LEELA NATH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court :

(2.) The assessment year involved is 1970-71. The assessee is one Mrs. Leela Nath, who had executed a deed of trust on 25th September, 1958. As the question involved in this case mainly depends on the construction of the trust deed, it would be relevant to refer to the said deed in a little detail. In the recital of the said deed, the names of the trustees were mentioned as the assessee herself, her husband and one Sri Wazir Chand for their lives. In the recital the settlor recited as follows:

(3.) Then, the deed recites that the settlor had handed over the trust property to the trustees for the benefit of the three minor children, viz., (1) Nita Nath, (2) Kamal Nath and (3) Rita Nath, as mentioned in the trust deed, to be utilised and dealt with in accordance with the terms of the trust. Clause 4 stipulates that the property of the trust shall be the said movable property described in Schedule "A" and the " accumulation on such income or accretion thereof or additions thereto by further contribution or otherwise ". Next clause provided that the founder or any other trustees or any other person interested in the welfare of the beneficiaries shall be entitled to make further contributions to this trust and for the benefit of the aforesaid beneficiaries and all such contributions when received and accepted by the founder or the trustees for the time being shall become an integral part of the corpus of the trust and should be dealt with as if they were part of the property originally included in the trust. Clause 6 provided that the beneficiaries mentioned in the said deed should be entitled to the property forming the subject-matter of the trust in "equal shares". Incidentally, Clause 7, we may mention, was inadvertently not printed in the paper book and we have allowed the assessee to produce before us, a typed copy of the 7th clause to be prepared, with the consent of the parties, which provided merely that the founder, along with one Mr. Wazir Chand and the husband of the founder or settlor, Mr. M. Nath, should be the sole trustees during their lifetime of the property of the trust. Clause 8 of the said trust provided that the trustees for the time being should be entitled to " invest the property of the trust in such manner as they in their absolute and uncontrolled discretion may consider proper and shall not be subject to any restrictions as described in the Trusts Act, 1882, or any other law pertaining to trustees during their lifetime, for the property of the trust". Clauses 9, 10, 11, 12 & 13 of the said deed provided as follows :