1. The appellant in these two appeals is a trust. As many as 13 common grounds of appeal have been urged but the gist of these grounds is aimed at assailing the order of the Commissioner under Section 263 of the Income-tax Act, 1961 ('the Act'). As these appeals are filed against a consolidated order of the Commissioner for both years we also propose to pass a common order for the sake of convenience, 2. The trust under consideration, namely, B.D. Fibre Enterprise ('master trust') came into existence vide trust deed dated 25-5-1980.
The settlor was one Shri Bhogilal Ranchhodlal Patel who settled upon trust a sum of Rs. 10,000 and the three trustees were : (1) Shri Baldevbhai Dosabhai Patel, (2) Shri Bhailal Bhai Baldevbhai Patel, and (3) Shri Parvinchandra Baldevbhai Patel. The trust deed further provided for 100 beneficiaries, each of whom was again a trust ('subsidiary trust'). Each of these trusts was represented in the 'master trust' through a trustee. It was further provided in the deed that each of the 100 beneficiary trusts would be entitled to 1 per cent of the net income.
3. The IAC (Assessment) on the basis of the above facts, proceeded to finalise the assessment order for both the years on the same date, i.e., 31-3-1983. He did so on the basis that the shares of the beneficiaries were determinate. The assessed income for the assessment year 1981-82 was Rs. 5,79,942 and for the assessment year 1982-83 it was Rs. 5,07,818. However, no tax liability was attracted in the case of the appellant as the entire income was allocated further amongst the 100 beneficiaries.
4. This matter would have rested there but for the fact that the learned Commissioner issued a notice under Section 263 on 12-2-1985 as according to him there had been a misapplication of the provisions of Section 164 of the Act. This according to the notice had resulted in an assessment which was not only erroneous but prejudicial to the interests of the revenue. In response to this notice the assessee did not choose to attend personally but sent a written reply dated 20-2-1985 mentioning in brief the objections against the proposed action of the Commissioner.
5. The Commissioner after considering the reply of the assessee proceeded to discuss each objection in detail. He discussed the background of the entire scheme of the 'master trust', the 'subsidiary trusts' and the ultimate beneficiaries. He also discussed various case laws including those of the House of Lords. He finally concluded that 'the so-called determinability of the interest of the beneficiaries at the first stage would be disregarded and that the assessee would be taxed as if the shares of the beneficiaries are indeterminate'. The assessments were, consequently, set aside.
6. We have only mentioned in brief the Commissioner's order under Section 263 although it is a lengthy and detailed order. We have done so because the arguments before the Commissioner have also been addressed to us. As we shall be dealing with them at the appropriate place, we have not considered it proper to repeat them here.
7. The learned counsel of the appellant detailed before us the set up of the trust. As we have already mentioned it in our order earlier, we do not do so now. The new facts and his arguments are as follows : The beneficiaries under each 'subsidiary trust' are two 'associations of persons' consisting of individuals (including minors) and HUFs, According to the learned counsel the shares of each of these individuals/HUFs are indeterminate. He also makes a statement at the bar that (i) none of the trustees in the 'master trust' are beneficiaries in the 'subsidiary trusts', (ii) none of the beneficiaries are related to the 'settlor' of the 'master trust', and (Hi) none of the settlors of the 'subsidiary trusts' are related to each other or to the beneficiaries.
8. It is also mentioned that separate assessments of the 'subsidiary trusts' have been finalised and in fact copy of the assessment order of one such trust, namely, 'Urvashi Divyabala Rakesh Trust' for the assessment year 1981-82 has been placed at page 343 of the paper book.
It is also contended that the AOPs who are beneficiaries under the 'subsidiary trusts' are fluctuating bodies, whose membership may undergo a change both as regards number and persons.
9. According to the learned counsel, the Commissioner erred in looking into and depending upon the records of cases other than that of the appellant for initiating the proceedings under Section 263. He contended that the trust deeds of the 'subsidiary trusts' are not a part of the records of the present case.
10. According to him once the Commissioner had accepted the fact that the 'master trust' contained the names of the beneficiaries and their respective shares were defined, the matter ended. The Commissioner could not go further and had to confine himself to the deed of the 'master trust'. He was legally bound not to take other events into account.
