Calcutta H.C : Whether, on the facts and in the circumstances of the case, and on a proper interpretation of the deed of trust executed on 24th July, 1959, the Tribunal was right in holding that a legally valid trust had been created and the ownership of 30,000 shares in M/s Metal Distributors (P.) Ltd. had been transferred by the assessee to the said trust ? 2. Whether, on the facts and in the circumstances Of the case, the Tribunal was right in holding that the income of the said trust could not be assessed in the hands of the assessee?

High Court Of Calcutta

CIT vs. Ghanshyamdas Binani

Sections 4, 62, 2(15)

Asst. Year 1960-61, 1962-63, 1963-64, 1964-65

Sabyasachi Mukharji & Suhas Chandra Sen, JJ.

IT Ref. No. 699 of 1972

11th May, 1982

Counsel Appeared

B.K. Bagchi & B.K. Naha, for the Revenue : D. Pal & R. Murarka, for the Assessee

SABYASACHI MUKHARJI, J. :

The following two questions have been referred to this Court : “(1) Whether, on the facts and in the circumstances of the case, and on a proper interpretation of the deed of trust executed on 24th July, 1959, the Tribunal was right in holding that a legally valid trust had been created and the ownership of 30,000 shares in M/s Metal Distributors (P.) Ltd. had been transferred by the assessee to the said trust ? 2. Whether, on the facts and in the circumstances Of the case, the Tribunal was right in holding that the income of the said trust could not be assessed in the hands of the assessee?”

This relates to the assessment to income-tax for the asst. yrs. 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 dt. 24th July, 1959. By cl. 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 : “The settlor hereby, reserves the right to revoke this trust at any time after the expiry of seven years from the date of these presents and upon such revocation the trustees will retransfer the said thirty thousand shares of Metal Distributors Pvt. Ltd. to the settlor within two months of the receipt of a notice from the settlor of such revocation and the trustees will spend the funds collected up to that time in such manner as they may consider fit and proper for religious and/or charitable purposes of a public nature or for paying donations to any public charitable trust.”

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.

SUHAS CHANDRA SEN, J. :

I agree.

[Citation : 141 ITR 482]

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