Commissioner of Income-tax, Gujarat Vs. Jayantilal Amratlal

Decided On : Sep-05-1963

Court : Gujarat

Notice (8): Undefined index: topics [APP/View/Case/meta.ctp, line 36]
Code Context


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			'acts' => '<a href="/act/133687/income-tax-act-1922-complete-act">Income Tax Act, 1922</a> - Sections 16(1)',
			'appealno' => 'Income-tax Reference No. 19 of 1962',
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			'casename' => 'Commissioner of Income-tax, Gujarat Vs. Jayantilal Amratlal',
			'casenote' => 'Direct Taxation - assessment - Section 16 (1) of Income Tax Act, 1922 and Section 36 of Bombay Trust Act (XXIX of 1950) - applicability of Proviso to Section 16 (1) (c) in question - trust deed did not contain provision for re-transfer or right to resume power over income or assets directly or indirectly - clause 10 of deed conferred power on settlor to invest trust properties or their income - such power overridden by Section 36 of Bombay Trust Act (XXIX of 1950) - income of trust not includible in income of assessee - held, trust deed did not fall within Proviso to Section 16 (1) (c).


 -  -  upon trust, known as Jayantilal Amratlal Charitable Trust for the following objects, namely, For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind. The Tribunal came to the conclusion that the de facto position of the settlor, whatever it is, would fall clearly outside the scope of its investigation and so long as the trust deed did not contain any provision which had the effect of a retransfer or a right to reassume power over the income or the assets directly or indirectly, proviso 1 to section 16(1) (c) could not apply. Clause 4 also provides that the trustees should at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya and in applying the income of the trust property for the aforesaid objects, the trustees may also consider claims of any needy or poor person belonging to the Visa formed community. Clause 10, which has been relied upon most by the revenue, provides as follows :The trustees may either permit the whole or any part of the trust premises to remain in its present state of investment or shall at any time or times during the lifetime of the settlor at his discretion and may after his death at their discretion call the same or any part thereof and shall during the lifetime of the settlor at his discretion invest the moneys produced by such sale and all other moneys lying invested with them in such of the investments as are authorised by law for investment or trust premises or in ordinary or preference shares of joint stock companies, whether partly of fully paid, or in debentures or in giving loans to any public company of firm or firm good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the trustees with the like direction to vary or transpose the said investments into or for others of the same or a like n The learned judges there held that the object of the third proviso was to consider a revocable trust irrevocable provided the settlor enjoyed no benefit whatever in the trust for a period exceeding six years. During these six years, when he could not revoke the trust, the benefit was to be enjoyed solely by the beneficiaries, but it the settlor were to retain any benefit in the enjoyment of the income, then even during these six years the trust did not become irrevocable and the third proviso did not apply. But, as we have already stated, though section 54 applies no doubt to private trusts, the position of a settlor as also of a trustee in charitable trusts cannot be any better than a trustee under a private trust and we should, therefore, think that if a trustee of a charitable trust were to give a loan to himself, that would clearly be a case of a conflict of duty and interest and would amount to a breach of trust on his part.',
			'caseanalysis' => null,
			'casesref' => 'Ramji Keshavji v. Commissioner of Income;',
			'citingcases' => '',
			'counselplain' => ' J.M. Thakore, Adv. General',
			'counseldef' => ' R.J. Kolah, Adv.',
			'court' => 'Gujarat',
			'court_type' => 'HC',
			'decidedon' => '1963-09-05',
			'deposition' => '',
			'favorof' => null,
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			'judge' => ' J.M. Shelat and; P.N. Bhagwati, JJ.',
			'judgement' => '<p style="text-align: justify;">J.M. Shelat, C.J.</p><p style="text-align: justify;">1. By a trust deed dated June 19, 1947, the assessee, Jayantilal Amratlal, settled 80 ordinary shares held by him in Messrs. Jayantilal Amratlal and Co. Ltd. upon trust, known as Jayantilal Amratlal Charitable Trust for the following objects, namely, 'For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind.' The trust deed was registered with the Charity Commissioner under the Bombay Trust Act (Act XXIX of 1950). Originally, as the recitals in the said deed of trust show, the trust fund consisted of the aforesaid 80 shares of the market value of Rs. 40,000. By his letter dated March 27, 1957, the settlor added to those 80 ordinary shares certain other shares held by him in other companies, bringing the total trust fund to about rupees three lakhs and a little more. Till the assessment year 1957-58, the income-tax department accepted the trust as a valid charitable trust and gave the necessary exemption to the trustees thereof in respect of its income. But while assessing the trust for the assessment year 1958-59, the Income-tax Officer came to the conclusion that section 16(1) (c), proviso I, applied and, therefore, the income of the trust could not be assessed in the hands of the trustees but was assessable in the hands of the settlor, the assessee Jayantilal Amratlal. The Income-tax Officer gave the reasons for so holding, (1) that the assessee had de facto control over the income and corpus of the trust and even the charities and temples to receive the benefit would be chosen by him, and (2) that the infringement of section 35(1) of the Bombay Trust Act, 1950, entailed a small penalty which was hardly deterrent. Finding that the assessment of Jayantilal Amratlal for the assessment years 1955-1956 and 1956-57 was still open, the Income-tax Officer assessed the income of the trust in the hands of the settlor and he passed the assessment orders for the assessment of Jayantilal Amratlal for the assessment of the trust for the assessment years 1958-1959 and 1959-1960 on the same day, i.e., on March 11, 1960. The assessee, Jayantial Amratlal, and the trust filed appeals against these orders before the Appellate Assistant Commissioner who confirmed the orders of the Income-tax Officer. The matters were then carried in appeal to the Tribunal and the Tribunal consolidated all the four appeals of the trust and the settlor, Jayantilal Amratlal, for all the assessment years and disposed them of by a single orders dated December 26, 1961. The Tribunal was of the view that the decision in the appeal before it had to be based on a proper construction of the trust deed as it stood and it would be its duty then to ascertain if the deed contained any provision for the retransfer directly or indirectly of the income or the assets of the trust to the settlor or in any way gave the settlor a right to reassume power directly or indirectly over the income or the assets. The Tribunal came to the conclusion that the de facto position of the settlor, whatever it is, would fall clearly outside the scope of its investigation and so long as the trust deed did not contain any provision which had the effect of a retransfer or a right to reassume power over the income or the assets directly or indirectly, proviso 1 to section 16(1) (c) could not apply. After analysing clauses (4), (10) and (21) of the deed of trust relied upon by the department, the Tribunal came to the conclusion that it did not see any thing in these clauses which conferred upon the assessee the right to retransfer directly or indirectly the income or the assets, or the right to reassume power over them. The Tribunal also was of the opinion that, though clause (10) of the deed conferred power upon the settlor to invest the trust properties or their income, and that under the provisions of that clause he could, if he so desired, invest them in his own companies, that power was overridden by section 36 of the Bombay Trust Act (XXIX of 1950). The Tribunal was also of the opinion that the fact that the settlor could offend against the provisions of that Act with impunity as the penalty thereunder was light, was a matter which was completely extraneous to the consideration before it. On these grounds, the Tribunal held that the trust deed did not fall within the mischief of the first proviso to section 16(1) (c) and, therefore, the income of the trust was not includible in the income of the assessee, Jayantilal Amratlal. </p><p style="text-align: justify;">2. Before the Tribunal reliance was placed upon the decision of this High Court in a case under section 23A of the Act, viz., Jayantilal Amratlal Private Ltd. v. Commissioner of Income-tax, where this High Court held, inter alia, that the promoters of the assessee-company there, i.e., Jayantilal Amratlal and his two brothers, Hariprasad and Ramanlal, were persons acting in union and when they subscribed to a portion of the capital, they could be said to have held the voting power in connection therewith as a block and that there was a community of interest and they could not be regarded as holding those shares as members of the public. As regards the aforesaid 80 ordinary shares, the High Court held that though they were settled upon trust by Jayantilal Amratlal as it was within his power as the settlor to give directions in connection with the voting right to be exercised by the trustees in respect of these shares and, therefore, these 80 shares also could not be regarded as shares held by members of the public. The High Court, therefore, held that the assessee-company was a company in which the public were not substantially interested within the meaning of the Explanation to section 23A. The Tribunal was of the opinion, and in our opinion rightly, that this decision had nothing to do with the question before it and, as we have already said held that section 16(1) (c) proviso 1, did not apply to the facts of the case and that the income of the trust should not be assessed in the hands of the settlor and was entitled to exemption under section 4(3) (i) of the Act. </p><p style="text-align: justify;">3. The department mainly relied upon, as seen from the order of the Income-tax Officer and the Assistant Commissioner, two facts, (1) that Jayantilal Amratlal had utilised those 80 shares for the purpose of controlling Jayantilal Amratlal and Co. Ltd.; and (2) that the income of the trust properties had been invested by Jayantilal Amratlal in three companies in which he and his two brothers had a shareholding. The department also was of the view that though section 35 of the Bombay Trust Act, 1950, as amended in 1954, prohibited investment in any manner other than prescribed there, the assessee, under the proviso thereto, could obtain sanction of the Charity Commissioner and that even if he did not do so and transgressed the provisions of section 35, the penalty was only Rs. 1,000, which was not a deterrent one and, therefore, the provisions of that section did not tend to prevent such contravention. The question that arises before us is whether these facts attract the application of proviso 1 to section 16(1) (c) of the Act. </p><p style="text-align: justify;">4. The deed of trust appointed Jayantilal Amratlal, his wife, his two brothers, Hariprasad and Ramanlal, and one Kasturlal Chandulal Parikh and Bhagubhai Chandulal, as trustees thereunder. Clause 1 of the deed provides that the trustees shall stand possessed of the said shares and all other moneys held by the trustees subject to the powers, provisions, agreements and declarations therein declared. Clause 4 provides that the trustees should hold the net residue of the income of the trust premises in trust to utilise the same for the objects therein above set out or for any other objects beneficial to mankind as the settlor may, during his lifetime, in writing direct and on and after his death as the trustees may in their absolute discretion think fit. Clause 4 also provides that the trustees should at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya and in applying the income of the trust property for the aforesaid objects, the trustees may also consider claims of any needy or poor person belonging to the Visa formed community. Clause 5 gives power to the trustees to accept contributions or donations to the trust premises from any person or person and directed the trustees to hold the same upon the same trust and subject to the same powers, provisions and stipulations contained in the trust deed. Clauses 6, 7 and 8 provide for the powers to the trustees to utilise the trust fund for the aforesaid charitable objects or any one of them. Clause 10, which has been relied upon most by the revenue, provides as follows : </p><p style="text-align: justify;">'The trustees may either permit the whole or any part of the trust premises to remain in its present state of investment or shall at any time or times during the lifetime of the settlor at his discretion and may after his death at their discretion call the same or any part thereof and shall during the lifetime of the settlor at his discretion invest the moneys produced by such sale and all other moneys lying invested with them in such of the investments as are authorised by law for investment or trust premises or in ordinary or preference shares of joint stock companies, whether partly of fully paid, or in debentures or in giving loans to any public company of firm or firm good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the trustees with the like direction to vary or transpose the said investments into or for others of the same or a like nature......'