9911796707
TMI Blog1944 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... of an entry which the assessee made in his business books on 6th May, 1937. The relevant parts of that entry are as follows : To-day I am making a family arrangement for my own good. All my estate belongs to me and is acquired by me and hence no one has a claim on this estate except me. I have got full right to dispose of this estate or make some arrangement about it as I like. The assessee then states that his first four wives are dead and that he is to marry again. He states that his age is 61 years. He then continues that at the time he made arrangements with the fifth wife's parents, I promised that out of my estate I will hand over to you an estate worth ₹ 20,000 for your benefit only up to your death. Then after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like. I have not kept with me the right to make any changes in that arrangement or to cancel it. Now it appears that no specific assets were set aside to meet this sum of ₹ 20.000 and that there are no further entries in the books with regard to it. The first question which we have to consider is, what is the correct construction to be put upon this document ? In my judgment it is clearly irrevocable, i.e., the covenanted sum cannot be revoked by the covenantor at any time. In substance it is a covenant to pay the income of ₹ 20,000 with a guarantee that there shall be ₹ 600 a year, and if there is any additional income that sum is also to be paid over. I do not think it is necessary to determine whether if the lady c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person by virtue of a covenant whether revocable or not, from assets remaining the property of the settlor or disponer. Now in my judgment that is the position created by this entry in the assessee's books. If that is so, then it falls to be considered whether the position is taken out of the main sub-clause (c) by the third proviso which is as follows : Provided further that this clause shall not apply to any income arising to any person by virtue of a settlement or disposition which is not revocable for a period exceeding six years or during the lifetime of the person and from which income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be assessed on the said income as and when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered to remain the property of the assessee, is liable to be assessed as the income of the assessee. There appears no doubt that the capital amount of ₹ 20,000 mentioned in the entry, at no time, ceased to be property of the assessee. By the entry also he has not transferred a specific amount to himself in another capacity. In law, therefore, it would be proper to state that there is no transfer of assets by the settlor to another party. The question for consideration is whether on the facts found by the Tribunal the income remains the income of the assessee. It is common ground that Section 16(1)(c) of the Act applies. The first part of that clause deals with income arising to any person by virtue of a settlement or disposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed in particular on the last words of the proviso, viz., the settlor shall be liable to be assessed on the said income as and when the power to revoke arises to him. From these words it was sought to be argued that the power to revoke must be a revocation of the transfer of assets. In my opinion this argument is unsound. The proviso opens with the words Provided further that this clause shall not apply.... there is no warrant for reading the word clause as applicable only to the second half of clause (c), and not the first half also. In my opinion, the last words of the proviso, quoted above, also do not help the Commissioner, because the power to revoke may be equally applicable to the income, which is payable, as to the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. It, therefore, makes the deed irrevocable during the lifetime of the assessee's wife, for whose benefit the arrangement is made. The first condition of the third proviso is thus fulfilled. The second condition is that from the income (so settled on the wife during her lifetime) the settlor derives no direct or indirect benefit. On a perusal of the entry, which embodies the arrangement, it is clear that the settlor has no power of disposition over the income. The wife is entitled to utilise it as she pleases, irrespective or in total disregard of the wishes or desires of the assessee. It was contended that the assessee is bound to maintain his wife and this income, which is settled on her, may be taken into consideration if she cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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