COMMISSIONER OF INCOME TAX ANDHRA PRADESH COMMISSIONER OF INCOME TAX ANDHRA PRADESH Vs. TRUSTEES OF H E H THE NIZAMS FAMILY TRUST:H E H THE NIZAMS FAMILY TRUST

JUDGEMENT

(1.) These appeals have been preferred by the Revenue against the common judgment of the High Court of Andhra Pradesh answering the following questions in favour of the assessee:

(2.) By a Deed of Trust dated May 10, 1950 the Nizam of Hyderabad created a Family Trust. A corpus of nine crores in Government securities was transferred to the trustees under that Deed. The corpus was notionally divided into 175 equal units. Five units were to constitute a fund called the 'Reserve Fund', and 31/2 units were to constitute the "Family Trust Expenses Account". The remaining 1661/2 units were allotted to the relatives mentioned in the Schedule in the manner provided therein, the number of units allocated to each individual relative being specified there.

(3.) Two clauses of the Trust Deed hold the center of the stage in these appeals. Clause 6 creates a Reserve Fund comprising five equal units of the corpus of the Trust Fund. The trustees hold the Reserve Fund upon trust to apply the income or corpus thereof for any special, unusual, unforeseen or emergency expenses for the benefit of the members of the Settlor's family specified in the Schedule. Additionally, if the income of the Family Trust Expenses Account is insufficient to meet the charges of collection of the income of the Trust Fund and the remuneration of the trustees and of the Committee of Management and the other costs, charges, expenses and outgoings relating to the Trust, the trustees are enjoined to make good such deficit out of the income or corpus of the Reserve Fund, and for that purpose they may transfer to the Family Trust Expenses Account such sums as may be required. It is further provided that on the death of any of the Settlor's relatives specified in the Schedule the trustees must set apart out of the Reserve Fund a certain portion calculated in accordance with the directions contained in the clause and to add such portion to the units of the corpus of the Trust Fund allocated to the member specified in the Schedule and to amalgamate the same, and to hold it upon the same trusts 'as those hereinafter declared and contained of and concerning the unit or units of the corpus of the Trust Fund allocated to such relative of the settlor as aforesaid.'