</p><p style="text-align: justify;">5. The clause also provides that on and after the death of the settlor the trustees may permit the whole or any part of the trust premises to remain in the state of investment in which the same are at the time of the death of the settlor or may at any time or times sell the same or any part thereof and invest the moneys produced by such and all other moneys lying invested with them in such of the investments as are authorised by section 20 of the Indian Trusts Act (11 of 1882). Lastly, clause 21 provides that all questions arising in the management and administration of the trust and all differences of opinions amongst the trustees shall be disposed of in accordance with the opinion of the settlor during his lifetime and on and after the death of the settlor, in accordance with the opinion of the majority of the trustees. </p><p style="text-align: justify;">6. The arguments utilised by the Income-tax Officer in his assessment order and which seem to have found favor with the Assistant Commissioner cannot, on examination, be held to be valid, for, they cannot be a ground for holding that proviso 1 to section 16(1) (c) applies. It the settlor, Jayantilal Amratlal, used the aforesaid 80 shares for the purpose of controlling Jayantilal Amratlal and Co. Ltd., as the Income-tax Officer argued, the share would still be remain the trust assets and no question of the right to reassume power over them or over their income or of retransferring them can possibly arise, for he would utilise their voting power as assets of the trust. Similarly, the investments of the income of the trust funds in the three aforesaid companies mentioned in his order would not bring in the application of proviso 1 to section 16(1) (c). The learned Advocate-General, in any event, did not employ these arguments as part of his contention. Instead, the structure of his contention depended solely upon the construction of clauses 10 and 21 of the trust deed and their effect. When read together, there can be no doubt that Jayantilal Amratlal, as the settlor, had absolute discretion during his lifetime to invest under the provisions of clause 10 the assets and the income of the trust fund and the other trustees had no power to overried his wishes. But that by itself would not be a relevant factor as held in Commissioner of Income-tax v. Sir Kikabhai Premchand, at page 211, a case relied upon to some extent by the learned Advocate-General himself. But the contention of the learned Advocate-General did not depend solely upon the deplitude of powers reserved to the settlor in the investments under clauses 10 and 21 but the resultant effect thereof. His submission was that we should consider the absolute discretion given to the settlor under these clauses, including the power to invest the trust funds and the income thereof in such public companies, firms, etc., as he chose and to grant loans to them on such terms and conditions as he might think proper and fit. The power reserved to him as the settlor to give loans to public companies and/or firms, coupled with the absolute voice given to him in the matter of management and administration of the trust under clause 21 would, in the view of the learned Advocate-General, result in a right in his favour to reassume control over the trust funds and the income thereof which he had over them before he made the trust deed and settled them on trusts specified therein. For instance, argued the learned Advocate-General, the settlor could grant under their clauses a loan to a firm in which he was interested which, by virtue of the partners being jointly and severally liable, would in substance be a loan to himself. He could grant such loans perhaps to the detriment of the trust on such terms and conditions which he decided. Once such a loan was thus made, the settlor would have all the powers over the fund so advanced which he had over that fund before he settled it on trust. Thus, according to the learned Advocate-General, the powers under clauses 10 and 21 coupled with the power to give loans, constituted a right to reassume power over the trust funds and income thereof which he had over these funds before the trust deed was made, bringing into operation proviso 1 to section 16(1) (c), and it was this very mischief which the legislature wanted to prevent and which was the reason for inserting section 16(1) (c) and the proviso thereto in the Act. The learned Advocate-General relied upon the case of Commissioner of Income-tax v. Sir Kikabhai Premchand, which we have already referred. That was a case, however, under proviso 111 to section 16(1) (c) and not proviso 1. The question debated there was whether the settlor derived any benefit in the income of the trust fund directly or indirectly. The learned judges there considered clause 8 of the trust deed which was the clause dealing with investment and which gave power to the settlor to grant a loan to any person including himself and which was regarded as a power to give loan to himself with or without security and even without interest. The learned judges there held that the object of the third proviso was to consider a revocable trust irrevocable provided the settlor enjoyed no benefit whatever in the trust for a period exceeding six years. During these six years, when he could not revoke the trust, the benefit was to be enjoyed solely by the beneficiaries, but it the settlor were to retain any benefit in the enjoyment of the income, then even during these six years the trust did not become irrevocable and the third proviso did not apply. On an examination of clauses of the deed, they came to the conclusion that the settlor was at liberty to lend part of the income to himself without security and without interest which led one to the conclusion that he derived at least an indirect benefit. They negatived the contention on behalf of the assessee that so long as the settlor did not lend any moneys to himself and did not actually derive any benefit, the third proviso would apply and the income therefore would not be liable to tax in the hands of the settlor. The court held that a proper construction of the trust deed did not and could not and could not depend upon what the settlor actually did or what he refrained from doing. It could only depend upon the court coming to the conclusion that, as the trust deed stood, the settlor was entitled to certain benefits whether they were direct or indirect in nature and that there could be no doubt, looking at the clause as to investments, that the settlor was entitled to a benefit under the provisions of the trust deed and thereby derived an indirect benefit in the income of the trust and, therefore, the third proviso did not apply and the income of the trust was liable to tax in the hands of the settlor. As we said, the decision is one under proviso 111 to section 16(1) (c) and therefore had no application to the instant case. But we may observe before parting with this case that clause 7 of trust deed in that case gave power to the settlor to purchase the trust property, not withstanding that he was a trustee. With reference to that clause, a contention was urged before the learned judge that that power would not be lawful in view of section 53 of the Trust Act. But the learned judges negatived it observing that, whatever the legal consequences of the act of the trustee may be, the fact remained that the settlor had the power to purchase the trust property under the deed of trust. We may, however, observe that this fact was, as is clear from the judgment, not made a ground for the judgment against the assessee. The learned Advocate-General also referred to us the case of Abbay L. Khatau v. Commissioner of Income-tax. This decision also cannot help us in view of the fact that the department there had applied proviso 111 instead of proviso 1, although the trust was an irrevocable trust. That being the case, the learned judges there declined to decide the question whether the case fell within the first proviso, as the department had not at any time tried to bring the case under that proviso. The learned Advocate-General then pointed out to us an unreported decision of the High Court of Bombay in Commissioner of Income-tax v. Mathuradas Mangaldas Parekh (Income-tax Reference No. 4 of 1954), collected in Volume 1 of Unreported Income-tax Judgment of the Bombay High Court, at page 314, published by the Western India Regional Council of the Institute of Chartered Accountants of India, Bombay. There an undivided Hindu Family, through its karta, executed a deed of settlement in favor of his three minor daughters. The trustees were the karta and his wife in their individual capacity. Clause (4) of the trust deed gave trustees very wide powers including full and unrestricted power of investing and transposing the investments in all respects as if they were absolutely entitled thereto beneficially. The revenue contended that the trustees under that clause might make loans to themselves and without interest and, therefore, a right to reassume power over the income was conferred upon the settlor and, consequently, the case fell within the first proviso to section 16(1) (c) of the Act. The learned judges rejected this contention as being unsound on the ground that the trustees would be committing a breach of law if they advanced moneys to themselves which was prohibited by section 54 of the Trust Act. They also held that interest would be derived by the trustees and not by the settlor and, therefore, the income derived by the trustees could not be assessed in the hands of the assessee, Hindu undivided family. It will be thus seen that one of the reasons for refusing to apply proviso 1 to section 16(1) (c) in the decision was that if the trustees were to give a loan to themselves section 54 of the Trust Act would be a bar and such a loan would be in breach of law by the trustees and, therefore, the power conferred upon them was not a valid power which could be considered while determining whether proviso 1 applied or not. The learned Advocate-General tried to distinguish this case upon the grounds, (1) that the case was concerned with the private trust and therefore section 54 of the Trust Act applied, and (2) that the power to give loan included the power to give loan to the trustees and not to the settlor. Though section 54 of the Trust Act applies to private trusts, principles analogous to the provisions of that section must apply to trusts which are not private. The decision, therefore, in Mathuradas Mangaldas is of some use in so far as it can be said to lay down the principle that a power given to the settlor under a trust deed which is challenged as one granting to him the power to reassume control over the corpus or the income of the trust fund, should be a valid power. These decisions,</p><p style="text-align: justify;">7. however, do not directly apply to the facts before us and, therefore, cannot help us much in deciding the question before us and we must, therefore, turn to the provisions of section 16(1) (c), proviso 1, to answer them. </p><p style="text-align: justify;">8. Commenting on the provisions in the English Act corresponding to these provisions, the House of Lords in A. G. Chamberlain v. Commissioners of Inland Revenue stated that these provisions were designed to overtake and circumvent a growing tendency on the part of taxpayers to endeavour to avoid or reduce tax liability by means of settlements. The method consisted in the disposal by the taxpayer of part of his property in such a way that its income should no longer be received by him, while at the same time he retained certain powers over, or interest in, the property or its income. The legislature's counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should notwithstanding, be treated as still his income and taxed in his hands accordingly. The effect of the first proviso to section 16(1) (c) in substance is that a transfer should be deemed to be revocable, though apparently irrevocable, if it contains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or the assets of the trust premises. It is only if one or the other of these provisions is present in the transfer that an irrevocable transfer is, in the eye of the law, a revocable transfer. The learned Advocate-General has not relied upon the first part of the proviso, which deals with the case of retransfer of income or assets of the trust fund to the settlor, but upon the second part of it, namely, a case where the deed of trust gives the settlor a right to reassume power directly or indirectly over the income or the assets of the trust premises. </p><p style="text-align: justify;">9. The question, therefore, is whether clauses 10 and 21 of the present deed of trust relied upon by the learned Advocate-General, have the effect of giving a right to the settlor to reassume power directly or indirectly over the income or assets of the trust fund which he had before he made the trust deed. When proviso 1 talks about a right to reassume power, prima facie, that must mean that there is such a power lawfully given under the deed of trust. It obviously cannot be a right, against the mischief of which the legislature was constrained to make a provisions and which a settlor cannot lawfully exercise without either committing a breach of trust or a breach of some law. In the case of Mathuradas Mangaldas, the High Court of Bombay considered it an effective answer to the contention on behalf of the revenue that, though the deed of trust there contained power to the trustees to give loans to themselves, section 54 of the Trust Act would render such an act a breach of the law and, therefore, such a provision cannot be regarded as a right to reassume power. The same principle was also laid down by the High Court of Calcutta in Commissioner of Income-tax v. S. M. Bose. There the assessee settled certain property on himself as trustee to hold it in trust for his daughter. The deed provided that the trustee was to take possession and after paying outgoings, the income of the trust estate was to be paid to his daughter during the term of her natural life, for her sole and separate use. The deed also made provision as to how the income was to be dealt with on the death of the daughter but the settlor retained no right whatsoever over the corpus of the income and he had no power of revocation. Clause 3 of the deed provided that as long as the present trustee, namely, the settlor or persons named as trustees in addition or substitution acted as trustees, they should not be accountable to any of the beneficiaries relating to his or their dealing or the income of the trust estate. The question was whether the income from the trust property was taxable in the hands of the assessee as his income by virtue of the provisions of section 16(1) (c) of the Act. The High Court held that the settlor had by this trust put the income for ever out of his control and that being so, the income from the trust properties could not be assessed as part of the income of the assessee under section 16(1) (c). It also held that clause 3, which was relied upon by the department, did not give the settlor control over the income as it was merely a provision limiting the rights of the beneficiary to question certain acts of the trustee. Dealing with the first proviso to section 16(1) (c), the learned judges observed at page 141 of the report that that proviso only contemplated a case where 'the settlor can lawfully reassume power over the income or the assets and that unless that was so, the proviso would cover every trust where a settlor had made himself a trustee because a trustee acting dishonestly could always assume control over the income.' </p><p style="text-align: justify;">10. The argument of the learned Advocate-General was that no reliance should be placed upon the decision in the case of Mathurdas Mangaldas, because it was a case of private trust and to such private trust only section 54 of the Trust Act would apply. But, as we have already stated, though section 54 applies no doubt to private trusts, the position of a settlor as also of a trustee in charitable trusts cannot be any better than a trustee under a private trust and we should, therefore, think that if a trustee of a charitable trust were to give a loan to himself, that would clearly be a case of a conflict of duty and interest and would amount to a breach of trust on his part. In the present case, we are on somewhat safer grounds. The Bombay Public Trust Act (XXIX of 1950) came into force on August 14, 1950, and section 35 thereof, as it stood prior to its amendment in 1954, provided that where the trust property consisted of money and could not be applied immediately or at any early date to the purpose of the public trust, the trustee shall be bound, subject to any direction contained in the instrument of trust, to invest the money in public securities. The second proviso to that section laid down that the Charity Commissioner may, by general or special order, permit the trustee of any public trust or classes of such trusts to invest the money in any other manner. As section 35 stood before its amendment in 1954, a trustee of a