BAIDYA NATH DE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question of law referred to this Court under s. 66 (1) of the Indian IT Act in this case is :

(2.) THE facts are very short and not in dispute. One Baidya Nath De executed a trust deed on 5th April, 1951, constituting himself as the sole trustee during his lifetime. THE beneficiaries under the trust were Baidya Nath De himself, his wife, mother, a minor son, two unmarried daughters, sons to be born and their heirs. THE settlor did not specify the definite shares of the beneficiaries. On 10th Feb., 1954, he executed a supplementary deed giving up his beneficial interest reserved under the trust deed of 5th April, 1951, and directed that the shares of the beneficiaries should be as follows :

(3.) IT is contended before us that the section is attracted only in cases where property is transferred to trustees for the benefit of the wife or the minor child or both and is not attracted to a case where any benefit is reserved to any person other than the wife or minor child. The argument is that the use of the expression "or both" showed that the section was to be limited to the cases where any benefit was reserved for the wife or minor child or both and it could not be applicable in a case where any third party, that is to say, a person other than the wife or minor child, had any interest reserved under a trust deed. We are unable to accept this argument. Sec. 16(3)(b) clearly deals with only that portion of the income of the trustee, which arises from assets transferred to him by the settlor for the benefit of his wife pr minor child or both. By implication, it is clear that the whole of the income need not be reserved for the benefit of the wife or the minor child or both. The addition of the words "or both" does not make the position any different. IT was argued that the expression "or both" need not have been used at all, for if the section had stopped at the expression "minor child" the meaning would have been the same. Probably that is so and the use of the expression "or both" may be ex abundant cautela, but the meaning seems to be clear, namely, that any portion of the income which arises from assets transferred to a trustee for the benefit of his wife or minor child or both is to be included in the income of the individual, that is to say, the settlor. The question came up for consideration by the Bombay High Court in the case of CIT vs. Sir Mahomed Yusuf Ismail (1944) 12 ITR 8 (Bom) : TC42R.893, by a Bench presided over by Beaumont, C.J., and Chagla, J., as he then was. In view of the opinion formed by the Court as to whether there could be a reopening of the assessment under s. 34 of the Act in the circumstances of the case both the learned judges thought that they need not go into the further question as to the meaning of s. 16(3)(b), but Beaumont, C.J., dealt with the question at page 16 of the report and observed :