ORDER
D.S. Meenakshisundaram, Vice President
1. This batch of 10 appeals filed by the Revenue involve an identical contention. Hence they were heard together and are disposed of by a common order for the sake of convenience.
2. These appeals arise out of the income-tax assessments made on Smt. Padmabati Chatterjee, the assessee herein. The assessment years are 1971-72 to 1979-80 for which the previous years ended on the 31st of March of the corresponding and respective financial year. The dispute in these appeals relates to the income from a house property which has been the subject-matter of 5 Trust Deeds executed by the assessee between 28-5-1969 and 6-6-1969. The name of the Trust is known as Padmabati Trust. The assessee had appointed her four major sons as trustees. The Trust was for the benefit of the seven sons, four majors and three minors and also for the performance of Devseva to the family deity and for the benefit of certain charitable purposes and objects. Each of these beneficiaries was,’to get l/9th of the income from this house property. The assessee had also executed four supplementary Trust Deeds on 26-6-1979 for the purpose of clarifying and removing the difficulties faced by the trustees in administering the Trust. As a result of these supplementary Trust Deeds, the Trust for the benefit of charitable and religious purposes was merged into Devseva Trust for the benefit of the family deity of the assessee and, consequently, the shares of the beneficiaries became 1/8th each. Since the supplementary Trust Deeds were executed and registered on 26-6-1979, they are not material for the purpose of the present appeals except for a proper understanding of the contentions of the Revenue and the assessee’s counsel, as they were referred to in the course of the arguments. But we are actually concerned only with the five Trust Deeds executed in the year 1969.
3. The Assessing Officer held that the original Trust Deeds executed by the assessee in 1969 were revocable transfers within the meaning of section 63 of the Income-tax Act, 1961. In the assessment years 1971-72 and 1972-73, the ITO held that the entire income from this property would consequently be assessable in the hands of the assessee under Section 61 of the Act. For this, he followed the order of the AAC for the assessment year 1977-78 dated 12-1-1984. Thus, by the assessment orders passed under Section 143(3) read with Section 147 on 5-3-1984, the entire rental income from this property was assessed in the hands of the assessee for the two assessment years 1971-72 and 1972-73 at Rs. 19,838 for each year.
4. The assessments for the years 1973-74, 1974-75, 1975-76 and 1976-77 were all completed on 27-3-1985 under Section 143(3) read with Section 148 and Section 146 of the Act. In these assessment orders, the Assessing Officer, while holding that the Trust created by the assessee was a revocable Trust, further held that the 1/9th share of each of the three minor sons of the assessee in the trust property would only be includible in the hands of the assessee. He also held that the 1 /9th share of rental income to be handed over to the assessee for worship of the family deity would also be assessable in her hands. Thus, the total income assessed in the hands of the assessee for these four years were as follows :
Assessment years
1973-74 1974-75 1975-76 1976-77
(Rs.) (Rs.) (Rs.) (Rs.)
1. Income of the
3 minor sons 9,791 12,933 12,342 12,651
1 /9th share each
2. Assessee’s l/9th
share handed over
to the assessee for
worship of the 6,000 6,000 6,000 6,000
family deity being
less than Rs. 6,000
Total income 15,791 18,933 18,342 18,651
All these orders were passed by the ITO by relying on the findings in the earlier order for the assessment year 1977-78, referred to above.