11. It is also urged that the profit had been duly credited to the account of each beneficiary although no payments had been actually made. He drew our attention to the balance sheet of the appellant on page 385 of the paper book.
12. To a query from the Bench as to whether trustees can be beneficiaries (as in the subsidiary trusts) the learned counsel took us through the provisions of Sections 3 and 9 of the Indian Trusts Act, 1882, and also referred to (i) Scott on Trusts, 1967, Third edn., (ii) Halsbury's Laws of England, Fourth edn., and (iii) Jowitt's Dictionary of English Law. (Extracts from these three are placed on the files). It was contended that there was no legal bar on trustees being beneficiaries as well. According to him any person who could hold properly could be a beneficiary. It was also submitted that beneficiaries could always enforce their rights against the trustees and beneficiaries always had such a right.
13. It was further submitted that it was not a case of 'tax avoidance' as made out by the Commissioner but a case of 'tax planning'. He argued that this was not a case where the income of one person was being shown as that of somebody else. According to the learned counsel the department had not been able to bring the case within the ambit of Section 164 which is the charging section. The action of the Commissioner in doing so by looking into material available on files of other assessees was not in accordance with law.
14. As regards the decisions relied upon by the Commissioner, the learned counsel argued that the English decisions were distinguishable on facts and could not be applied to every case. According to him some of our High Courts had held in the case of trusts that the department was not entitled to 'lift the veil' and probe underneath. He went a step further to submit that 'tax planning' was permitted provided it was within the four corners of law. This was in response to the observation of the Commissioner that this was a 'tax avoidance scheme'.
He finally contended that the case of the appellant was squarely covered by Section 161 of the Act as shares were determinate and the action of the Commissioner in bringing the same under Section 164 was against law. It was accordingly prayed that the order under Section 263 be quashed.
15. We would here like to give a list of cases cited and referred to by the learned counsel and which are duly considered while passing this order- CIT v. Manilal Dhanji [1962] 44 ITR 876 (SC), CIT v. Smt.
Kamalini Khatau [1978] 112 ITR 652 (Guj.) (FB), CIT v. Lady Ratanbai Mathuradas [1968] 67 ITR 504 (Bom.), B.P. Mahalaxmiwala v. CIT [1954] 26 ITR 177 (Bom.), K.T. Doctor v. CIT [1980] 124 ITR 501 (Guj.), McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC), CIT v. Chunilal Khushaldas [1974] 93 ITR 369 (Guj.), Furniss v. Dawson [1984] 1 All. ER 530 and Ganga Properties v. ITO [1979] 118 ITR 447 (Cal.).
16. The learned departmental representative on the other hand argued that the very fact that a trust was created with 100 beneficiaries was something abnormal on the face of it. He in fact went a step further by saying that there could be no commercial justification for doing so. He also contended that these 'subsidiary trusts' further had two AOPs each as beneficiaries. He also submitted that all the persons constituting the 'master trust', 'subsidiary trusts' and the AOPs were related to each other. According to him the appellant had by such a subterfuge succeeded in not paying any tax at all on business income of lakhs of rupees. According to him it was the substance and not the form of any transaction that had to be looked at.
17. The departmental representative also argued that the term 'beneficiary' is to be understood as in the Income-tax Act and not as defined in the Indian Trusts Act. According to him beneficiary was a person who received the income and was not somebody who was a mere figurehead. He also submitted and in fact drew our attention to pages 161 and 163 of the paper book filed by the appellant that the 'master trust' and 'subsidiary trusts' were created on the same date, i.e., 23-5-1980 and was part of an associated operation. According to him there was a new line of thinking in the Courts in England and India and stress was being laid on the substance and not the form of any transaction. He argued that the 'master trust' could not be viewed in isolation but had to be seen as part of an 'associated operation'.
18. He also contended that the 'master trust' itself was a discretionary trust. He drew our attention to clauses 3, 5 and 14 of the trust deed for the following propositions : 2. Beneficiaries (if admitted they are specific) are only for income and not any other assets.
