LAWS(BOM)-1948-3-19

COMMISSIONER OF INCOME TAX Vs. KIKABHAI PREMCHAND SIR

Decided On March 12, 1948
COMMISSIONER OF INCOME-TAX (CENTRAL) Appellant
V/S
SIR KIKABHAI PREMCHAND Respondents

JUDGEMENT

(1.) THE question that we have to answer on this reference turns upon the construction of a deed of settlement executed by Sir Kikabhoy Premchand on February 9, 1940. THE trust deed was executed mainly for the purpose of establishing, equipping, and maintaining a sanatorium called Lady Lily Kikabhoy Premchand Sanatorium, Poona, for the benefit of the deserving and needy persons and their families and belonging to specified Hindu communities. THE question that we have to answer is, whether on the facts of this case the two sums of Rs. 4,259 and Rs. 4,741, representing the income of this trust, were rightly held to be saved from the application of the provisions of Section 16(1)(c) of the Indian Income-tax Act as amended by the Act of 1989.

(2.) IN looking to the trust deed as a whole it seems fairly clear that the settlor while having a genuine intention to make a charitable trust was as genuinely anxious to retain to himself as much power as possible. Although he has appointed trustees other than himself, the various provisions clearly show that practically all the power is retained in his own hands and the trustees during his lifetime are associated with him merely in name. But that by itself very likely would not be a very relevant factor in order to determine whether the income of this trust is saved under Section 16(1)(c) of the Act.

(3.) CLAUSE 7 lays down the various powers which are given to the trustees in relation to the trust estate, and Sub-clause (n) of this clause gives power to the settlor to purchase the trust property himself whether the property is moveable or immoveable property notwithstanding that he is a trustee and notwithstanding any rule of law or equity to the contrary. Sir Jamshedji has contended that Section 53 of the Indian Trusts Act prohibits the trustee from purchasing the trust property in spite of this power. But, whatever the legal consequences of the act of the trustee may be, the fact remains that the settlor has taken to himself this power under the trust deed.