5. For the assessment year 1977-78, the ITO by his order dated 21-3-1980 had brought to charge the l/9th share of the two minor sons of the assessee in her hands, viz., Rs. 4,193 x 2 = Rs. 8,386. In respect of l/9th share payable to her for Devseva, the ITO took the income as chargeable in her hands at Rs. 6,000 instead of Rs. 4,193 as hereinabove computed because of the specific provisions in the Trust Deed. Thus, the total income assessed for this year amounted to Rs. 14,386. When the assessee took up the matter in appeal for this year, the AAC set aside the assessment by his order dated 12-1-1984 with a direction to the ITO to make a fresh assessment in accordance with the directions given by him. As per these directions of the AAC the whole of the income from the trust property was held to be assessable in the hands of the assessee under Section 61 of the Act. The assessee came up on further appeal to the Tribunal against this order of the AAC objecting to the same, on the ground that it resulted in an enhancement of her income, for which the AAC had not given any notice nor opportunity to the assessee by issuing a notice under Section 251(2) of the Act. The Appellate Tribunal ‘A’ Bench, Calcutta in ITA No. 652 (Cal.)/1984 accepted these contentions of the assessee by their order dated 25-3-1986 and set aside the order of the AAC and restored the matter to his file with a direction that he shall hear and decide the appeal afresh after giving an opportunity of being heard to the assessee as well as the ITO and also after complying with the provisions of Section 251(2) of the Act. Pursuant to this order of the Appellate Tribunal, the Dy. Commissioner (Appeals), Range-18, Calcutta heard the appeal and passed a fresh order on 15-2-1990, wherein he held that the Padmabati Trust created by the assessee is not a revocable Trust and that the provisions of Section 61 read with Section 63 of the Income-tax Act are not applicable at all in this case. He disagreed with the findings of the ITO that there was any power or right reserved by the assessee to reassume or enjoy directly or indirectly the income from the property merely because she received one-ninth share of the property income for the purpose of performing devseva to the family deity. He, therefore, decided this issue of revocable nature of the Trust in favour of the assessee. The Dy. Commissioner (Appeals), however, upheld the inclusion of the beneficial interest of the two minor sons in the hands of the assessee as justified and proper. Accordingly, he allowed the assessee’s appeal in part. It is against this order of the Dy. Commissioner (Appeals) that the Department has come up on further appeal to the Tribunal in I.T.A. No. 1725 (Cal.)/1990 raising the following ground :-
That, on the facts and in the circumstances of the case, the learned Deputy Commissioner of Income-tax (Appeals) erred in holding that the trust is not revocable and the provisions of Section 61 read with Section 63 of the Income-tax Act, 1961 are not applicable in this case.
6. During the pendency of the appeal filed by the assessee before the Tribunal for the assessment year 1977-78, the ITO passed a fresh assessment order under Section 143(3) read with Section 251 of the Act for the assessment year 1977-78 on 5-3-1986. In this assessment order, he brought to charge the entire income from the house property, which is the subject-matter of Trust in the hands of the assessee as her taxable income. Thus, the total income assessed in this assessment order was Rs. 37,433.
7. For the assessment year 1978-79, the assessment was completed under Section 144 on 27-3-1983. In this assessment order the total income assessed was Rs. 18,579 made up of Rs. 12,579 representing the l/9th share of income of each of the three minor sons of the assessee plus Rs. 6,000 for the l/9th share paid to the assessee for performing devseva.
8. For the assessment year 1979-80, the assessment was completed under Section 144 read with Section 147(a) on 5-3-1986. In this assessment order, the entire income from the trust property had been assessed in the hands of the assessee as belonging to her. The total income so assessed amounted to Rs. 37,433.
9. The appeals filed by the assessee for the assessment years 1971-72 and 1972-73 were disposed of by a common order dated 12-3-1990 by the Dy. Commissioner (Appeals). There he followed his order dated 15-2-1990 for the assessment year 1977-78, referred to in paragraph 5 above and held that the transfer to the Trust of the property by the assessee was not a revocable transfer and that only the beneficial interest of the three minor sons in both the years should be taxed in her hands under Section 64 of the Act.
10. The appeals for the assessment years 1973-74to 1976-77 and 1978-79 were also disposed of by a common order dated 13-3-1990 wherein the Dy. Commissioner (Appeals) following the same line of reasoning held that the Trust created by the assessee was not a revocable transfer. He, however, upheld the inclusion of the beneficial interest of the minor sons only in the respective years.