19. He further submitted that in fact the income is not even receivable by the aforesaid 100 trusts (beneficiaries). According to him the word used in the Act was 'benefit'. In other words one had to see whether any benefit had in fact accrued to the 'beneficiaries'. He accordingly contended that this was nothing but a 'tax avoidance' scheme. He argued that tax should be attracted at the first stage itself (master trust) and that is what the learned Commissioner had done. He accordingly urged that the order under Section 263 be upheld.20. The learned departmental representative during the course of his arguments referred to the following judgments-McDowell & Co. Ltd.'s case (supra), Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 (SC), Manilal Dhanji's case (supra), Kum. Pallavi S. Mayor v. CIT [1981] 127 ITR 701 (Guj.) and N.V. Shanmugham & Co. v. CIT[1971] 81 ITR 310 (SC).
21. The learned counsel in the rejoinder argued that the idea for forming the trust was to legally reduce the liability to pay tax.
According to him it was only the deed of the 'master trust' that had to be looked at. As the beneficiaries were determinate and so were the shares, nothing else remained to be done. He also repeated his arguments to the effect that beneficiaries were to be understood as under the Indian Trusts Act. He, however, accepted the fact that the 'subsidiary trusts' were discretionary trusts.
22. The counsel also objected to the arguments of the departmental representative as to the 'master trust' being a 'discretionary trust'.
He argued that the case before the Commissioner had never proceeded on these lines and it is not open to the revenue to urge so now. Without conceding this point he further submitted that the clauses pointed out by the departmental representative in the trust deed were general in nature and dealt with the investment of funds. According to him these clauses were to be read in a reasonable and sensible manner and were for purposes of internal administration. According to him what had to be seen was whether the shares were determinate and not income. That according to the learned counsel is the scheme of the Act. He also urged that the decisions cited by the revenue were not applicable to the facts' of his case. He placed further reliance on the following judgments-CIT v. Balwantrai Jethalal Vaidya [1958] 34 ITR 187 (Bom.) and CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 (SC).
23. We have heard these appeals at great length and have also perused the voluminous paper book running into 480 pages filed before us. We have also gone through the plethora of judgments cited before us by the parties but do not propose to discuss each one in detail. We will discuss at appropriate places the judgments which are necessary for passing the order. We would, however, like to make it clear that judgments not specifically mentioned have also been considered.
24. The first objection of the learned counsel for the appellant was to the action of the Commissioner in looking to the facts of cases outside the assessment records. The learned Commissioner rejected the objection as according to him the decision in the case of Ganga Properties (supra) relied upon by the assessee was distinguishable on facts. We agree with the learned Commissioner on this point as in fact the decision cited supra does not support the appellant being different on facts. The learned Commissioner was entitled to look into the records of the ancillary trusts as they were part of the chain that started with the 'master trust' and ended with the 'association of persons' who were supposed to be the ultimate beneficiaries.
25. The second objection raised was to the action of the Commissioner in probing 'underneath the veil' even after the fact that the 'master trust' identified the beneficiaries and specified their shares. The learned counsel referred to the Hon'ble Gujarat High Court decision in the case of K.T. Doctor (supra). According to us the Commissioner was entitled to do so as he came to the conclusion that the 'master trust' was only part of an associated operation designed to 'avoid tax'. The learned Commissioner observed as under : It is the right of the Income-Tax Department to go to the real state of affairs behind a facade which might have been created by the assessee.
I would show . . . how the whole scheme devised by the assessee is a scheme for tax avoidance which is in reality nothing but tax evasion.
26. The Commissioner also referred to various decisions of the House of Lords explaining the position of law as it was earlier and the subsequent change in judicial thinking in England. He observed as under : So far all tax avoidance schemes were looked at in the light of the decision of the House of Lords in the case of IRC v. Duke of Westminster [1935] All ER 259, [1936] AC at p. 19 and Duke of Westminster v. IRC 19 Tax Cases 490 at p. 520. Therein Lord Tomlin had held as under : Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the commissioners of inland revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax. This so-called doctrine of "the substance" seems to me to be nothing more than an attempt to make a man pay notwithstanding that he has so ordered his affairs that the amount of tax sought from him is not legally claimable.
Fortunately for the revenue and unfortunately for the assessee, the above is no longer good law. The House of Lords in W.R. Ramsay Ltd. v. IRC [1982] AC 300, [1981] 1 All ER 865, [1981] STC 174 held that 'where the courts are asked to determine the legal effect of a transaction carried out in steps as part of a pre-arranged scheme, the Courts are entitled to compare the position after the last step with that before the first and levy tax on that basis ; the Courts are not limited to examining each steps separately.
