KESHAVLAL PUNJARAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) A number of questions have arisen in the course of the assessment in the case of Keshavlal Punjaram and others assessed in the capacity of legal heirs of Partivkumar Harshedkumar as an Association of Persons (hereinafter referred to as AOP), in Income tax Ref. No. 66/77. The main question invoked in this reference has also been raised in Wealth tax Ref. No. 18 of 1976, where also Keshavlal Punjaram & others as legal heirs of Partivkumar Harshadkumar are the assessees. Since an identical question is involved in these allied matters it will be convenient to dispose of both these matters by this common judgment. We will first deal with the question which is common IT Ref. No. 66/77 and WT Ref. No. 18/76 (being question No. 1 out of the four questions in ITR No. 66/77 and the only question in WTR No. 18/76, though it is worded slightly differently). The said question reads as under : ITR No. 66/77 :

(2.) ONE Keshavlal Punjaram executed an indenture of settlement on 18th April, 1928. After executing the aforesaid indenture of settlement, the settler made modifications in respect of certain vital matters by a subsequent document executed by him pursuant to the power reserved under the original deed of settlement of 1928 (Annex. A). The first modification was made by document dt. 29th July, 1940 (Annex. B). The second and final modification was made as per document dt. 16th Sept., 1948, (Annex. C). We are concerned with the modification made in so far as the rights of Harshadrai Keshavlal (who will be hereinafter referred to as "H") and his legal heirs have been affected by this modification. By original document at Annex. A, executed in 1928, it was provided by cl. (2) that the trust funds shall be held for the benefit of H and that the income of the fund should be paid to him "for and during his life and down to his death. In so far as the heirs of H were concerned, a provision was made by cl. (3) and the trustees were directed to hold the trust funds in trust for the rightful heirs of the said H. By Annex. B, which was the first document of modification, executed in 1940, i.e., some 12 years after the execution of the original document, the provision made for payment of income of the trust to H was deleted and it was instead provided that income of the trust funds should be accumulated during the lifetime of the settlor. It was further provided that after the lifetime of the settlor the net income was to be paid to H for and during his life and down to his death. By the second modification, as per the last document executed in 1948 as per annex. C the settlor directed that the trust funds shall be held in trust for the said H "for the life and for his heirs, executors, administrators and assigns absolutely". The relevant portion may be reproduced for the sake of preciseness :

(3.) WE are now concerned with the three questions referred to us for our opinion, being questions Nos. 2, 3 and 4 in IT Ref. No. 66/77. So far as question No. 2 is concerned, it reads as under :