public trust could invest the trust fund in securities other than public securities if the deed of trust permitted him to do so. But by Bombay Act LIX of 1954, section 35 was amended and, as so amended, it made it incumbent upon a trustee of a public trust to deposit the trust money in the manner provided therein 'notwithstanding any direction contained in the instrument of the trust'. Therefore, notwithstanding a provision in the deed of trust permitting the trustee to invest in securities other than those mentioned in the section, a trustee is prohibited from doing so and the penalty for contravention of the provisions of section 35 would be a prosecution and, on conviction, a fine of Rs. 1,000, as provided in section 66 of the Act. Giving a loan to himself by a trustee, although the deed might empower him to do so, would not only be a breach of trust but an illegal act resulting in a penal offence. In our view, even if a trust deed were to provide for power in favor of a settlor, who is also a trustee, to grant loan to himself, such a power cannot amount to a lawful right to reassume power and if there is such a provision in a trust deed, it has to be taken as ineffective. </p><p style="text-align: justify;">11. But the learned Advocate-General argued (1) that we are called upon in this case to consture the deed of trust and, to decide whether that deed of trust conferes a right to reassume power and, therefore, it would not be permissible to us to look at another statute to determine the proper construction of section 16(1) (c), proviso 1, and (2) that proviso 11 to section 35 of the Bombay Trust Act in any event gives authority to the Charity Commissioner to grant leave to trustees to invest otherwise than prescribed in sub-section (1) of that section. The answer, however, to both these contentions is fairly simple. When a statute talks about a right to reassume, it must mean a lawful right which can be lawfully exercised. This conclusion is fortified by the decisions in the case of Mathuradas Mangaldas and in the case of Commissioner of Income-tax v. S. M. Bose, already referred to above. So far as the second part of his contention is concerned, a right to reassume must be given to the settlor independently of any third party and department upon his own volition. It is true that the Charity Commissioner may grant leave to the settlor but he may or may not grant it. A right to reasssume cannot rest dependent upon whether the charity Commissioner may or may not grant sanction. Such a question arose in Ramji Keshavji v. Commissioner of Income-tax, where proviso 1 to section 16(1) (c) was relied upon by the Commissioner. The learned judges there held, on a reading of clause 5 of the deed of trust, that under that clause all the powers reserved thereunder for payment of the income of certain sale proceeds were in favor of one Kamalabai, the wife of the settlor, and not the settlor. It was true that under the provisions of that clause, the said Kamalabhai was given the right to apply to the trustees for payment for a change of air for the settlor, or if there was protracted illness of the settlor, but the High Court held that it was still a right given to Kamalabhai and not to the settlor and the amount under clause 5 was to be paid to Kamalabai and therefore, it was the volition of Kamalabai alone which could bring into operation, first the application, and, secondly, if it was acceded to, the payment to her. Mr. Justice Kania, as he then was, therefore, of the view that the provisions of clause 5 under these circumstances did not amount to either a retransfer of the assets or the income or a reassumption of power directly or indirectly in the settlor. In the case before us, the power under clause 10, even when read with clause 21, is, for the reasons aforesaid, rendered nugatory by the provisions of section 35 of the Bombay Trust Act. The power of investment in a manner other than that prescribed under section 35(1) of the Trust Act can obviously be exercised only with the sanction of the Charity Commissioner. The power is dependent for its exercise upon the volition of a public officer, i.e., the Charity Commissioner, who has to decide the question of sanction upon the terms of the statute or the rules made thereunder and it cannot amount to a right to reassume power over the income or the assets of the trust against the mischief of which the legislature has provided an express provision. Surely, it must be presumed that the Charity Commissioner would not grant his sanction to an investment which is bound to result in a conflict of duty and interest on the part of the settlor who is also a trustee. Therefore, such a right, if it can be called a right, is not one of any substance and cannot, therefore, be construed as a right to reassume power over the trust assets or the income thereof, as contemplated by proviso 1 to section 16(1) (c). </p><p style="text-align: justify;">12. A loan, by the very nature of it, cannot be said to amount to an exercise of dominion or control over its subjects-matter. It is repayable and is given on conditions as to the time of repayment and interest, if any. By taking a loan, a settlor does not exercise over its subject-matter power or dominion which, but for the trust or the settlement, he would have been able to exercise. Therefore, on this ground also, it cannot be held that, if the settlor were to give a loan to himself or to his firm, he would be exercising control over the trust fund or its income as he would have had over the fund or its income before he settled that fund upon the trust. Besides, a loan still remains an asset or the income of the trust and it is a subject-matter still governed by and is subject to the provisions of the trust. For these reasons, section 16(1) (c), proviso 1, is not applicable to the facts of this case. </p><p style="text-align: justify;">13. Our answers to the question referred to us are as follows : </p><p style="text-align: justify;">Question No. 1 - In the affirmative. </p><p style="text-align: justify;">Question No. 2 - In the affirmative. </p><p style="text-align: justify;">The Commissioner will pay to the opponent the costs of this reference. </p><p style="text-align: justify;">Questions answered in the affirmative.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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		(int) 23 => 'Bhagubhai Chandulal',
		(int) 24 => 'Visa',
		(int) 25 => 'Co. Ltd.',
		(int) 26 => 'Advocate-General',
		(int) 27 => 'Advocate-General',
		(int) 28 => 'Advocate-General',
		(int) 29 => 'Advocate-General',
		(int) 30 => 'Advocate-General',
		(int) 31 => 'Advocate-General',
		(int) 32 => 'Advocate-General',
		(int) 33 => 'Advocate-General',
		(int) 34 => 'Advocate-General',
		(int) 35 => 'the High Court',
		(int) 36 => 'the Bombay High Court',
		(int) 37 => 'the Western India Regional Council of the Institute of Chartered Accountants',
		(int) 38 => 'Advocate-General',
		(int) 39 => 'the House of Lords',
		(int) 40 => 'Advocate-General',
		(int) 41 => 'Advocate-General',
		(int) 42 => 'the High Court',
		(int) 43 => 'the High Court of Calcutta',
		(int) 44 => 'The High Court',
		(int) 45 => 'Advocate-General',
		(int) 46 => 'The Bombay Public Trust Act',
		(int) 47 => 'Bombay Act LIX',
		(int) 48 => 'Advocate-General',
		(int) 49 => 'the Bombay Trust Act',
		(int) 50 => 'the High Court',
		(int) 51 => 'the Bombay Trust Act'
	),
	'FAC' => array(
		(int) 0 => 'Jayantilal Amratlal',
		(int) 1 => 'Jayantilal Amratlal',
		(int) 2 => 'Jayantilal Amratlal'
	),
	'ORDINAL' => array(
		(int) 0 => 'first',
		(int) 1 => 'third',
		(int) 2 => 'third',
		(int) 3 => 'third',
		(int) 4 => 'third',
		(int) 5 => 'first',
		(int) 6 => 'first',
		(int) 7 => 'first',
		(int) 8 => 'first',
		(int) 9 => 'second',
		(int) 10 => 'first',
		(int) 11 => 'second',
		(int) 12 => 'second',
		(int) 13 => 'third',
		(int) 14 => 'first',
		(int) 15 => 'secondly'
	),
	'GPE' => array(
		(int) 0 => 'Ramanlal',
		(int) 1 => 'Ramanlal',
		(int) 2 => 'Bombay',
		(int) 3 => 'India',
		(int) 4 => 'Bombay',
		(int) 5 => 'Bombay',
		(int) 6 => 'Kamalabai',
		(int) 7 => 'Kamalabhai',
		(int) 8 => 'Kamalabai',
		(int) 9 => 'Kamalabai'
	),
	'QUANTITY' => array(
		(int) 0 => '1 to section 16(1',
		(int) 1 => '1 to section 16(1',
		(int) 2 => '1 to section 16(1'
	),
	'NORP' => array(
		(int) 0 => 'Hindu',
		(int) 1 => 'Hindu'
	),
	'PRODUCT' => array(
		(int) 0 => 'Family'
	),
	'LANGUAGE' => array(
		(int) 0 => 'English'
	)
)
$desc = array(
	'Judgement' => array(
		'id' => '732798',
		'acts' => '<a href="/act/133687/income-tax-act-1922-complete-act">Income Tax Act, 1922</a> - Sections 16(1)',
		'appealno' => 'Income-tax Reference No. 19 of 1962',
		'appellant' => 'Commissioner of Income-tax, Gujarat',
		'authreffered' => '',
		'casename' => 'Commissioner of Income-tax, Gujarat Vs. Jayantilal Amratlal',
		'casenote' => 'Direct Taxation - assessment - Section 16 (1) of Income Tax Act, 1922 and Section 36 of Bombay Trust Act (XXIX of 1950) - applicability of Proviso to Section 16 (1) (c) in question - trust deed did not contain provision for re-transfer or right to resume power over income or assets directly or indirectly - clause 10 of deed conferred power on settlor to invest trust properties or their income - such power overridden by Section 36 of Bombay Trust Act (XXIX of 1950) - income of trust not includible in income of assessee - held, trust deed did not fall within Proviso to Section 16 (1) (c).


 -  -  upon trust, known as Jayantilal Amratlal Charitable Trust for the following objects, namely, For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind. The Tribunal came to the conclusion that the de facto position of the settlor, whatever it is, would fall clearly outside the scope of its investigation and so long as the trust deed did not contain any provision which had the effect of a retransfer or a right to reassume power over the income or the assets directly or indirectly, proviso 1 to section 16(1) (c) could not apply. Clause 4 also provides that the trustees should at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya and in applying the income of the trust property for the aforesaid objects, the trustees may also consider claims of any needy or poor person belonging to the Visa formed community. Clause 10, which has been relied upon most by the revenue, provides as follows :The trustees may either permit the whole or any part of the trust premises to remain in its present state of investment or shall at any time or times during the lifetime of the settlor at his discretion and may after his death at their discretion call the same or any part thereof and shall during the lifetime of the settlor at his discretion invest the moneys produced by such sale and all other moneys lying invested with them in such of the investments as are authorised by law for investment or trust premises or in ordinary or preference shares of joint stock companies, whether partly of fully paid, or in debentures or in giving loans to any public company of firm or firm good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the trustees with the like direction to vary or transpose the said investments into or for others of the same or a like n The learned judges there held that the object of the third proviso was to consider a revocable trust irrevocable provided the settlor enjoyed no benefit whatever in the trust for a period exceeding six years. During these six years, when he could not revoke the trust, the benefit was to be enjoyed solely by the beneficiaries, but it the settlor were to retain any benefit in the enjoyment of the income, then even during these six years the trust did not become irrevocable and the third proviso did not apply. But, as we have already stated, though section 54 applies no doubt to private trusts, the position of a settlor as also of a trustee in charitable trusts cannot be any better than a trustee under a private trust and we should, therefore, think that if a trustee of a charitable trust were to give a loan to himself, that would clearly be a case of a conflict of duty and interest and would amount to a breach of trust on his part.',
		'caseanalysis' => null,
		'casesref' => 'Ramji Keshavji v. Commissioner of Income;',
		'citingcases' => '',
		'counselplain' => ' J.M. Thakore, Adv. General',
		'counseldef' => ' R.J. Kolah, Adv.',
		'court' => 'Gujarat',
		'court_type' => 'HC',
		'decidedon' => '1963-09-05',
		'deposition' => '',
		'favorof' => null,
		'findings' => null,
		'judge' => ' J.M. Shelat and; P.N. Bhagwati, JJ.',
		'judgement' => '<p style="text-align: justify;">J.M. Shelat, C.J.</p><p style="text-align: justify;">1. By a trust deed dated June 19, 1947, the assessee, Jayantilal Amratlal, settled 80 ordinary shares held by him in Messrs. Jayantilal Amratlal and Co. Ltd. upon trust, known as Jayantilal Amratlal Charitable Trust for the following objects, namely, 'For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind.' The trust deed was registered with the Charity Commissioner under the Bombay Trust Act (Act XXIX of 1950). Originally, as the recitals in the said deed of trust show, the trust fund consisted of the aforesaid 80 shares of the market value of Rs. 40,000. By his letter dated March 27, 1957, the settlor added to those 80 ordinary shares certain other shares held by him in other companies, bringing the total trust fund to about rupees three lakhs and a little more. Till the assessment year 1957-58, the income-tax department accepted the trust as a valid charitable trust and gave the necessary exemption to the trustees thereof in respect of its income. But while assessing the trust for the assessment year 1958-59, the Income-tax Officer came to the conclusion that section 16(1) (c), proviso I, applied and, therefore, the income of the trust could not be assessed in the hands of the trustees but was assessable in the hands of the settlor, the assessee Jayantilal Amratlal. The Income-tax Officer gave the reasons for so holding, (1) that the assessee had de facto control over the income and corpus of the trust and even the charities and temples to receive the benefit would be chosen by him, and (2) that the infringement of section 35(1) of the Bombay Trust Act, 1950, entailed a small penalty which was hardly deterrent. Finding that the assessment of Jayantilal Amratlal for the assessment years 1955-1956 and 1956-57 was still open, the Income-tax Officer assessed the income of the trust in the hands of the settlor and he passed the assessment orders for the assessment of Jayantilal Amratlal for the assessment of the trust for the assessment years 1958-1959 and 1959-1960 on the same day, i.e., on March 11, 1960. The assessee, Jayantial Amratlal, and the trust filed appeals against these orders before the Appellate Assistant Commissioner who confirmed the orders of the Income-tax Officer. The matters were then carried in appeal to the Tribunal and the Tribunal consolidated all the four appeals of the trust and the settlor, Jayantilal Amratlal, for all the assessment years and disposed them of by a single orders dated December 26, 1961. The Tribunal was of the view that the decision in the appeal before it had to be based on a proper construction of the trust deed as it stood and it would be its duty then to ascertain if the deed contained any provision for the retransfer directly or indirectly of the income or the assets of the trust to the settlor or in any way gave the settlor a right to reassume power directly or indirectly over the income or the assets. The Tribunal came to the