11. The appeals for the two years 1977-78 and 1979-80 were disposed of by a separate order dated 12-3-1990, wherein the Dy. Commissioner (Appeals) following his order for 1977-78 held that the transfer of the house property to the Trust was not revocable, that the Trust was valid and that the income arising to the Trust from the house property was not liable to be taxed in the hands of the assessee as settlor of the trust property. He further held that for the assessment year 1977-78, the beneficial interest of the two minor sons of the assessee alone would be taxed in her hands and in the assessment year 1979-80 only the beneficial interest of her minor son Anath Bandhu Chatterjee would be taxed in her hands under Section 64 of the Act. Thus, the Dy. Commissioner (Appeals) partly allowed all the appeals filed by the assessee. These orders of the Dy. Commissioner (Appeals) are objected to by the Revenue on the same ground quoted above in paragraph 5 (supra).
12. Shri S.C. Chatterjee, the learned Departmental Representative relied on the clause in the supplementary Trust Deed dated 26-6-1979 at page 15 of the assessee’s compilation and pointed out that it clearly established that the assessee was in receipt of the 1/8th share of the income from the house property though it was said to be for Devseva purpose and that this would amount to a provision in favour of the settler which would bring it within the mischief of Section 63 of the Act, making it a revocable transfer and that the Dy. Commissioner erred in his conclusion that it is not a revocable transfer. In support of his submissions Shri Chatterjee relied on the decision of the Supreme Court in CIT v. S. Raghbir Singh [1965] 57 ITR 408 at page 413. He, therefore, argued that the orders of the Dy. Commissioner should be reversed and the assessments made by the ITO should be restored.
13. On behalf of the assessee, her learned counsel Shri B.C. Ghosh relied on the findings of the Dy. Commissioner (Appeals) holding that the transfer in question was not a revocable transfer and submitted that the clause referred to by the learned Departmental Representative was an enabling clause so that Devseva would be carried on by the assessee, who is the settlor, during her life time without any break and after her life time by her eldest son, who is the senior most trustee and that it would not amount to any provision or reservation of any right in favour of the assessee to receive this income for herself and for her enjoyment. He submitted that the assessee’s case was directly covered by the decision of the Calcutta High Court in the case of Mrs. Leela Nath v. CIT[1982] 134 ITR 507 [1981] 6 Taxman 357. at pages 516 and 517. He, therefore, argued that the orders of the Dy. Commissioner (Appeals) were correct and that the same should be upheld.
14.I have carefully examined the contentions urged on both sides in the light of the terms of the Trust Deeds, copies of which have been filed by the assessee’s learned counsel and the authorities referred to above.
15. In the present case, the learned counsel on both sides were agreed that the main order where the entire issue has been considered in great detail by the Dy. Commissioner (Appeals), is in ITA No. 1725 (Cal.) of 1990 for the assessment year 1977-78. A perusal of this order shows that the Dy. Commissioner had considered the provisions of the original Trust Deeds executed by the assessee in 1969 as also of the supplementary Trust Deeds of 1979 and came to the conclusion that nowhere it was found that the transferor Smt. Padmabati Chatterjee reassumed power directly or indirectly over the whole or any part of the income or assets settled upon the Trust. The Dy. Commissioner held that the assessee was simply acting as an agent for Devseva since the deity is not a living person or individual and, therefore, it could not receive its beneficial share from the Trust and hence for this kind of beneficiary there had to be some individual to represent them, but it did not mean that the settlor had the right in her own capacity to receive the share of the beneficial interest in the income of the settled property on the trust. The Dy. Commissioner also held that no such power had been given to her by any Trust Deed, that the family deity was the beneficiary and that whatever amounts were received for Devseva of the family deity were spent for that purpose only and nothing therefrom was used by the settlor in any manner. The Dy. Commissioner further held that it is a settled custom of Hindu society also, that anything settled upon God is not used in any way by the settlor and that only because of her religious faith, the assessee wants to spend the money which is received from the Trust for the share of the beneficial interest of Devseva, but that this sort of functioning did not give her any right to receive directly or indirectly any income or assets of the Trust for her own benefit. He, therefore, held that he found no merit in holding that the transferor Smt. Padmabati Chatterjee had reassumed any direct or indirect power over the income of the trust or its assets. The Dy. Commissioner also held that the Trust created by the assessee was not a revocable Trust and that the provisions of Section 61 read with Section 63 of the Act were not at all applicable in this case. Accordingly, he decided the issue of revocable nature of the transfer in favour of the assessee.
