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TMI Blog1978 (1) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... or charitable purposes to perpetuate the memory of the deceased parents of the assessee and for their spiritual benefit and a public, religious and charitable trust was set up. In the assessment the Income-tax Officer added the sum of Rs. 9,738, being the interest accruing to the trust, to the income of the assessee on the ground that the said sums of money had not been handed over in cash to the trustees and that mere entries in the books of a concern which did not have the cash balance on the date of transfer in favour of the trust did not constitute a gift. The Income-tax Officer also considered clauses 4, 9, 21, 39(vi), 40 and 42 of the deed and held that the cumulative effect of the said clauses was that the trust was wholly illuso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case and on a proper interpretation of annexure 'A', there was a valid trust so as not to justify the inclusion of Rs. 9,738 in the assessment of the assessee, the settlor ?" No one appeared on behalf of the assessee at the hearing. The only contention of Mr. Suhas Sen, learned counsel for the revenue, before us was that this trust should be deemed to be revocable within the meaning of section 16 of the Indian Income-tax Act, 1922, inasmuch as the settlement contained a provision which gave the settlor a right to reassume power directly over the assets of the trust and, therefore, in computing the total income of the settlor the income arising by virtue of this settlement should be deemed to be the income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or immovable notwithstanding the fact that the purchaser would be a trustee and notwithstanding any rule of law or equity to the contrary. (b) Power was given to the settlor to make a loan to any person including himself with or without security or howsoever as the settlor would determine as if he were absolutely entitled to such money. (c) The settlor who constituted himself a trustee was made not accountable either to the Advocate-General or to the Collector and was made not liable for any act or omission on his part in the course of management or for the consequences as if he was the sole owner of the trust estate and entitled to all the income thereof. Construing the above clauses, the Bombay High Court held that under the deed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Commissioner of Income-tax v. Jayantilal Amratlal [1968] 67 ITR 1. The deed in that case gave wide powers to the settlor who could direct the trustees to set aside any portion of the income of the trust for certain purposes. He could also direct any specific fund or investment or property forming part of the trust and/or the income thereof to be utilised and applied exclusively for one or more charitable objects. He had further power to direct the trustees to hand over the income of the trust or any part thereof to any institution, association or society to apply for all or any of the charitable purposes without being bound to see the application thereof. He had power to direct the trustees to invest the trust funds in sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to confer a right to reassume power within the first proviso. Otherwise a settlor could never name himself a sole trustee. It seems to us that the latter part of the proviso contemplates a provision which would enable the settlor to take the income or assets outside the provisions of the trust deed ...... Coming to the various clauses of the trust deed ...... what he (settlor) can direct under clause 4 is the application of income to a particular charitable purpose. Similarly under clause 6 he can nominate the charitable object and the fund or investment which should be utilised for that object. This is in no sense a power to reassume control. Clause 8 enables the settlor to delegate the carrying out of a particular charitable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the clause includes loan or deposit to any company, person or firm including the firm or firms in which the settlor or the trustees may be directly or indirectly interested, and on such terms as to interest as the trustees may think proper. But, ex facie, the clause does not permit the trustees or settlor to grant loans to themselves in their personal capacity. In the case of Jayantilal Amratlal [1968] 67 ITR 1 the Supreme Court quoted with approval an observation of the Bombay High Court in the case of Commissioner of Income-tax v. Muthuradas Mangaladas Parekh (ITR No. 4 of 1954 decided on August 26, 1954-unreported), where the Bombay High Court negatived a similar contention by saying that the "Trustees would be committing a breach of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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