9911796707
TMI Blog1961 (5) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... eed of amendment dated the 12th January, 1942, the assessee cancelled some of the paragraphs of the original deed and amended certain other paragraphs and also added paragraphs 42(a), 44 and 45. It was contended on behalf of the assessee before the Income-tax Officer that the trust was an irrevocable one and that the income of the property transferred by the assessee should not be assessed in the hands of the assessee but it should be assessed in the hands of the trustees under section 41 of the Income-tax Act. This objection was rejected by the Income-tax Officer, who held that the trust was a revocable one and so the income of the trust property should be assessed in the hands of the assessee under the provisions of section 16(1)(c) of the Income-tax Act. The order of the Income-tax Officer was upheld by the Appellate Assistant Commissioner on appeal. The assessee took the matter on further appeal before the Income-tax Appellate Tribunal, which took the view that the provisions of section 16(1)(c) of the Income-tax Act did not apply to the case and the income of the trust properties should not be assessed in the hands of the assessee. As directed by the High Court, the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20th January, 1941, which is to the following effect: 43. That if any of the beneficiaries under these presents or their heirs in future shall challenge the Indenture of Release and Agreement dated the 6th December, 1939, executed by the settlor in favour of the said Raja Bahadur and vice versa and the action taken thereon namely the Release of the Amawan Zarpeshgi lease properties dated the 15th June, 1931, and the petition of satisfaction filed on the 4th January, 1941, in the court of Subordinate Judge, 1st court, Patna, in Execution Case No. 42 of 1938-39 then the said beneficiaries shall on making such objection forfeit their right as beneficiaries under these presents and also if there shall be a breach by any of the beneficiaries of the covenants and/or conditions and limitations imposed under these presents he or she will not be entitled to any money or to any share in the rents, issues or usufruct of the trust property, and he or she will be deemed to have been excluded from the categories of beneficiaries and his or her share of the rents, issues and profits will be dealt with or enjoyed by the settlor in her entire discretion provided always that the settlor may at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titles and benefits, created in their favour or any of them, by the said indenture of trust dated the 20th January, 1941, and further created under the Amended Indenture of Trust. It was argued on behalf of the assessee that the clause of forfeiture is illegal. We are unable to accept this argument as correct. In our opinion section 31 of the Transfer of Property Act applies to this case, and in view of the provisions of that section the clause of forfeiture is legally valid as a condition subsequent which terminates an interest and revests it in the grantor. We are of opinion that in view of the language of paragraph 45 of the amended deed of trust, read with paragraph 43 of the original deed of trust, dated the 20th January, 1941, there is provision for retransfer directly or indirectly of the income or assets to the settlors, within the meaning of the first proviso to section 16(1)(c) of the Income-tax Act. It is also clear that there is a right to the settlor to reassume power directly or indirectly over the income or assets in this case within the meaning of the first proviso. It follows, therefore, that though the deed of amendment dated the 12th January, 1942, makes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act apply not only to the substantive provisions of section 16(1)(c) but also to the first proviso to section 16(1)(c). It was argued on behalf of the assessee that all the provisos to section 16(1)(c) are inter dependent and must be construed together. It was pointed out that in the present case the deed of trust is not revocable for a period exceeding six years. In this connection, reference was made by learned counsel for the assessee to paragraphs 42 and 45 of the deed of amendment. We have already quoted paragraph. 45 in the earlier portion of the judgment. Paragraph 42 of the deed of amendment is to the following effect: 42. That the trustees under these presents may terminate (1) after payment of the debts and liabilities as set out in Schedule D and all other liabilities of the trust that would be then outstanding or (2) after extinguishment of the Thicca leases in favour of the Hon'ble Maharajadhiraj of Darbhanga or (3) that in favour of Capt. Maharaj Kumar Gopal Saran Narain Singh of Tikari whichever event shall occur last. Reference was also made in this connection to the Thicca lease in favour of the Maharaja of Darbhanga. It was poin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