Still later, the House of Lords in Furniss (Inspector of Taxes) v. Dawson & Related Appeals [1984] 1 All ER 530, have held that in a pre-planned tax saving scheme no distinction is drawn for fiscal purposes because none exists in reality between (i) a series of steps which are followed through by virtue of an arrangement which falls short of a binding contract, and (ii) a like series of steps which are followed through because the participants are contractually bound to take each step seriatum.
He also referred to a decision of the Hon'ble Supreme Court and the Hon'ble Gujarat High Court as under : In India, in the cases of limited companies the principles as presently laid down by the House of Lords have already been accepted by the Supreme Court in Juggilal Kamlapat v. CIT [1969] 73 ITR 702 at p. 710, wherein their Lordships of the Supreme Court had observed as under : It is true that from juristic point of view the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members. But in certain exceptional cases the Court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade. For example, the Court has power to disregard the corporate entity if it is used for tax evasion or to circumvent tax obligation or to perpetrate fraud.
Somehow, it was being argued all through, that while the department is entitled to lift the veil of corporate entity in a company case and to pay regard to the economic realities behind the legal facade, it was not entitled to do so in the case of trusts. The Gujarat High Court said so in the case of K.T. Doctor v. CIT [1980] 124 ITR 501.
But the latest decision of the House of Lords in Furniss v. Dawson & Related Appeals [1984] 1 All ER 530 has made things very clear. If the revenue can lift the veil of corporate entity and pay regard to the economic realities behind the legal facade in cases of tax evasion or where the assessees are trying to circumvent the tax obligation or to perpetrate fraud, there is no reason why the revenue cannot do the same in other cases including trusts. It can be nobody's case that the trusts are entitled to evade tax by avoidance scheme while the corporations are not entitled to do so.
Actually, in law, a company derives its legal identity from a certificate of registration which is a recognition given by a sovereign. A trust is a creation of an individual and does not enjoy such recognition. Hence theoretically the doctrine of lifting of veil ought to apply with greater sanctity in case of trusts.
The law of the land should be the same for all assessees. When a taxpayer devises a scheme consisting of many stages which ultimately lead to a complete avoidance as well as evasion of taxes on income which has been earned by a group of people, it cannot be said that this assessee should be shown any mercy or should be treated kindly simply because his ingenuity has taken care of the existing provisions of the statute by creating wheels within wheels or constructing a flight of steps in order to achieve the ultimate purpose and that the tax law should look at only the first flight of steps and not at all the flights and their destination.
27. Another point raised by the learned counsel is that the profit has been duly credited to the account of each beneficiary. (Balance sheet on page 385 of the paper book.) We, however, find that this fact does not help the assessee as it is not clear whether any amounts have been paid to the alleged 'beneficiaries'. It appears that the entire amount continues to lie with Baldevbhai Dosabhai & Sons (Bombay) of which the proprietor is the 'master trust' (appellant).
28. We would also refer at this point to the statement made at the bar by the learned counsel to the effect that (/) none of the trustees in the 'master trust' are beneficiaries in the subsidiary trusts, (2) none of the beneficiaries are related to the settlor of the 'master trust', and (3) none of the settlors of the subsidiary trusts are related to each other or to the beneficiaries. The learned Commissioner on the other hand has appended a chart to his order in respect of 10 of the 'subsidiary trusts' (beneficiaries) to show the close relationship between the trustees in the 'master trust' and the ultimate beneficiaries of the entire scheme, who are the trustees themselves.
The observations of the Commissioner are as under : What the assessee has done in the present case is first to create a trust, with a certain number of beneficiaries whose shares are determinate in terms of the trust deed applicable to the present trust. The number of beneficiaries is kept so large, that the divisible income of the business carried on escapes taxability altogether making use of the proviso to Section 164(1). The beneficiaries of B.D. Fibre Enterprises Trust, sharing 1 per cent of the income, in turn are themselves trusts which are discretionary as would be seen from a study of the chart attached as Annexure 1 to this order, wherein we have taken 10 cases of the beneficiary trusts and have given the names of trustees, beneficiaries, settlor, the amount settled, etc., respectively.
