COMMISSIONER OF INCOME TAX Vs. BHAGWANDAS S MALVI

JUDGEMENT

(1.) THE question that is referred at the instance of the Revenue is as under :

(2.) THE assessees are the trustees of a trust created by one Tribhuvandas by a trust deed dt. 31st March, 1932, and the question referred to arises with reference to the asst. year 1959 60, the relevant accounting year being Samvat year 2014. The trust deed provided that the trustees were to collect the income and after appropriating specified amounts for expenses were to pay the balance to the settlor during his lifetime and after his death to pay the balance to his wife, Jamnabai, and son, Shantilal. Clause 4(c) of the trust deed contained provisions as regards disposal after the death of the settlor and it is as under :

(3.) THE assessees filed an appeal before the AAC. He took the view that the surrender of interest by Shantilal amounted only to self effacement and not transfer or attempt to transfer; that such surrender of life interest by Shantilal had only the effect of accelerating the succession as provided by the trust deed. He, therefore, set aside the order passed by the ITO and held that the sum of Rs. 2,000 which was set aside to carry out repairs, etc., was the only amount that was liable to be assessed at the maximum rate and the balance of the income of the trust was to be assessed either in the hands of the beneficiaries directly or in the hands of the trustees at the appropriate rate applicable to the beneficiaries. The Revenue went in second appeal before the Tribunal. Before the Tribunal, only one contention was urged on behalf of the Revenue. That related to the true nature and effect of the relinquishment. It was almost conceded before the Tribunal that if the relinquishment by Shantilal had the same effect for the purpose of the trust settlement as his death, then, under the said settlement Shantilal's sons who were all majors on 31st Dec., 1956, would be entitled to the trust income in equal shares. Relying upon the decision of this High Court in CIT vs. Shrimati Kasturbai Walchand Trust (1964) 51 ITR 255 (Bom) : TC23R.790, the Tribunal took the view that the interest of the sons of Shantilal was accelerated as a result of the relinquishment of interest by Shantilal and his wife, Rukmini, and the Tribunal dismissed the appeal that was filed on behalf of the Revenue. The question referred to above arises from this order passed by the Tribunal.