasive taxpayer may find escape. That may be so ; but I will repeat what has been said before. It is not the function of a court of law to give to words a strained and unnatural meaning because only thus will a taxing section apply to a transaction which, had the legislature thought of it, would have been covered by appropriate words." Viscount Simonds obser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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