16. As stated already, there are 5 Trust Deeds executed by the assessee in the year 1969 in respect of her house property. The Deeds dated 28-5-1969, 30-5-1969 and 2-6-1969 are Deeds in favour of the 7 children of the assessee. Of these, 4 sons were majors while 3 were minors at the time of execution of the Trust.
17. The Trust Deed that is relevant for our purpose is the one executed on 4-6-1969 for the benefit of Devseva. There is also another Trust Deed dated 6-6-1969 for the benefit of certain religious and charitable purposes specified in the Deed. I am not referring to the supplementary Deeds executed by the assessee on 26-6-1979 as they falls outside the accounting years with which we are presently concerned. I, therefore, confine myself only to the Trust Deed dated 4-6-1969 which is the only Deed relevant for our purpose. A perusal of this Trust Deed shows that the settlor had settled 1 /5th share of the plot of land along with 1/5th share in the masonry structures built thereon as shown in the plan annexed to the document and marked as Lot ‘4’, the fair market value of which amounted to Rs. 50,000, on trust for Devseva. The four trustees are the four major sons of the assessee. The name of this Trust is also Padmabati Trust. Clause 2 of the Trust Deed vests the trust properties in the trustees. I quote below Clause 3 which is relevant for the purpose of this appeal for a correct and proper understanding of the controversy in the present appeals :-
3. During the life time of the said Settlor Smt. Padmabati Chatterjee the income arising from the trust property shall be proportionately distributed amongst the various beneficiaries of the trust and also spent in Devseva and in other charitable purposes as embodied in this deed of trust by the trustees UPON TRUST as follows :
(a) To pay out of the income of the Trust property all Corporation taxes, any other property tax or taxes including cess or other levy by the Central or State Governments and including taxes on income of the trust property or taxes on the capital value of the trust property; if leviable under any law.
(b) That after payment of all such outgoings, expenses taxes, cess or other levy including income-tax payable on the income of the trust property, and after incurring annual expenses of repair, maintenance, replacement of machinery or sanitary expenses one-ninth of the net available balance of income shall be distributed in the following manner:-
(i) That the trustees shall upon trust shall disburse 1 /9th (one-ninth) of the net annual income per annum, for meeting expenses of ‘Devseva’ and for regular worship of the family deity of the settlor. The disbursement shall be made by the trustees every month through Smt. Padmabati Chatterjee who shall be paid the above money for disbursement, The ‘Devseva’ and such other religious expenses shall amount to not less than Rs. 500 per month. If however, the l/9th (one-ninth) share of income of the trust falls short of Rs. 500 per month then the Trustees shall make good the deficiency from the residuary l/9th (one-ninth) share settled upon trust for general charitable purposes. After the death of the Settlor the above ‘Devseva’ expenses shall be paid to the eldest son of Shri Harihar Chatterjee, and to the eldest son of Shri Dilip Kumar Chatterjee, minor grandsons of the settlor. Until the above minors attain majority the same should be spent by Shri Harihar Chatterjee and Shri Dilip Kumar Chatterjee after the death of the Settlor.
