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TMI Blog1972 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of this case, the surrender, release and yielding up of his life interest by the assessee in the Neville Ness Trust Fund No. 2, created by late Sir Nusserwanjee Nowrosjee Wadia in 1947 amounted to a transfer of assets to Miss Diana Wadia and Master Nusli Wadia within the meaning of section 16(3)(a)(iv) of the Indian Income-tax Act? 2. Whether, on the facts and in the circumstances of this case, the expenditure incurred on the education of the minor children of the assessee out of their income which they derived from the trust made by their grandfather, late Sir Nusserwanjee Nowrosjee Wadia, in 1947 is liable to be added and included in the expenditure of the assessee under section 4 and if so, under which sub-section of section 4 of the Expenditure-tax Act?" The only facts which need to be noticed are as follows: By a deed of settlement, dated 30th January, 1947, Sir Ness Wadia settled 1,001 fully paid ordinary shares of the Bombay Dyeing and Manufacturing Co. Ltd. upon trusts mentioned in the deed. The main trusts which need to be noticed were as follows: The net dividends, interest and income of the trust were in the first instance payable to the settlor's son, Nevi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the trusts declared by the said indenture of Settlement." For the years 1958-59 and 1959-60 a sum of Rs. 1,46,126 was received as income in respect of the trust investments and shares. The Income-tax Officer considered this income (dividends) to be includible in the assessee's income. He held that the assessee was liable in respect of the above income under section 16(3)(a)(iv). His finding accordingly was that the above income which arose to the minor daughter and son of the assessee by reason of the above deed dated 30th March, 1957, was from the assets directly transferred by the assessee in favour of his minor children, and that the transfer was not for any consideration at all. Having regard to this finding Rs. 1,46,126 of the dividend income was included in the assessee's income for the year 1958-59. For the next year, i.e., 1959-60, he added Rs. 73,063 on the same footing in the income of the assessee. These findings were confirmed by the Appellate Assistant Commissioner in the appeals filed by the assessee. The Income-tax Tribunal rejected the contention made on behalf of the revenue and in that connection observed that : " One thing is clear from the deed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he footing that resignation was a transaction that attracted capital gains tax. In that connection the contention of the revenue was negatived and a finding was made that the sum of Rs. 1 crore was received by the assessee for resigning the managing agency and not for selling it and the assessee was, therefore, not liable to tax. In connection with the question which arose the court observed in that case : "If a transaction creates certain legal rights and obligations, then the court must give effect to those legal rights and obligations and must not, overlooking these rights and obligations, try and fathom what was in substance the nature of the transaction entered into by the parties." The further observations were to the effect that the form of the transaction could be ignored and the real nature of the transaction could be ascertained by the court. In the case of Makhan Lal v. Nagendra Nath, the High Court of Calcutta, while dealing with a deed which was described as a surrender in connection with a partition effected, observed: " A surrender is a yielding up an estate for life to him that hath an immediate estate in reversion or remainder wherein the estate for life of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is to ascertain the true meaning and effect of the contents of the deed dated 30th March, 1957. Mr. Hajarnavis emphasised that in the recital in the deed as also in clause (1) of the operative part of the deed the assessee himself stated that he was executing the deed to accelerate the respective further life estates and interest of his daughter and son and therefore in clause (1) stated : " . . . . he the releasor doth hereby surrender release and yield up all that the interest in the said Neville Ness Trust Fund No. 2. . . to the intent that the subsequent life estates or interest in the said Neville Ness Trust Fund No 2 on the decease of the releasor may be accelerated and take effect in possession as from the date hereof to the entire exclusion of the releasor and of any benefit to him." Mr. Hajarnavis has submitted that the words in the operative clause (1) are the words for making of a transfer by the assessee of his life estate in favour of his daughter and son. We are unable to accept this submission because the operative clause (1) directly and clearly provides for complete surrender and release of all interests of the assessee in the trusts created by the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that neither section 4(i) nor section 4(ii) was applicable to the case. In that connection the Tribunal referred to the definition of "dependant" in section 2(g)(i) and held that from the facts of the case it was clear that it could not be said that the minor children were dependants within the meaning of section 2(g)(i) as they were neither mainly nor wholly dependent on the assessee. Mr. Hajarnavis for the revenue has rightly conceded before us that the provisions in section 4(i) and (ii) could be attracted and expenditure incurred by the dependants of the assessee can be included in his own expenditure only in cases where a finding could be made that the minors in question were dependants of the assessee. He admitted that the finding of fact made by the Tribunal, that the assessee's daughter and son were not dependants, could not be altered by us in the present reference. He, therefore, rightly conceded that having regard to the daughter and son of the assessee having not been found to be dependants the question of including the expenditure incurred by them in the expenditure of the assessee could never arise. The result of the above concession is that answer to question No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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