conclusion that the de facto position of the settlor, whatever it is, would fall clearly outside the scope of its investigation and so long as the trust deed did not contain any provision which had the effect of a retransfer or a right to reassume power over the income or the assets directly or indirectly, proviso 1 to section 16(1) (c) could not apply. After analysing clauses (4), (10) and (21) of the deed of trust relied upon by the department, the Tribunal came to the conclusion that it did not see any thing in these clauses which conferred upon the assessee the right to retransfer directly or indirectly the income or the assets, or the right to reassume power over them. The Tribunal also was of the opinion that, though clause (10) of the deed conferred power upon the settlor to invest the trust properties or their income, and that under the provisions of that clause he could, if he so desired, invest them in his own companies, that power was overridden by section 36 of the Bombay Trust Act (XXIX of 1950). The Tribunal was also of the opinion that the fact that the settlor could offend against the provisions of that Act with impunity as the penalty thereunder was light, was a matter which was completely extraneous to the consideration before it. On these grounds, the Tribunal held that the trust deed did not fall within the mischief of the first proviso to section 16(1) (c) and, therefore, the income of the trust was not includible in the income of the assessee, Jayantilal Amratlal. </p><p style="text-align: justify;">2. Before the Tribunal reliance was placed upon the decision of this High Court in a case under section 23A of the Act, viz., Jayantilal Amratlal Private Ltd. v. Commissioner of Income-tax, where this High Court held, inter alia, that the promoters of the assessee-company there, i.e., Jayantilal Amratlal and his two brothers, Hariprasad and Ramanlal, were persons acting in union and when they subscribed to a portion of the capital, they could be said to have held the voting power in connection therewith as a block and that there was a community of interest and they could not be regarded as holding those shares as members of the public. As regards the aforesaid 80 ordinary shares, the High Court held that though they were settled upon trust by Jayantilal Amratlal as it was within his power as the settlor to give directions in connection with the voting right to be exercised by the trustees in respect of these shares and, therefore, these 80 shares also could not be regarded as shares held by members of the public. The High Court, therefore, held that the assessee-company was a company in which the public were not substantially interested within the meaning of the Explanation to section 23A. The Tribunal was of the opinion, and in our opinion rightly, that this decision had nothing to do with the question before it and, as we have already said held that section 16(1) (c) proviso 1, did not apply to the facts of the case and that the income of the trust should not be assessed in the hands of the settlor and was entitled to exemption under section 4(3) (i) of the Act. </p><p style="text-align: justify;">3. The department mainly relied upon, as seen from the order of the Income-tax Officer and the Assistant Commissioner, two facts, (1) that Jayantilal Amratlal had utilised those 80 shares for the purpose of controlling Jayantilal Amratlal and Co. Ltd.; and (2) that the income of the trust properties had been invested by Jayantilal Amratlal in three companies in which he and his two brothers had a shareholding. The department also was of the view that though section 35 of the Bombay Trust Act, 1950, as amended in 1954, prohibited investment in any manner other than prescribed there, the assessee, under the proviso thereto, could obtain sanction of the Charity Commissioner and that even if he did not do so and transgressed the provisions of section 35, the penalty was only Rs. 1,000, which was not a deterrent one and, therefore, the provisions of that section did not tend to prevent such contravention. The question that arises before us is whether these facts attract the application of proviso 1 to section 16(1) (c) of the Act. </p><p style="text-align: justify;">4. The deed of trust appointed Jayantilal Amratlal, his wife, his two brothers, Hariprasad and Ramanlal, and one Kasturlal Chandulal Parikh and Bhagubhai Chandulal, as trustees thereunder. Clause 1 of the deed provides that the trustees shall stand possessed of the said shares and all other moneys held by the trustees subject to the powers, provisions, agreements and declarations therein declared. Clause 4 provides that the trustees should hold the net residue of the income of the trust premises in trust to utilise the same for the objects therein above set out or for any other objects beneficial to mankind as the settlor may, during his lifetime, in writing direct and on and after his death as the trustees may in their absolute discretion think fit. Clause 4 also provides that the trustees should at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya and in applying the income of the trust property for the aforesaid objects, the trustees may also consider claims of any needy or poor person belonging to the Visa formed community. Clause 5 gives power to the trustees to accept contributions or donations to the trust premises from any person or person and directed the trustees to hold the same upon the same trust and subject to the same powers, provisions and stipulations contained in the trust deed. Clauses 6, 7 and 8 provide for the powers to the trustees to utilise the trust fund for the aforesaid charitable objects or any one of them. Clause 10, which has been relied upon most by the revenue, provides as follows : </p><p style="text-align: justify;">'The trustees may either permit the whole or any part of the trust premises to remain in its present state of investment or shall at any time or times during the lifetime of the settlor at his discretion and may after his death at their discretion call the same or any part thereof and shall during the lifetime of the settlor at his discretion invest the moneys produced by such sale and all other moneys lying invested with them in such of the investments as are authorised by law for investment or trust premises or in ordinary or preference shares of joint stock companies, whether partly of fully paid, or in debentures or in giving loans to any public company of firm or firm good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the trustees with the like direction to vary or transpose the said investments into or for others of the same or a like nature......'</p><p style="text-align: justify;">5. The clause also provides that on and after the death of the settlor the trustees may permit the whole or any part of the trust premises to remain in the state of investment in which the same are at the time of the death of the settlor or may at any time or times sell the same or any part thereof and invest the moneys produced by such and all other moneys lying invested with them in such of the investments as are authorised by section 20 of the Indian Trusts Act (11 of 1882). Lastly, clause 21 provides that all questions arising in the management and administration of the trust and all differences of opinions amongst the trustees shall be disposed of in accordance with the opinion of the settlor during his lifetime and on and after the death of the settlor, in accordance with the opinion of the majority of the trustees. </p><p style="text-align: justify;">6. The arguments utilised by the Income-tax Officer in his assessment order and which seem to have found favor with the Assistant Commissioner cannot, on examination, be held to be valid, for, they cannot be a ground for holding that proviso 1 to section 16(1) (c) applies. It the settlor, Jayantilal Amratlal, used the aforesaid 80 shares for the purpose of controlling Jayantilal Amratlal and Co. Ltd., as the Income-tax Officer argued, the share would still be remain the trust assets and no question of the right to reassume power over them or over their income or of retransferring them can possibly arise, for he would utilise their voting power as assets of the trust. Similarly, the investments of the income of the trust funds in the three aforesaid companies mentioned in his order would not bring in the application of proviso 1 to section 16(1) (c). The learned Advocate-General, in any event, did not employ these arguments as part of his contention. Instead, the structure of his contention depended solely upon the construction of clauses 10 and 21 of the trust deed and their effect. When read together, there can be no doubt that Jayantilal Amratlal, as the settlor, had absolute discretion during his lifetime to invest under the provisions of clause 10 the assets and the income of the trust fund and the other trustees had no power to overried his wishes. But that by itself would not be a relevant factor as held in Commissioner of Income-tax v. Sir Kikabhai Premchand, at page 211, a case relied upon to some extent by the learned Advocate-General himself. But the contention of the learned Advocate-General did not depend solely upon the deplitude of powers reserved to the settlor in the investments under clauses 10 and 21 but the resultant effect thereof. His submission was that we should consider the absolute discretion given to the settlor under these clauses, including the power to invest the trust funds and the income thereof in such public companies, firms, etc., as he chose and to grant loans to them on such terms and conditions as he might think proper and fit. The power reserved to him as the settlor to give loans to public companies and/or firms, coupled with the absolute voice given to him in the matter of management and administration of the trust under clause 21 would, in the view of the learned Advocate-General, result in a right in his favour to reassume control over the trust funds and the income thereof which he had over them before he made the trust deed and settled them on trusts specified therein. For instance, argued the learned Advocate-General, the settlor could grant under their clauses a loan to a firm in which he was interested which, by virtue of the partners being jointly and severally liable, would in substance be a loan to himself. He could grant such loans perhaps to the detriment of the trust on such terms and conditions which he decided. Once such a loan was thus made, the settlor would have all the powers over the fund so advanced which he had over that fund before he settled it on trust. Thus, according to the learned Advocate-General, the powers under clauses 10 and 21 coupled with the power to give loans, constituted a right to reassume power over the trust funds and income thereof which he had over these funds before the trust deed was made, bringing into operation proviso 1 to section 16(1) (c), and it was this very mischief which the legislature wanted to prevent and which was the reason for inserting section 16(1) (c) and the proviso thereto in the Act. The learned Advocate-General relied upon the case of Commissioner of Income-tax v. Sir Kikabhai Premchand, which we have already referred. That was a case, however, under proviso 111 to section 16(1) (c) and not proviso 1. The question debated there was whether the settlor derived any benefit in the income of the trust fund directly or indirectly. The learned judges there considered clause 8 of the trust deed which was the clause dealing with investment and which gave power to the settlor to grant a loan to any person including himself and which was regarded as a power to give loan to himself with or without security and even without interest. The learned judges there held that the object of the third proviso was to consider a revocable trust irrevocable provided the settlor enjoyed no benefit whatever in the trust for a period exceeding six years. During these six years, when he could not revoke the trust, the benefit was to be enjoyed solely by the beneficiaries, but it the settlor were to retain any benefit in the enjoyment of the income, then even during these six years the trust did not become irrevocable and the third proviso did not apply. On an examination of clauses of the deed, they came to the conclusion that the settlor was at liberty to lend part of the income to himself without security and without interest which led one to the conclusion that he derived at least an indirect benefit. They negatived the contention on behalf of the assessee that so long as the settlor did not lend any moneys to himself and did not actually derive any benefit, the third proviso would apply and the income therefore would not be liable to tax in the hands of the settlor. The court held that a proper construction of the trust deed did not and could not and could not depend upon what the settlor actually did or what he refrained from doing. It could only depend upon the court coming to the conclusion that, as the trust deed stood, the settlor was entitled to certain benefits whether they were direct or indirect in nature and that there could be no doubt, looking at the clause as to investments, that the settlor was entitled to a benefit under the provisions of the trust deed and thereby derived an indirect benefit in the income of the trust and, therefore, the third proviso did not apply and the income of the trust was liable to tax in the hands of the settlor. As we said, the decision is one under proviso 111 to section 16(1) (c) and therefore had no application to the instant case. But we may observe before parting with this case that clause 7 of trust deed in that case gave power to the settlor to purchase the trust property, not withstanding that he was a trustee. With reference to that clause, a contention was urged before the learned judge that that power would not be lawful in view of section 53 of the Trust Act. But the learned judges negatived it observing that, whatever the legal consequences of the act of the trustee may be, the fact remained that the settlor had the power to purchase the trust property under the deed of trust. We may, however, observe that this fact was, as is clear from the judgment, not made a ground for the judgment against the assessee. The learned Advocate-General also referred to us the case of Abbay L. Khatau v. Commissioner of Income-tax. This decision also cannot help us in view of the fact that the department there had applied proviso 111 instead of proviso 1, although the trust was an irrevocable trust. That being the case, the learned judges there declined to decide the question whether the case fell within the first proviso, as the department had not at any time tried to bring the case under that proviso. The learned Advocate-General then pointed out to us an unreported decision of the High Court of Bombay in Commissioner of Income-tax v. Mathuradas Mangaldas Parekh (Income-tax Reference No. 4 of 1954), collected in Volume 1 of Unreported Income-tax Judgment of the Bombay High Court, at page 314, published by the Western India Regional Council of the Institute of Chartered Accountants of India, Bombay. There an undivided Hindu Family, through its karta, executed a deed of settlement in favor of his three minor daughters. The trustees were the karta and his wife in their individual capacity. Clause (4) of the trust deed gave trustees very wide powers including full and unrestricted power of investing and transposing the investments in all respects as if they were absolutely entitled thereto beneficially. The revenue