The assessee and its discretionary trust beneficiaries have gone a step further. The beneficiary trusts consist of association of persons as beneficiaries and those AOPs consist of individuals and HUFs who are shown in column 7 of Annexure I and once again the shares are indeterminate.
The trustees in the beneficiary trusts of the assessee are mostly common and it is they who have organised the whole scheme in order to evade tax and play a fraud on revenue, a fraud which apparently appears to be legal and in accordance with the provisions of Section 164(1) read with proviso thereto. A deliberate effort has been made to keep the number of beneficiary trusts of the assessee so large that the resultant divided income does not attract any tax or very little tax.
Further on a beneficiary or beneficiaries shown in column 4 are association of persons of which the members as shown in column 7 belong to the families of the trustees. These ultimate beneficiaries are written by permutation and combination and are members, majors as well as minors of the same families. It is a very closed group of persons. Some of these persons have other income, but under the impugned arrangements the income from the assessee-trusts does not get added anywhere to their income and escapes assessment altogether.
It would be obvious to anyone that the whole exercise had been carried out with the set purposes of evading the payment of legitimate tax dues on the income of the assessee or the ultimate beneficiaries.
29. According to the Commissioner the real beneficiaries are less than 20 members of the Patel family who are beneficiaries in more than one trust.
30. We also observe from the chart filed by the appellant (from pages 251 to 327 of the paper book) that the same set of persons are the members of the various AOPs (beneficiaries in the subsidiary trusts) in one combination or the other. It may be seen that the names of the following trustees in the 'master trust' appear in most of the AOPs as members as well as the trustees in the subsidiary trusts : 31. In view of these clear facts we are in agreement with the Commissioner on the point that the ultimate beneficiaries are a closely knit group of persons of the same family.
32. The learned counsel's argument that it was a case of 'tax planning' within the four corners of law also engaged our minds. The learned Commissioner cited various English decisions to show that it was a case of 'tax evasion'. He observed as under : As pointed out by the House of Lords in the case of Furniss v. Dawson & Related Appeals [1984] 1 All ER 530, before coming to a conclusion of planned evasion, the facts have to be noticed. In the present case, the facts as given above indicate that firstly there is a pre-ordained series of transactions in a single composite transaction. Secondly, these transactions contain steps which were inserted without any commercial or business purposes, apart from a tax advantage. Thirdly, the corpus settled by the settlor is insignificant at every stage. These facts are undisputed. We have, thereafter, to look at the net result of these facts. The net result is that B.D. Fibre Enterprises Trust does not pay any tax while the income is kept within a close group of families and their members, who too in turn pay no taxes even after pocketing substantial income and controlling large income-generating business with all its perks and advantages. Whichever way we look at it, the net result is the same. The arrangements are self-cancelling and are mala fide, the sole intention being tax evasion.
33. We would at this stage like to refer to the decision of the Hon'ble Supreme Court in the case of McDowell & Co. Ltd. (supra) which was cited by both sides during the course of the hearing. The learned counsel for the appellant drew our attention to pages 170 and 171 of the reported judgment for the proposition that 'tax planning' was legitimate within the framework of law. The learned departmental representative on the other hand termed this as a case of 'tax evasion' intended to defraud the exchequer of legitimate taxes.
34. We observe that the judgment in McDowell & Co. Ltd.'s case (supra) was delivered on 17-4-1985, whereas the order of the Commissioner under Section 263 was passed on 21-3-1985, i.e., earlier. The decision of the Commissioner was very much influenced by various decisions of the House of Lords on the point of 'tax planning' and he did not have the benefit of the decision of the Hon'ble Supreme Court. It is, however, seen that the English decisions have been discussed and followed in McDowell & Co. Ltd.'s case (supra) in a separate judgment confined to the points of tax avoidance by his Lordship Justice Chinnappa Reddy. In the judgment his Lordship has traced the history of the English law on the subject and observed : I have referred to the English cases at some length, only to show that in the very country of its birth, the principle of Westminster has been given a decent burial, and in that very country, where the phrase 'tax avoidance' had originated, the judicial attitude towards tax avoidance has changed and the smile, cynical or even affectionate though it might have been at. one time, has now frozen into a deep frown. The Courts are now concerning themselves not merely with the genuineness of a transaction, but with the intended effect of it on fiscal purposes. No one can now get away with a tax avoidance project with the mere statement that there is nothing illegal about it.(p. 158) 35. His Lordship also referred to the earlier judgments of the Supreme Court in the cases of CIT v. A. Raman & Co. [1968] 67 ITR 11 and CIT v.B.M. Kharwar [1969] 72 ITR 603 and disapproved the observations on 'tax avoidance'.
