COMMISSIONER OF INCOME TAX Vs. GHANSHYAMDAS BINANI

JUDGEMENT

(1.) The following two questions have been referred to this court :

(2.) Reading the trusThis relates to the assessment to income-tax for the assessment years 1962-63, 1963-64, 1964-65 and 1960-61, for which the relevant previous years were Diwali Sambat years 2018, 2016, 2019 and 2020 (sic). The assessee had transferred 30,000 shares of Metal Distributors Pvt. Ltd. to a trust of Mathuradas Govardhandas Binani Charitable Trust by an indenture dated July 24, 1959. By Clause 15 of the above trust deed, the assessee had reserved the right to revoke the trust at any time after the expiry of seven years from the date of its execution. The ITO was of the view that according to Hindu law a Hindu could not make a revocable trust for the purpose of charity and, therefore, such a conditional transfer did not result in a complete divestment of the shares. He was also of the opinion that the transfer was made in July, 1959, after the close of the accounting year. In order to decide the question it will be relevant to refer to the relevant clause of the trust deed. Clause 15 provides as follows :

(3.) Reading the trust deed in its entirety it appears to us that the object of the trust has been clearly indicated. The subject-matter of the trust has also been indicated. There has been divestiture in favour of the trustees. If that is the position, then, in our opinion, there was a legally valid trust and the property has been transferred by the assessee. If that is so, question No. 1 must be answered in the affirmative and in favour of the assessee. If question No. 1 is in the affirmative, then the income of the trust cannot be assessed in the hands of the assessee in the year in question. Therefore, question No. 2 must be held in the affirmative and in favour of the assessee. We are not going into the question whether it was a valid charitable trust. It is not necessary for us to deal with the same. Reliance was placed on certain observations in the case of Lokamanya Tilak Jubilee National Trust Fund, In re [1942] 10 ITR 26 (Bom), on the question whether the object of a trust such as the one in this case was to create a valid charitable trust or not. It is not necessary for us to embark upon this controversy. Accordingly, the questions are answered in the manner indicated above.In the facts and circumstances of the case, parties will bear and pay their own costs.