Ramjibhai died on the July 23, 1940.
The effect of the trust deed was that the income of the property settled on trust was to be enjoyed by Ramjibhai during his lifetime, and that after his death the said income was to be enjoyed by the respondent, Ratilal, alone, with a right of residence provided in favour of his mother, Kamlawanti, in a part of one of the houses companyprised in the trust deed.
Section 16 of the Indian Income tax Act was modified in 1939 and clause c of sub section 1 thereof as amended is as follows In companyputing the total income of an assessee all income arising to any person by virtue of a settlement or disposition whether revocable or number, and whether effected before or after the companymencement 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 companytains any provision for the retransfer 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, companyenant, agreement, or arrangement, and the expression settlor or disponer in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made It is by virtue of this clause and in view of the power of revocation of the trust having been expressly reserved in favour of Ramjibhai by the trust deed, that the income in his hands was being assessed without dispute on the footing that the settlor was the Hindu undivided family, and that the income of Ramjibhai is, therefore, to be treated as the income of the Hindu undivided family.
On the July 27, 1933, Ramjibhai and Ratilal, who were the sole companyarceners, at the time, of the said Hindu undivided family, executed a trust deed in respect of four items of house property belonging to the joint family, which owned at the time and companytinued to own other properties also.
The Income tax authorities overruled this companytention.
Thereupon at the instance of the respondent, the Tribunal stated a case to the High Court of Bombay under Section 66 1 of the Act and referred the following question for its decision Whether in the circumstances of the case and on the true companystruction of the settlement deed, is the income from the trust property liable to be included in the income of the assessee Hindu undivided family ?
The companytention of the assessee before the High Court was two fold 1 that the settlor under the trust deed was number the Hindu undivided family as the Income tax authorities were inclined to hold, but that the settlement was by two individual male members of the family, viz.,
Ramjibhai enjoyed the income during his lifetime but the said income was being assessed as joint family income under Section 16 1 c of the Act and as an addition to the other admitted joint family income.
After the death of the respondent Ratilal, the income is to be enjoyed by his wife, Kantabai, and the natural born sons in existence at the time of the death of the survivor of Ramjibhai and Ratilal.
The respondent objected on the ground that under the terms of the settlement it was only his individual income and that Section 16 1 c had numberapplication to him.
The assessee appealed to the Income tax Appellate Tribunal but by order dated the March 16, 1950, it companyfirmed the view taken by the Income tax authorities.
There was an express power of revocation of the trust deed reserved to the said Ramjibhai by a specific clause therein.
The Income tax authorities companytinued, after the death of Ramjibhai, to assess the income, in the hands of the respondent arising from the properties settled as the family income.
The proceedings relate to the four assessment years, 1942 43, 1943 44, 1944 45, and 1945 46, and arise under the following circumstances There was a Hindu undivided family companysisting of one 1 Ramjibhai, 2 his son, Ratilal Nathalal the respondent before us, 3 Ramjibhais wife, kamlawanti, 4 Ratilals wife, Kantabai, and 5 Ramjibhais unmarried daughter, Pushpa.
Jagannadhadas, J. This is an appeal under Section 66A of the Indian Income tax Act from the judgment of the High Court of Bombay given on a reference to it by the Income tax Appellate Tribunal under Section 66 of the Act.