contended that the trustees under that clause might make loans to themselves and without interest and, therefore, a right to reassume power over the income was conferred upon the settlor and, consequently, the case fell within the first proviso to section 16(1) (c) of the Act. The learned judges rejected this contention as being unsound on the ground that the trustees would be committing a breach of law if they advanced moneys to themselves which was prohibited by section 54 of the Trust Act. They also held that interest would be derived by the trustees and not by the settlor and, therefore, the income derived by the trustees could not be assessed in the hands of the assessee, Hindu undivided family. It will be thus seen that one of the reasons for refusing to apply proviso 1 to section 16(1) (c) in the decision was that if the trustees were to give a loan to themselves section 54 of the Trust Act would be a bar and such a loan would be in breach of law by the trustees and, therefore, the power conferred upon them was not a valid power which could be considered while determining whether proviso 1 applied or not. The learned Advocate-General tried to distinguish this case upon the grounds, (1) that the case was concerned with the private trust and therefore section 54 of the Trust Act applied, and (2) that the power to give loan included the power to give loan to the trustees and not to the settlor. Though section 54 of the Trust Act applies to private trusts, principles analogous to the provisions of that section must apply to trusts which are not private. The decision, therefore, in Mathuradas Mangaldas is of some use in so far as it can be said to lay down the principle that a power given to the settlor under a trust deed which is challenged as one granting to him the power to reassume control over the corpus or the income of the trust fund, should be a valid power. These decisions,</p><p style="text-align: justify;">7. however, do not directly apply to the facts before us and, therefore, cannot help us much in deciding the question before us and we must, therefore, turn to the provisions of section 16(1) (c), proviso 1, to answer them. </p><p style="text-align: justify;">8. Commenting on the provisions in the English Act corresponding to these provisions, the House of Lords in A. G. Chamberlain v. Commissioners of Inland Revenue stated that these provisions were designed to overtake and circumvent a growing tendency on the part of taxpayers to endeavour to avoid or reduce tax liability by means of settlements. The method consisted in the disposal by the taxpayer of part of his property in such a way that its income should no longer be received by him, while at the same time he retained certain powers over, or interest in, the property or its income. The legislature's counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should notwithstanding, be treated as still his income and taxed in his hands accordingly. The effect of the first proviso to section 16(1) (c) in substance is that a transfer should be deemed to be revocable, though apparently irrevocable, if it contains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or the assets of the trust premises. It is only if one or the other of these provisions is present in the transfer that an irrevocable transfer is, in the eye of the law, a revocable transfer. The learned Advocate-General has not relied upon the first part of the proviso, which deals with the case of retransfer of income or assets of the trust fund to the settlor, but upon the second part of it, namely, a case where the deed of trust gives the settlor a right to reassume power directly or indirectly over the income or the assets of the trust premises. </p><p style="text-align: justify;">9. The question, therefore, is whether clauses 10 and 21 of the present deed of trust relied upon by the learned Advocate-General, have the effect of giving a right to the settlor to reassume power directly or indirectly over the income or assets of the trust fund which he had before he made the trust deed. When proviso 1 talks about a right to reassume power, prima facie, that must mean that there is such a power lawfully given under the deed of trust. It obviously cannot be a right, against the mischief of which the legislature was constrained to make a provisions and which a settlor cannot lawfully exercise without either committing a breach of trust or a breach of some law. In the case of Mathuradas Mangaldas, the High Court of Bombay considered it an effective answer to the contention on behalf of the revenue that, though the deed of trust there contained power to the trustees to give loans to themselves, section 54 of the Trust Act would render such an act a breach of the law and, therefore, such a provision cannot be regarded as a right to reassume power. The same principle was also laid down by the High Court of Calcutta in Commissioner of Income-tax v. S. M. Bose. There the assessee settled certain property on himself as trustee to hold it in trust for his daughter. The deed provided that the trustee was to take possession and after paying outgoings, the income of the trust estate was to be paid to his daughter during the term of her natural life, for her sole and separate use. The deed also made provision as to how the income was to be dealt with on the death of the daughter but the settlor retained no right whatsoever over the corpus of the income and he had no power of revocation. Clause 3 of the deed provided that as long as the present trustee, namely, the settlor or persons named as trustees in addition or substitution acted as trustees, they should not be accountable to any of the beneficiaries relating to his or their dealing or the income of the trust estate. The question was whether the income from the trust property was taxable in the hands of the assessee as his income by virtue of the provisions of section 16(1) (c) of the Act. The High Court held that the settlor had by this trust put the income for ever out of his control and that being so, the income from the trust properties could not be assessed as part of the income of the assessee under section 16(1) (c). It also held that clause 3, which was relied upon by the department, did not give the settlor control over the income as it was merely a provision limiting the rights of the beneficiary to question certain acts of the trustee. Dealing with the first proviso to section 16(1) (c), the learned judges observed at page 141 of the report that that proviso only contemplated a case where 'the settlor can lawfully reassume power over the income or the assets and that unless that was so, the proviso would cover every trust where a settlor had made himself a trustee because a trustee acting dishonestly could always assume control over the income.' </p><p style="text-align: justify;">10. The argument of the learned Advocate-General was that no reliance should be placed upon the decision in the case of Mathurdas Mangaldas, because it was a case of private trust and to such private trust only section 54 of the Trust Act would apply. But, as we have already stated, though section 54 applies no doubt to private trusts, the position of a settlor as also of a trustee in charitable trusts cannot be any better than a trustee under a private trust and we should, therefore, think that if a trustee of a charitable trust were to give a loan to himself, that would clearly be a case of a conflict of duty and interest and would amount to a breach of trust on his part. In the present case, we are on somewhat safer grounds. The Bombay Public Trust Act (XXIX of 1950) came into force on August 14, 1950, and section 35 thereof, as it stood prior to its amendment in 1954, provided that where the trust property consisted of money and could not be applied immediately or at any early date to the purpose of the public trust, the trustee shall be bound, subject to any direction contained in the instrument of trust, to invest the money in public securities. The second proviso to that section laid down that the Charity Commissioner may, by general or special order, permit the trustee of any public trust or classes of such trusts to invest the money in any other manner. As section 35 stood before its amendment in 1954, a trustee of a public trust could invest the trust fund in securities other than public securities if the deed of trust permitted him to do so. But by Bombay Act LIX of 1954, section 35 was amended and, as so amended, it made it incumbent upon a trustee of a public trust to deposit the trust money in the manner provided therein 'notwithstanding any direction contained in the instrument of the trust'. Therefore, notwithstanding a provision in the deed of trust permitting the trustee to invest in securities other than those mentioned in the section, a trustee is prohibited from doing so and the penalty for contravention of the provisions of section 35 would be a prosecution and, on conviction, a fine of Rs. 1,000, as provided in section 66 of the Act. Giving a loan to himself by a trustee, although the deed might empower him to do so, would not only be a breach of trust but an illegal act resulting in a penal offence. In our view, even if a trust deed were to provide for power in favor of a settlor, who is also a trustee, to grant loan to himself, such a power cannot amount to a lawful right to reassume power and if there is such a provision in a trust deed, it has to be taken as ineffective. </p><p style="text-align: justify;">11. But the learned Advocate-General argued (1) that we are called upon in this case to consture the deed of trust and, to decide whether that deed of trust conferes a right to reassume power and, therefore, it would not be permissible to us to look at another statute to determine the proper construction of section 16(1) (c), proviso 1, and (2) that proviso 11 to section 35 of the Bombay Trust Act in any event gives authority to the Charity Commissioner to grant leave to trustees to invest otherwise than prescribed in sub-section (1) of that section. The answer, however, to both these contentions is fairly simple. When a statute talks about a right to reassume, it must mean a lawful right which can be lawfully exercised. This conclusion is fortified by the decisions in the case of Mathuradas Mangaldas and in the case of Commissioner of Income-tax v. S. M. Bose, already referred to above. So far as the second part of his contention is concerned, a right to reassume must be given to the settlor independently of any third party and department upon his own volition. It is true that the Charity Commissioner may grant leave to the settlor but he may or may not grant it. A right to reasssume cannot rest dependent upon whether the charity Commissioner may or may not grant sanction. Such a question arose in Ramji Keshavji v. Commissioner of Income-tax, where proviso 1 to section 16(1) (c) was relied upon by the Commissioner. The learned judges there held, on a reading of clause 5 of the deed of trust, that under that clause all the powers reserved thereunder for payment of the income of certain sale proceeds were in favor of one Kamalabai, the wife of the settlor, and not the settlor. It was true that under the provisions of that clause, the said Kamalabhai was given the right to apply to the trustees for payment for a change of air for the settlor, or if there was protracted illness of the settlor, but the High Court held that it was still a right given to Kamalabhai and not to the settlor and the amount under clause 5 was to be paid to Kamalabai and therefore, it was the volition of Kamalabai alone which could bring into operation, first the application, and, secondly, if it was acceded to, the payment to her. Mr. Justice Kania, as he then was, therefore, of the view that the provisions of clause 5 under these circumstances did not amount to either a retransfer of the assets or the income or a reassumption of power directly or indirectly in the settlor. In the case before us, the power under clause 10, even when read with clause 21, is, for the reasons aforesaid, rendered nugatory by the provisions of section 35 of the Bombay Trust Act. The power of investment in a manner other than that prescribed under section 35(1) of the Trust Act can obviously be exercised only with the sanction of the Charity Commissioner. The power is dependent for its exercise upon the volition of a public officer, i.e., the Charity Commissioner, who has to decide the question of sanction upon the terms of the statute or the rules made thereunder and it cannot amount to a right to reassume power over the income or the assets of the trust against the mischief of which the legislature has provided an express provision. Surely, it must be presumed that the Charity Commissioner would not grant his sanction to an investment which is bound to result in a conflict of duty and interest on the part of the settlor who is also a trustee. Therefore, such a right, if it can be called a right, is not one of any substance and cannot, therefore, be construed as a right to reassume power over the trust assets or the income thereof, as contemplated by proviso 1 to section 16(1) (c). </p><p style="text-align: justify;">12. A loan, by the very nature of it, cannot be said to amount to an exercise of dominion or control over its subjects-matter. It is repayable and is given on conditions as to the time of repayment and interest, if any. By taking a loan, a settlor does not exercise over its subject-matter power or dominion which, but for the trust or the settlement, he would have been able to exercise. Therefore, on this ground also, it cannot be held that, if the settlor were to give a loan to himself or to his firm, he would be exercising control over the trust fund or its income as he would have had over the fund or its income before he settled that fund upon the trust. Besides, a loan still remains an asset or the income of the trust and it is a subject-matter still governed by and is subject to the provisions of the trust. For these reasons, section 16(1) (c), proviso 1, is not applicable to the facts of this case. </p><p style="text-align: justify;">13. Our answers to the question referred to us are as follows : </p><p style="text-align: justify;">Question No. 1 - In the affirmative. </p><p style="text-align: justify;">Question No. 2 - In the affirmative. </p><p style="text-align: justify;">The Commissioner will pay to the opponent the costs of this reference. </p><p style="text-align: justify;">Questions answered in the affirmative.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'id' => '732798',
			'acts' => '<a href="/act/133687/income-tax-act-1922-complete-act">Income Tax Act, 1922</a> - Sections 16(1)',
			'appealno' => 'Income-tax Reference No. 19 of 1962',
			'appellant' => 'Commissioner of Income-tax, Gujarat',
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			'casename' => 'Commissioner of Income-tax, Gujarat Vs. Jayantilal Amratlal',
			'casenote' => 'Direct Taxation - assessment - Section 16 (1) of Income Tax Act, 1922 and Section 36 of Bombay Trust Act (XXIX of 1950) - applicability of Proviso to Section 16 (1) (c) in question - trust deed did not contain provision for re-transfer or right to resume power over income or assets directly or indirectly - clause 10 of deed conferred power on settlor to invest trust properties or their income - such power overridden by Section 36 of Bombay Trust Act (XXIX of 1950) - income of trust not includible in income of assessee - held, trust deed did not fall within Proviso to Section 16 (1) (c).