18. It is this clause which according to the Revenue has reserved a right in favour of the assessee to reassume power directly or indirectly over the whole or any part of the income or asset within the meaning of Section 63(a)(ii) of the Act. A careful reading of the aforesaid clause would show that the said clause cannot be construed in the aforesaid manner as contended by the Revenue. It is an elementary rule of construction of Deeds that the terms of a Deed should be read as a whole and construed fairly and reasonably. A reading of this clause would show that the intention of the settlor assessce herein, was to settle the 1 /5th share of the property on the trustees for the benefit of what may be called Devseva Trust. As mentioned already, this 1/5th share is vested in the four trustees and not in the settlor. Clause 3 does not contain any provision for the retransfer directly or indirectly of the whole of any part of the income or assets to the settlor nor does it give any right to the settlor to assume power directly or indirectly over the whole or any part of the income or assets. On the contrary, a fair reading of this clause fully supports the conclusion of the Dy. Commissioner (Appeals) that both the asset and the income therefrom entirely belong only to Devseva Trust and not to the assessee at all. As rightly held by the Dy. Commissioner, since the family deity for whose benefit this Trust has been created by the assessee, has to be represented by same person, the assessee as the mother and eldest member of the family has been entrusted with the obligation and duty of performing the puja to the family deity during her life time. It would be more appropriate to say that she had taken upon herself this legal obligation and duty. It is nowhere the intention of the settlor to take this l/9th or 1/8th share of income from the property for her own benefit and enjoyment and not for the purpose of the Devseva to the family deity. The construction sought to be placed by the Revenue is not at all justified on the terms of the Deed; rather it is far fetched having regard to the religious background, tradition and custom of Hindu society, to which the assessee belongs.
19. The decision of the Supreme Court in S. Raghbir Singh’s case (supra) relied on by the Revenue really supports the assessee’s contentions rather than the Revenue. While construing the first proviso to Section 16(1)(c) of the Indian Income-tax Act of 1922. Their Lordships of the Supreme Court held as follows at page 414 of the reports:
We are unable to accept the argument of counsel for the revenue that by the use of the expression’indirectly’ in the first proviso the legislature sought to bring within the purview of Clause (c) cases where the settlor was under the guise of a trust seeking to discharge his own liability. The proviso contemplates cases in which there is a provision for retransfer of the income or assets and such provision is for retransfer directly or indirectly. It also contemplates cases where there is a provision which confers a right upon the settlor to reassume power over the income or assets directly or indirectly. It is the provision for retransfer directly or indirectly of income or assets or for reassurnption of power directly or indirectly over income or assets which brings the case within the first proviso. Cases in which there is a settlement, but there is no provision in the settlement for retransfer or right to reassume power do not fall within the proviso, even if as a result of the settlement the settlor obtains a benefit.
This decision of the Supreme Court was followed by the Calcutta High Court in the case of Mrs. Leela Nath’s case (supra). The passage quoted above has been relied on by the Calcutta High Court at pages 522 and 523 of the reports while construing the provisions of Sections 61 and 63 of the present Income-tax Act, 1961. In this decision, Their Lordships of the Calcutta High Court have held that in order to be a revocable transfer under Section 63 of the Income-tax Act, 1961, the transfer deed must contain a provision for retransfer directly or indirectly of the whole or any part of the income or assets to the transferor or the right to reassume power directly or indirectly over the whole or any part of the income of assets, that mere transfer or enjoyment of any income or assets by the transferor without there being any right to reassume power would not make it revocable and that if the trustees acting in derogation or in breach of the transfer and the benefit is derived thereby by the settlor, it cannot be said that the Deed of Transfer was revocable. In my view, this decision of the Calcutta High Court is directly applicable to the facts of the present case and the Dy. Commissioner (Appeals) rightly followed this decision to hold that this is not a revocable transfer by the assessee. There is no warrant for holding that these Trust Deeds executed by the assessee contain any provision or give her any right to reassume either directly or indirectly power over the assets or the income of the property for her own benefit. Such an intention on the part of the assessee, is totally absent, as could be seen from the terms of the Trust Deeds. I, therefore, respectively follow the decisions of the Supreme Court and the Calcutta High Court, referred to above, and confirm the orders of the Dy. Commissioner (Appeals) holding that the Trust Deeds in question are not revocable transfers and that, therefore, the income from this property settled on trust is not assessable in the hands of the assessee, except to the extent they are hit by the provisions of Section 64 of the Act in respect of the three minor sons of the assessee who are also beneficiaries under these Trust Deeds. In fact, the Dy. Commissioner had taken care to see that such income of the minor beneficiaries is included in the income of the assessee for purposes of tax.
20. In the result, the appeals are dismissed.