. . . The evil consequences of tax avoidance are manifold. First, there is substantial loss of much needed public revenue, particularly in a welfare State like ours. Next, there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation.
Then there is 'the large hidden loss' to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoided and his expert team of advisers, lawyers and accountants on the one side and the tax-gatherer and his perhaps not so skilful advisers on the other side. Then again there is the 'sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it'.
Last, but not the least, is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless, good citizens from those of the 'artful dodgers'. It may, indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said, 'Taxes are what we pay for a civilized society. I like to pay taxes. With them I buy civilization.' But, surely, it is high time for the judiciary in India too to part its ways from the principle of Westminster and the alluring logic of tax avoidance. We now live in a welfare State whose financial needs, if backed by the law, have to be respected and met. We must recognise that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that it stands on no less a moral plane than honest payment of taxation. In our view, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it ....
It is neither fair nor desirable to expect the Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction.(p 160) 37. We would now proceed to examine the present appeals in the light of the Supreme Court judgment supra.
38. The appellant, namely, the 'master trust', was created with numerous beneficiaries whose shares were determinate. The beneficiaries were kept so large (100 in number) that the divisible income did not attract any tax in their hands by resorting to the proviso to Section 164(1).
39. The beneficiaries in the 'master trust' who were entitled to 1 per cent of the net income each in turn were themselves trusts which were discretionary as shares were not specified. The third step in the entire scheme were the AOPs who were beneficiaries in the 'subsidiary trusts', such AOPs consisting of individuals and HUFs whose shares once again were indeterminate.
40. The persons who were the trustees in 'the 'master trust' and the 'subsidiary trusts' as well as the beneficiaries being the members of the AOP were common or were minor sons, daughters, wives and HUFs of the trustees. In other words a substantial amount of income was under the control of a few persons closely related to each other. It is also quite clear that not a single paisa was being paid as tax on the substantial income being earned by the 'master trust'. According to the counsel of the appellant this entire exercise was undertaken to avoid payment of tax liability.
41. We, however, come to the conclusion that the appellant cannot succeed on this score as to us it does not appear to be a case of 'tax avoidance' in the light of the law laid down by the highest Court of the land to which we respectfully bow down. The assessee by an 'associated operation' created a 'master trust' 100 subsidiary trusts and 200 AOPs with the net effect of not only earning and retaining substantial amount of income but also getting away without shelling out anything by way of taxes. The income was in fact under the control of a few persons of the same family.
42. We do hold that the case of the appellant is squarely hit by the judgment of the Hon'ble Supreme Court in the case of McDowell & Co.
Ltd. (supra). We propose to decide accordingly.
43. In the light of the decision we are taking we do not pronounce our opinion on the argument advanced as to whether a trustee can be a beneficiary or not. We also do not adjudicate on the point raised by the departmental representative as to whether the 'master trust' is a discretionary trust or not.
44. Before parting with these appeals we would also like to mention another fact which came to our knowledge. In the 'master trust' the trustees are (1) Shri Baldevbhai Dosabhai Patel, (2) Shri Bhailalbhai Baldevbhai Patel, and (3) Shri Pravinchandra Baldevbhai Patel. These persons have appended their signatures at pages 81 and 82 of the trust deed corresponding to pages 157 and 159 of the paper book. These persons are once again trustees in the 'subsidiary trust', namely, 'Urvashi Divyabala Rakesh Trust' whose trust deed is at pages 163 to 209 of the paper book. These three persons have signed as trustees on pages 23 and 24 of the trust deed corresponding to pages 207 and 209 of the paper book. We on comparing these signatures find that they do not tally at all.
45. In the light of the discussion in the preceding paragraphs we proceed to uphold the consolidated order under Section 263 passed by the Commissioner and dismiss the appeals filed by the assessee.