 -  -  upon trust, known as Jayantilal Amratlal Charitable Trust for the following objects, namely, For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind. The Tribunal came to the conclusion that the de facto position of the settlor, whatever it is, would fall clearly outside the scope of its investigation and so long as the trust deed did not contain any provision which had the effect of a retransfer or a right to reassume power over the income or the assets directly or indirectly, proviso 1 to section 16(1) (c) could not apply. Clause 4 also provides that the trustees should at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya and in applying the income of the trust property for the aforesaid objects, the trustees may also consider claims of any needy or poor person belonging to the Visa formed community. Clause 10, which has been relied upon most by the revenue, provides as follows :The trustees may either permit the whole or any part of the trust premises to remain in its present state of investment or shall at any time or times during the lifetime of the settlor at his discretion and may after his death at their discretion call the same or any part thereof and shall during the lifetime of the settlor at his discretion invest the moneys produced by such sale and all other moneys lying invested with them in such of the investments as are authorised by law for investment or trust premises or in ordinary or preference shares of joint stock companies, whether partly of fully paid, or in debentures or in giving loans to any public company of firm or firm good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the trustees with the like direction to vary or transpose the said investments into or for others of the same or a like n The learned judges there held that the object of the third proviso was to consider a revocable trust irrevocable provided the settlor enjoyed no benefit whatever in the trust for a period exceeding six years. During these six years, when he could not revoke the trust, the benefit was to be enjoyed solely by the beneficiaries, but it the settlor were to retain any benefit in the enjoyment of the income, then even during these six years the trust did not become irrevocable and the third proviso did not apply. But, as we have already stated, though section 54 applies no doubt to private trusts, the position of a settlor as also of a trustee in charitable trusts cannot be any better than a trustee under a private trust and we should, therefore, think that if a trustee of a charitable trust were to give a loan to himself, that would clearly be a case of a conflict of duty and interest and would amount to a breach of trust on his part.',
			'caseanalysis' => null,
			'casesref' => 'Ramji Keshavji v. Commissioner of Income;',
			'citingcases' => '',
			'counselplain' => ' J.M. Thakore, Adv. General',
			'counseldef' => ' R.J. Kolah, Adv.',
			'court' => 'Gujarat',
			'court_type' => 'HC',
			'decidedon' => '1963-09-05',
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			'judge' => ' J.M. Shelat and; P.N. Bhagwati, JJ.',
			'judgement' => '<p style="text-align: justify;">J.M. Shelat, C.J.</p><p style="text-align: justify;">1. By a trust deed dated June 19, 1947, the assessee, Jayantilal Amratlal, settled 80 ordinary shares held by him in Messrs. Jayantilal Amratlal and Co. Ltd. upon trust, known as Jayantilal Amratlal Charitable Trust for the following objects, namely, 'For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind.' The trust deed was registered with the Charity Commissioner under the Bombay Trust Act (Act XXIX of 1950). Originally, as the recitals in the said deed of trust show, the trust fund consisted of the aforesaid 80 shares of the market value of Rs. 40,000. By his letter dated March 27, 1957, the settlor added to those 80 ordinary shares certain other shares held by him in other companies, bringing the total trust fund to about rupees three lakhs and a little more. Till the assessment year 1957-58, the income-tax department accepted the trust as a valid charitable trust and gave the necessary exemption to the trustees thereof in respect of its income. But while assessing the trust for the assessment year 1958-59, the Income-tax Officer came to the conclusion that section 16(1) (c), proviso I, applied and, therefore, the income of the trust could not be assessed in the hands of the trustees but was assessable in the hands of the settlor, the assessee Jayantilal Amratlal. The Income-tax Officer gave the reasons for so holding, (1) that the assessee had de facto control over the income and corpus of the trust and even the charities and temples to receive the benefit would be chosen by him, and (2) that the infringement of section 35(1) of the Bombay Trust Act, 1950, entailed a small penalty which was hardly deterrent. Finding that the assessment of Jayantilal Amratlal for the assessment years 1955-1956 and 1956-57 was still open, the Income-tax Officer assessed the income of the trust in the hands of the settlor and he passed the assessment orders for the assessment of Jayantilal Amratlal for the assessment of the trust for the assessment years 1958-1959 and 1959-1960 on the same day, i.e., on March 11, 1960. The assessee, Jayantial Amratlal, and the trust filed appeals against these orders before the Appellate Assistant Commissioner who confirmed the orders of the Income-tax Officer. The matters were then carried in appeal to the Tribunal and the Tribunal consolidated all the four appeals of the trust and the settlor, Jayantilal Amratlal, for all the assessment years and disposed them of by a single orders dated December 26, 1961. The Tribunal was of the view that the decision in the appeal before it had to be based on a proper construction of the trust deed as it stood and it would be its duty then to ascertain if the deed contained any provision for the retransfer directly or indirectly of the income or the assets of the trust to the settlor or in any way gave the settlor a right to reassume power directly or indirectly over the income or the assets. The Tribunal came to the conclusion that the de facto position of the settlor, whatever it is, would fall clearly outside the scope of its investigation and so long as the trust deed did not contain any provision which had the effect of a retransfer or a right to reassume power over the income or the assets directly or indirectly, proviso 1 to section 16(1) (c) could not apply. After analysing clauses (4), (10) and (21) of the deed of trust relied upon by the department, the Tribunal came to the conclusion that it did not see any thing in these clauses which conferred upon the assessee the right to retransfer directly or indirectly the income or the assets, or the right to reassume power over them. The Tribunal also was of the opinion that, though clause (10) of the deed conferred power upon the settlor to invest the trust properties or their income, and that under the provisions of that clause he could, if he so desired, invest them in his own companies, that power was overridden by section 36 of the Bombay Trust Act (XXIX of 1950). The Tribunal was also of the opinion that the fact that the settlor could offend against the provisions of that Act with impunity as the penalty thereunder was light, was a matter which was completely extraneous to the consideration before it. On these grounds, the Tribunal held that the trust deed did not fall within the mischief of the first proviso to section 16(1) (c) and, therefore, the income of the trust was not includible in the income of the assessee, Jayantilal Amratlal. </p><p style="text-align: justify;">2. Before the Tribunal reliance was placed upon the decision of this High Court in a case under section 23A of the Act, viz., Jayantilal Amratlal Private Ltd. v. Commissioner of Income-tax, where this High Court held, inter alia, that the promoters of the assessee-company there, i.e., Jayantilal Amratlal and his two brothers, Hariprasad and Ramanlal, were persons acting in union and when they subscribed to a portion of the capital, they could be said to have held the voting power in connection therewith as a block and that there was a community of interest and they could not be regarded as holding those shares as members of the public. As regards the aforesaid 80 ordinary shares, the High Court held that though they were settled upon trust by Jayantilal Amratlal as it was within his power as the settlor to give directions in connection with the voting right to be exercised by the trustees in respect of these shares and, therefore, these 80 shares also could not be regarded as shares held by members of the public. The High Court, therefore, held that the assessee-company was a company in which the public were not substantially interested within the meaning of the Explanation to section 23A. The Tribunal was of the opinion, and in our opinion rightly, that this decision had nothing to do with the question before it and, as we have already said held that section 16(1) (c) proviso 1, did not apply to the facts of the case and that the income of the trust should not be assessed in the hands of the settlor and was entitled to exemption under section 4(3) (i) of the Act. </p><p style="text-align: justify;">3. The department mainly relied upon, as seen from the order of the Income-tax Officer and the Assistant Commissioner, two facts, (1) that Jayantilal Amratlal had utilised those 80 shares for the purpose of controlling Jayantilal Amratlal and Co. Ltd.; and (2) that the income of the trust properties had been invested by Jayantilal Amratlal in three companies in which he and his two brothers had a shareholding. The department also was of the view that though section 35 of the Bombay Trust Act, 1950, as amended in 1954, prohibited investment in any manner other than prescribed there, the assessee, under the proviso thereto, could obtain sanction of the Charity Commissioner and that even if he did not do so and transgressed the provisions of section 35, the penalty was only Rs. 1,000, which was not a deterrent one and, therefore, the provisions of that section did not tend to prevent such contravention. The question that arises before us is whether these facts attract the application of proviso 1 to section 16(1) (c) of the Act. </p><p style="text-align: justify;">4. The deed of trust appointed Jayantilal Amratlal, his wife, his two brothers, Hariprasad and Ramanlal, and one Kasturlal Chandulal Parikh and Bhagubhai Chandulal, as trustees thereunder. Clause 1 of the deed provides that the trustees shall stand possessed of the said shares and all other moneys held by the trustees subject to the powers, provisions, agreements and declarations therein declared. Clause 4 provides that the trustees should hold the net residue of the income of the trust premises in trust to utilise the same for the objects therein above set out or for any other objects beneficial to mankind as the settlor may, during his lifetime, in writing direct and on and after his death as the trustees may in their absolute discretion think fit. Clause 4 also provides that the trustees should at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya and in applying the income of the trust property for the aforesaid objects, the trustees may also consider claims of any needy or poor person belonging to the Visa formed community. Clause 5 gives power to the trustees to accept contributions or donations to the trust premises from any person or person and directed the trustees to hold the same upon the same trust and subject to the same powers, provisions and stipulations contained in the trust deed. Clauses 6, 7 and 8 provide for the powers to the trustees to utilise the trust fund for the aforesaid charitable objects or any one of them. Clause 10, which has been relied upon most by the revenue, provides as follows : </p><p style="text-align: justify;">'The trustees may either permit the whole or any part of the trust premises to remain in its present state of investment or shall at any time or times during the lifetime of the settlor at his discretion and may after his death at their discretion call the same or any part thereof and shall during the lifetime of the settlor at his discretion invest the moneys produced by such sale and all other moneys lying invested with them in such of the investments as are authorised by law for investment or trust premises or in ordinary or preference shares of joint stock companies, whether partly of fully paid, or in debentures or in giving loans to any public company of firm or firm good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the trustees with the like direction to vary or transpose the said investments into or for others of the same or a like nature......'