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TMI Blog1965 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer directly or indirectly of income or assets or for reassumption of power directly or indirectly over income or assets which brings the case within the first proviso. Cases in which there is a settlement, but there is no provision in the settlement for retransfer or right to reassume power do not fall within the proviso, even if as a result of the settlement, the settlor obtains a benefit. Appeal dismissed. - - - - - Dated:- 9-4-1965 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SHAH J.---On April 10, 1953, the estate of the joint Hindu family of which the respondent was a member was partitioned, and the respondent was allotted, besides other properties, 400 shares of the Simbhaoli Sugar Mills Private Ltd. and was made liable to pay a business debt amounting to Rs. 3,91,875 due by the family to R. B. Seth Jessa Ram Fateh Chand of Delhi, On April 14, 1953, the respondent executed a deed of trust in respect of 300 out of the shares of the Simbhaoli Sugar Mills which fell to his share. The following are the material provisions of the deed of trust : " AND WHEREAS on partition, the author was allotted, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the powers and the authorities hereinbefore contained : (i) The trustees shall not be entitled to sell the shares except as provided hereafter but they can mortgage or pledge the same for raising funds as they may feel necessary for paying off the debts of the author, provided . . . " Clause 6 provided : " That in carrying out the objects of the trust the trustees shall keep in mind and abide by the following directions : (i) The payment of the debts of the author as detailed in Schedule ' A ' referred to above shall receive the topmost priority and the trustees shall not spend any money out of the trust property or its income in any direction till they have paid off all the debts of the author, provided always if the trustees are unable to pay off the debts, out of the income, i.e., dividends, bonuses, etc., of the shares within a period of ten years they shall be entitled to sell the same or part of it and thus pay off the debts that may be due at that time. (ii) After debts are discharged the trustees shall spend 80 % of the income of the trust property remaining in their hands after full discharge of the debts, on the maintenance of the children and grandchild ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement 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 a settlement, disposition or transfer shall be deemed to be revocable if it contains any provision for the re-transfer directly or indirectly of the income or assets to the settlor, disponer or transferor, or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or assets : Provided further that the expression ' settlement or disposition ' shall for the purposes of this clause include any disposition, trust, covenant, agreement or arrangement, and the expression ' settlor or disponer ' in relation to a settlement or a disposition shall include any person by whom the settlement or disposition was made : Provided further that this clause shall not apply to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planatory. The second proviso in terms says that the expression ' settlement or disposition ' is to include any disposition, trust, covenant, agreement or arrangement, and the expression ' settlor or disponer ' is to include any person by whom the settlement or disposition was made. Similarly, the first proviso states that settlements, dispositions or transfers, if they are of the character described, shall for the purpose of the principal clause be revocable transfers. " The terms of section 16(1)(c), first proviso, are reasonably plain. A settlement or disposition is deemed to be statutorily revocable if there is a provision therein for retransfer of the income or assets or which confers a right to reassume power over the income or assets. The provision may even be for retransfer indirectly or for conferring power to reassume indirectly over the income or the assets. But the actual retransfer or exercise of the power to reassume is not necessary : if there be a provision of the nature contemplated, the proviso operates. The terms of the deed may now be examined. The shares were settled upon trust, and four trustees, one of whom was the respondent, were appointed, Genuinenes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es where there is a provision which confers a right upon the settlor to reassume power over the income or assets directly or indirectly. It is the provision for retransfer directly or indirectly of income or assets or for reassumption of power directly or indirectly over income or assets which brings the case within the first proviso. Cases in which there is a settlement, but there is no provision in the settlement for retransfer or right to reassume power do not fall within the proviso, even if as a result of the settlement, the settlor obtains a benefit. It has been held in two cases decided by the High Court of Bombay that a person under an obligation arising out of his status may execute a trust to discharge his own obligation without attracting the operation of seetion 16(1)(c). In Ramji Keshavji v. Commissioner of Income-tax under a consent decree, the assessee executed a deed of trust conveying certain properties for the benefit of his wife to the trustees. The deed provided that the net income from the properties shall be paid to the assessee's wife during her lifetime and that she shall maintain her minor children by the assessee and " run the household ". It was held b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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