</p><p style="text-align: justify;">5. The clause also provides that on and after the death of the settlor the trustees may permit the whole or any part of the trust premises to remain in the state of investment in which the same are at the time of the death of the settlor or may at any time or times sell the same or any part thereof and invest the moneys produced by such and all other moneys lying invested with them in such of the investments as are authorised by section 20 of the Indian Trusts Act (11 of 1882). Lastly, clause 21 provides that all questions arising in the management and administration of the trust and all differences of opinions amongst the trustees shall be disposed of in accordance with the opinion of the settlor during his lifetime and on and after the death of the settlor, in accordance with the opinion of the majority of the trustees. </p><p style="text-align: justify;">6. The arguments utilised by the Income-tax Officer in his assessment order and which seem to have found favor with the Assistant Commissioner cannot, on examination, be held to be valid, for, they cannot be a ground for holding that proviso 1 to section 16(1) (c) applies. It the settlor, Jayantilal Amratlal, used the aforesaid 80 shares for the purpose of controlling Jayantilal Amratlal and Co. Ltd., as the Income-tax Officer argued, the share would still be remain the trust assets and no question of the right to reassume power over them or over their income or of retransferring them can possibly arise, for he would utilise their voting power as assets of the trust. Similarly, the investments of the income of the trust funds in the three aforesaid companies mentioned in his order would not bring in the application of proviso 1 to section 16(1) (c). The learned Advocate-General, in any event, did not employ these arguments as part of his contention. Instead, the structure of his contention depended solely upon the construction of clauses 10 and 21 of the trust deed and their effect. When read together, there can be no doubt that Jayantilal Amratlal, as the settlor, had absolute discretion during his lifetime to invest under the provisions of clause 10 the assets and the income of the trust fund and the other trustees had no power to overried his wishes. But that by itself would not be a relevant factor as held in Commissioner of Income-tax v. Sir Kikabhai Premchand, at page 211, a case relied upon to some extent by the learned Advocate-General himself. But the contention of the learned Advocate-General did not depend solely upon the deplitude of powers reserved to the settlor in the investments under clauses 10 and 21 but the resultant effect thereof. His submission was that we should consider the absolute discretion given to the settlor under these clauses, including the power to invest the trust funds and the income thereof in such public companies, firms, etc., as he chose and to grant loans to them on such terms and conditions as he might think proper and fit. The power reserved to him as the settlor to give loans to public companies and/or firms, coupled with the absolute voice given to him in the matter of management and administration of the trust under clause 21 would, in the view of the learned Advocate-General, result in a right in his favour to reassume control over the trust funds and the income thereof which he had over them before he made the trust deed and settled them on trusts specified therein. For instance, argued the learned Advocate-General, the settlor could grant under their clauses a loan to a firm in which he was interested which, by virtue of the partners being jointly and severally liable, would in substance be a loan to himself. He could grant such loans perhaps to the detriment of the trust on such terms and conditions which he decided. Once such a loan was thus made, the settlor would have all the powers over the fund so advanced which he had over that fund before he settled it on trust. Thus, according to the learned Advocate-General, the powers under clauses 10 and 21 coupled with the power to give loans, constituted a right to reassume power over the trust funds and income thereof which he had over these funds before the trust deed was made, bringing into operation proviso 1 to section 16(1) (c), and it was this very mischief which the legislature wanted to prevent and which was the reason for inserting section 16(1) (c) and the proviso thereto in the Act. The learned Advocate-General relied upon the case of Commissioner of Income-tax v. Sir Kikabhai Premchand, which we have already referred. That was a case, however, under proviso 111 to section 16(1) (c) and not proviso 1. The question debated there was whether the settlor derived any benefit in the income of the trust fund directly or indirectly. The learned judges there considered clause 8 of the trust deed which was the clause dealing with investment and which gave power to the settlor to grant a loan to any person including himself and which was regarded as a power to give loan to himself with or without security and even without interest. The learned judges there held that the object of the third proviso was to consider a revocable trust irrevocable provided the settlor enjoyed no benefit whatever in the trust for a period exceeding six years. During these six years, when he could not revoke the trust, the benefit was to be enjoyed solely by the beneficiaries, but it the settlor were to retain any benefit in the enjoyment of the income, then even during these six years the trust did not become irrevocable and the third proviso did not apply. On an examination of clauses of the deed, they came to the conclusion that the settlor was at liberty to lend part of the income to himself without security and without interest which led one to the conclusion that he derived at least an indirect benefit. They negatived the contention on behalf of the assessee that so long as the settlor did not lend any moneys to himself and did not actually derive any benefit, the third proviso would apply and the income therefore would not be liable to tax in the hands of the settlor. The court held that a proper construction of the trust deed did not and could not and could not depend upon what the settlor actually did or what he refrained from doing. It could only depend upon the court coming to the conclusion that, as the trust deed stood, the settlor was entitled to certain benefits whether they were direct or indirect in nature and that there could be no doubt, looking at the clause as to investments, that the settlor was entitled to a benefit under the provisions of the trust deed and thereby derived an indirect benefit in the income of the trust and, therefore, the third proviso did not apply and the income of the trust was liable to tax in the hands of the settlor. As we said, the decision is one under proviso 111 to section 16(1) (c) and therefore had no application to the instant case. But we may observe before parting with this case that clause 7 of trust deed in that case gave power to the settlor to purchase the trust property, not withstanding that he was a trustee. With reference to that clause, a contention was urged before the learned judge that that power would not be lawful in view of section 53 of the Trust Act. But the learned judges negatived it observing that, whatever the legal consequences of the act of the trustee may be, the fact remained that the settlor had the power to purchase the trust property under the deed of trust. We may, however, observe that this fact was, as is clear from the judgment, not made a ground for the judgment against the assessee. The learned Advocate-General also referred to us the case of Abbay L. Khatau v. Commissioner of Income-tax. This decision also cannot help us in view of the fact that the department there had applied proviso 111 instead of proviso 1, although the trust was an irrevocable trust. That being the case, the learned judges there declined to decide the question whether the case fell within the first proviso, as the department had not at any time tried to bring the case under that proviso. The learned Advocate-General then pointed out to us an unreported decision of the High Court of Bombay in Commissioner of Income-tax v. Mathuradas Mangaldas Parekh (Income-tax Reference No. 4 of 1954), collected in Volume 1 of Unreported Income-tax Judgment of the Bombay High Court, at page 314, published by the Western India Regional Council of the Institute of Chartered Accountants of India, Bombay. There an undivided Hindu Family, through its karta, executed a deed of settlement in favor of his three minor daughters. The trustees were the karta and his wife in their individual capacity. Clause (4) of the trust deed gave trustees very wide powers including full and unrestricted power of investing and transposing the investments in all respects as if they were absolutely entitled thereto beneficially. The revenue contended that the trustees under that clause might make loans to themselves and without interest and, therefore, a right to reassume power over the income was conferred upon the settlor and, consequently, the case fell within the first proviso to section 16(1) (c) of the Act. The learned judges rejected this contention as being unsound on the ground that the trustees would be committing a breach of law if they advanced moneys to themselves which was prohibited by section 54 of the Trust Act. They also held that interest would be derived by the trustees and not by the settlor and, therefore, the income derived by the trustees could not be assessed in the hands of the assessee, Hindu undivided family. It will be thus seen that one of the reasons for refusing to apply proviso 1 to section 16(1) (c) in the decision was that if the trustees were to give a loan to themselves section 54 of the Trust Act would be a bar and such a loan would be in breach of law by the trustees and, therefore, the power conferred upon them was not a valid power which could be considered while determining whether proviso 1 applied or not. The learned Advocate-General tried to distinguish this case upon the grounds, (1) that the case was concerned with the private trust and therefore section 54 of the Trust Act applied, and (2) that the power to give loan included the power to give loan to the trustees and not to the settlor. Though section 54 of the Trust Act applies to private trusts, principles analogous to the provisions of that section must apply to trusts which are not private. The decision, therefore, in Mathuradas Mangaldas is of some use in so far as it can be said to lay down the principle that a power given to the settlor under a trust deed which is challenged as one granting to him the power to reassume control over the corpus or the income of the trust fund, should be a valid power. These decisions,</p><p style="text-align: justify;">7. however, do not directly apply to the facts before us and, therefore, cannot help us much in deciding the question before us and we must, therefore, turn to the provisions of section 16(1) (c), proviso 1, to answer them. </p><p style="text-align: justify;">8. Commenting on the provisions in the English Act corresponding to these provisions, the House of Lords in A. G. Chamberlain v. Commissioners of Inland Revenue stated that these provisions were designed to overtake and circumvent a growing tendency on the part of taxpayers to endeavour to avoid or reduce tax liability by means of settlements. The method consisted in the disposal by the taxpayer of part of his property in such a way that its income should no longer be received by him, while at the same time he retained certain powers over, or interest in, the property or its income. The legislature's counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should notwithstanding, be treated as still his income and taxed in his hands accordingly. The effect of the first proviso to section 16(1) (c) in substance is that a transfer should be deemed to be revocable, though apparently irrevocable, if it contains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or the assets of the trust premises. It is only if one or the other of these provisions is present in the transfer that an irrevocable transfer is, in the eye of the law, a revocable transfer. The learned Advocate-General has not relied upon the first part of the proviso, which deals with the case of retransfer of income or assets of the trust fund to the settlor, but upon the second part of it, namely, a case where the deed of trust gives the settlor a right to reassume power directly or indirectly over the income or the assets of the trust premises. </p><p style="text-align: justify;">9. The question, therefore, is whether clauses 10 and 21 of the present deed of trust relied upon by the learned Advocate-General, have the effect of giving a right to the settlor to reassume power directly or indirectly over the income or assets of the trust fund which he had before he made the trust deed. When proviso 1 talks about a right to reassume power, prima facie, that must mean that there is such a power lawfully given under the deed of trust. It obviously cannot be a right, against the mischief of which the legislature was constrained to make a provisions and which a settlor cannot lawfully exercise without either committing a breach of trust or a breach of some law. In the case of Mathuradas Mangaldas, the High Court of Bombay considered it an effective answer to the contention on behalf of the revenue that, though the deed of trust there contained power to the trustees to give loans to themselves, section 54 of the Trust Act would render such an act a breach of the law and, therefore, such a provision cannot be regarded as a right to reassume power. The same principle was also laid down by the High Court of Calcutta in Commissioner of Income-tax v. S. M. Bose. There the assessee settled certain property on himself as trustee to hold it in trust for his daughter. The deed provided that the trustee was to take possession and after paying outgoings, the income of the trust estate was to be paid to his daughter during the term of her natural life, for her sole and separate use. The deed also made provision as to how the income was to be dealt with on the death of the daughter but the settlor retained no right whatsoever over the corpus of the income and he had no power of revocation. Clause 3 of the deed provided that as long as the present trustee, namely, the settlor or persons named as trustees in addition or substitution acted as trustees, they should not be accountable to any of the beneficiaries relating to his or their dealing or the income of the trust estate. The question was whether the income from the trust property was taxable in the hands of the assessee as his income by virtue of the provisions of section 16(1) (c) of the Act. The High Court held that the settlor had by this trust put the income for ever out of his control and that being so, the income from the trust properties could not be assessed as part of the income of the assessee under section 16(1) (c). It also held that clause 3, which was relied upon by the department, did not give the settlor control over the income as it was merely a provision limiting the rights of the beneficiary to question certain acts of the trustee. Dealing with the first proviso to section 16(1) (c), the learned judges observed at page 141 of the report that that proviso only contemplated a case where 'the settlor can lawfully reassume power over the income or the assets and that unless that was so, the proviso would cover every trust where a settlor had made himself a trustee because a trustee acting dishonestly could always assume control over the income.' </p><p style="text-align: justify;">10. The argument of the learned Advocate-General was that no reliance should be placed upon the decision in the case of Mathurdas Mangaldas, because it was a case of private trust and to such private trust only section 54 of the Trust Act would apply. But, as we have already stated, though section 54 applies no doubt to private trusts, the position of a settlor as also of a trustee in charitable trusts cannot be any better than a trustee under a private trust and we should, therefore, think that if a trustee of a charitable trust were to give a loan to himself, that would clearly be a case of a conflict of duty and interest and would amount to a breach of trust on his part. In the present case, we are on somewhat safer grounds. The Bombay Public Trust Act (XXIX of 1950) came into force on August 14, 1950, and section 35 thereof, as it stood prior to its amendment in 1954, provided that where the trust property consisted of money and could not be applied immediately or at any early date to the purpose of the public trust, the trustee shall be bound, subject to any direction contained in the instrument of trust, to invest the money in public securities. The second proviso to that section laid down that the Charity Commissioner may, by general or special order, permit the trustee of any public trust or classes of such trusts to invest the money in any other manner. As section 35 stood before its amendment in 1954, a trustee of a public trust could invest the trust fund in securities other than public securities if the deed of trust permitted him to do so. But by Bombay Act LIX of 1954, section 35 was amended and, as so amended, it made it incumbent upon a trustee of a public trust to deposit the trust money in the manner provided therein 'notwithstanding any direction contained in the instrument of the trust'. Therefore, notwithstanding a provision in the deed of trust permitting the trustee to invest in securities other than those mentioned in the section, a trustee is prohibited from doing so and the penalty for contravention of the provisions of section 35 would be a prosecution and, on conviction, a fine of Rs. 1,000, as provided in section 66 of the Act. Giving a loan to himself by a trustee, although the deed might empower him to do so, would not only be a breach of trust but an illegal act resulting in a penal offence. In our view, even if a trust deed were to provide for power in favor of a settlor, who is also a trustee, to grant loan to himself, such a power cannot amount to a lawful right to reassume power and if there is such a provision in a trust deed, it has to be taken as ineffective. </p><p style="text-align: justify;">11. But the learned Advocate-General argued (1) that we are called upon in this case to consture the deed of trust and, to decide whether that deed of trust conferes a right to reassume power and, therefore, it would not be permissible to us to look at another statute to determine the proper construction of section 16(1) (c), proviso 1, and (2) that proviso 11 to section 35 of the Bombay Trust Act in any event gives authority to the Charity Commissioner to grant leave to trustees to invest otherwise than prescribed in sub-section (1) of that section. The answer, however, to both these contentions is fairly simple. When a statute talks about a right to reassume, it must mean a lawful right which can be lawfully exercised. This conclusion is fortified by the decisions in the case of Mathuradas Mangaldas and in the case of Commissioner of Income-tax v. S. M. Bose, already referred to above. So far as the second part of his contention is concerned, a right to reassume must be given to the settlor independently of any third party and department upon his own volition. It is true that the Charity Commissioner may grant leave to the settlor but he may or may not grant it. A right to reasssume cannot rest dependent upon whether the charity Commissioner may or may not grant sanction. Such a question arose in Ramji Keshavji v. Commissioner of Income-tax, where proviso 1 to section 16(1) (c) was relied upon by the Commissioner. The learned judges there held, on a reading of clause 5 of the deed of trust, that under that clause all the powers reserved thereunder for payment of the income of certain sale proceeds were in favor of one Kamalabai, the wife of the settlor, and not the settlor. It was true that under the provisions of that clause, the said Kamalabhai was given the right to apply to the trustees for payment for a change of air for the settlor, or if there was protracted illness of the settlor, but the High Court held that it was still a right given to Kamalabhai and not to the settlor and the amount under clause 5 was to be paid to Kamalabai and therefore, it was the volition of Kamalabai alone which could bring into operation, first the application, and, secondly, if it was acceded to, the payment to her. Mr. Justice Kania, as he then was, therefore, of the view that the provisions of clause 5 under these circumstances did not amount to either a retransfer of the assets or the income or a reassumption of power directly or indirectly in the settlor. In the case before us, the power under clause 10, even when read with clause 21, is, for the reasons aforesaid, rendered nugatory by the provisions of section 35 of the Bombay Trust Act. The power of investment in a manner other than that prescribed under section 35(1) of the Trust Act can obviously be exercised only with the sanction of the Charity Commissioner. The power is dependent for its exercise upon the volition of a public officer, i.e., the Charity Commissioner, who has to decide the question of sanction upon the terms of the statute or the rules made thereunder and it cannot amount to a right to reassume power over the income or the assets of the trust against the mischief of which the legislature has provided an express provision. Surely, it must be presumed that the Charity Commissioner would not grant his sanction to an investment which is bound to result in a conflict of duty and interest on the part of the settlor who is also a trustee. Therefore, such a right, if it can be called a right, is not one of any substance and cannot, therefore, be construed as a right to reassume power over the trust assets or the income thereof, as contemplated by proviso 1 to section 16(1) (c). </p><p style="text-align: justify;">12. A loan, by the very nature of it, cannot be said to amount to an exercise of dominion or control over its subjects-matter. It is repayable and is given on conditions as to the time of repayment and interest, if any. By taking a loan, a settlor does not exercise over its subject-matter power or dominion which, but for the trust or the settlement, he would have been able to exercise. Therefore, on this ground also, it cannot be held that, if the settlor were to give a loan to himself or to his firm, he would be exercising control over the trust fund or its income as he would have had over the fund or its income before he settled that fund upon the trust. Besides, a loan still remains an asset or the income of the trust and it is a subject-matter still governed by and is subject to the provisions of the trust. For these reasons, section 16(1) (c), proviso 1, is not applicable to the facts of this case. </p><p style="text-align: justify;">13. Our answers to the question referred to us are as follows : </p><p style="text-align: justify;">Question No. 1 - In the affirmative. </p><p style="text-align: justify;">Question No. 2 - In the affirmative. </p><p style="text-align: justify;">The Commissioner will pay to the opponent the costs of this reference. </p><p style="text-align: justify;">Questions answered in the affirmative.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '[1965]55ITR214(Guj)',
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	'PERSON' => array(
		(int) 0 => 'J.M. Shelat',
		(int) 1 => 'Jayantilal Amratlal',
		(int) 2 => 'Jayantilal Amratlal',
		(int) 3 => 'Jayantial Amratlal',
		(int) 4 => 'Jayantilal Amratlal',
		(int) 5 => 'Jayantilal Amratlal',
		(int) 6 => 'Jayantilal Amratlal',
		(int) 7 => 'Hariprasad',
		(int) 8 => 'Jayantilal Amratlal',
		(int) 9 => 'Jayantilal Amratlal',
		(int) 10 => 'Jayantilal Amratlal',
		(int) 11 => 'Jayantilal Amratlal',
		(int) 12 => 'Jayantilal Amratlal',
		(int) 13 => 'Hariprasad',
		(int) 14 => 'Jayantilal Amratlal',
		(int) 15 => 'Jayantilal Amratlal',
		(int) 16 => 'Jayantilal Amratlal',
		(int) 17 => 'Kikabhai Premchand',
		(int) 18 => 'Kikabhai Premchand',
		(int) 19 => 'Abbay L. Khatau v. Commissioner of Income-tax',
		(int) 20 => 'Mathuradas Mangaldas Parekh',
		(int) 21 => 'Mathuradas Mangaldas',
		(int) 22 => 'A. G. Chamberlain v. Commissioners',
		(int) 23 => 'disembarrass',
		(int) 24 => 'Mathuradas Mangaldas',
		(int) 25 => 'S. M. Bose',
		(int) 26 => 'Mathurdas Mangaldas',
		(int) 27 => 'Mathuradas Mangaldas',
		(int) 28 => 'S. M. Bose',
		(int) 29 => 'Keshavji',
		(int) 30 => 'Kamalabhai',
		(int) 31 => 'Justice Kania'
	),
	'DATE' => array(
		(int) 0 => 'June 19, 1947',
		(int) 1 => '1950',
		(int) 2 => 'March 27, 1957',
		(int) 3 => '1957-58',
		(int) 4 => 'year 1958-59',
		(int) 5 => '1950',
		(int) 6 => 'years 1955-1956',
		(int) 7 => '1956-57',
		(int) 8 => 'years 1958-1959',
		(int) 9 => '1959-1960',
		(int) 10 => 'the same day',
		(int) 11 => 'March 11, 1960',
		(int) 12 => 'all the assessment years',
		(int) 13 => 'December 26, 1961',
		(int) 14 => '1950',
		(int) 15 => '1950',
		(int) 16 => '1954',
		(int) 17 => '11 of 1882',
		(int) 18 => '21',
		(int) 19 => '21',
		(int) 20 => 'six years',
		(int) 21 => 'these six years',
		(int) 22 => 'these six years',
		(int) 23 => '1954',
		(int) 24 => '1950',
		(int) 25 => 'August 14, 1950',
		(int) 26 => '1954',
		(int) 27 => '1954',
		(int) 28 => '1954',
		(int) 29 => '21'
	),
	'CARDINAL' => array(
		(int) 0 => '80',
		(int) 1 => '80',
		(int) 2 => '40,000',
		(int) 3 => '80',
		(int) 4 => 'three',
		(int) 5 => '1',
		(int) 6 => '2',
		(int) 7 => 'four',
		(int) 8 => '1',
		(int) 9 => '4',
		(int) 10 => '10',
		(int) 11 => '21',
		(int) 12 => '10',
		(int) 13 => '2',
		(int) 14 => 'two',
		(int) 15 => '80',
		(int) 16 => '80',
		(int) 17 => '1',
		(int) 18 => '3',
		(int) 19 => 'two',
		(int) 20 => '1',
		(int) 21 => '80',
		(int) 22 => '2',
		(int) 23 => 'three',
		(int) 24 => 'two',
		(int) 25 => '1,000',
		(int) 26 => '1',
		(int) 27 => '4.',
		(int) 28 => 'two',
		(int) 29 => 'one',
		(int) 30 => '5',
		(int) 31 => '6',
		(int) 32 => '7',
		(int) 33 => '8',
		(int) 34 => 'one',
		(int) 35 => '10',
		(int) 36 => '21',
		(int) 37 => '6.',
		(int) 38 => '80',
		(int) 39 => 'three',
		(int) 40 => '1',
		(int) 41 => '10',
		(int) 42 => '21',
		(int) 43 => '10',
		(int) 44 => '211',
		(int) 45 => '10',
		(int) 46 => '10',
		(int) 47 => '21',
		(int) 48 => '111',
		(int) 49 => '1',
		(int) 50 => '8',
		(int) 51 => '111',
		(int) 52 => '7',
		(int) 53 => '111',
		(int) 54 => '1',
		(int) 55 => '4',
		(int) 56 => '1',
		(int) 57 => '314',
		(int) 58 => 'three',
		(int) 59 => '4',
		(int) 60 => '1',
		(int) 61 => '1',
		(int) 62 => '1',
		(int) 63 => '2',
		(int) 64 => '1',
		(int) 65 => '8',
		(int) 66 => '9',
		(int) 67 => '10',
		(int) 68 => '21',
		(int) 69 => '1',
		(int) 70 => '3',
		(int) 71 => '3',
		(int) 72 => '141',
		(int) 73 => '10',
		(int) 74 => '1,000',
		(int) 75 => '11',
		(int) 76 => '1',
		(int) 77 => '1',
		(int) 78 => '2',
		(int) 79 => '11',
		(int) 80 => '1',
		(int) 81 => '1',
		(int) 82 => '5',
		(int) 83 => 'one',
		(int) 84 => '5',
		(int) 85 => '10',
		(int) 86 => '12',
		(int) 87 => '1',
		(int) 88 => '13',
		(int) 89 => '2'
	),
	'ORG' => array(
		(int) 0 => 'Co. Ltd.',
		(int) 1 => 'Jayantilal Amratlal Charitable Trust',
		(int) 2 => 'the Bombay Trust Act',
		(int) 3 => 'the Bombay Trust Act',
		(int) 4 => 'Appellate',
		(int) 5 => 'Tribunal',
		(int) 6 => 'Tribunal',
		(int) 7 => 'Tribunal',
		(int) 8 => 'Tribunal',
		(int) 9 => 'Tribunal',
		(int) 10 => 'Tribunal',
		(int) 11 => 'the Bombay Trust Act',
		(int) 12 => 'Tribunal',
		(int) 13 => 'Tribunal',
		(int) 14 => 'Tribunal',
		(int) 15 => 'this High Court',
		(int) 16 => 'Jayantilal Amratlal Private Ltd.',
		(int) 17 => 'this High Court',
		(int) 18 => 'the High Court',
		(int) 19 => 'The High Court',
		(int) 20 => 'Co. Ltd.',
		(int) 21 => 'the Bombay Trust Act',
		(int) 22 => 'Kasturlal Chandulal Parikh',
		(int) 23 => 'Bhagubhai Chandulal',
		(int) 24 => 'Visa',
		(int) 25 => 'Co. Ltd.',
		(int) 26 => 'Advocate-General',
		(int) 27 => 'Advocate-General',
		(int) 28 => 'Advocate-General',
		(int) 29 => 'Advocate-General',
		(int) 30 => 'Advocate-General',
		(int) 31 => 'Advocate-General',
		(int) 32 => 'Advocate-General',
		(int) 33 => 'Advocate-General',
		(int) 34 => 'Advocate-General',
		(int) 35 => 'the High Court',
		(int) 36 => 'the Bombay High Court',
		(int) 37 => 'the Western India Regional Council of the Institute of Chartered Accountants',
		(int) 38 => 'Advocate-General',
		(int) 39 => 'the House of Lords',
		(int) 40 => 'Advocate-General',
		(int) 41 => 'Advocate-General',
		(int) 42 => 'the High Court',
		(int) 43 => 'the High Court of Calcutta',
		(int) 44 => 'The High Court',
		(int) 45 => 'Advocate-General',
		(int) 46 => 'The Bombay Public Trust Act',
		(int) 47 => 'Bombay Act LIX',
		(int) 48 => 'Advocate-General',
		(int) 49 => 'the Bombay Trust Act',
		(int) 50 => 'the High Court',
		(int) 51 => 'the Bombay Trust Act'
	),
	'FAC' => array(
		(int) 0 => 'Jayantilal Amratlal',
		(int) 1 => 'Jayantilal Amratlal',
		(int) 2 => 'Jayantilal Amratlal'
	),
	'ORDINAL' => array(
		(int) 0 => 'first',
		(int) 1 => 'third',
		(int) 2 => 'third',
		(int) 3 => 'third',
		(int) 4 => 'third',
		(int) 5 => 'first',
		(int) 6 => 'first',
		(int) 7 => 'first',
		(int) 8 => 'first',
		(int) 9 => 'second',
		(int) 10 => 'first',
		(int) 11 => 'second',
		(int) 12 => 'second',
		(int) 13 => 'third',
		(int) 14 => 'first',
		(int) 15 => 'secondly'
	),
	'GPE' => array(
		(int) 0 => 'Ramanlal',
		(int) 1 => 'Ramanlal',
		(int) 2 => 'Bombay',
		(int) 3 => 'India',
		(int) 4 => 'Bombay',
		(int) 5 => 'Bombay',
		(int) 6 => 'Kamalabai',
		(int) 7 => 'Kamalabhai',
		(int) 8 => 'Kamalabai',
		(int) 9 => 'Kamalabai'
	),
	'QUANTITY' => array(
		(int) 0 => '1 to section 16(1',
		(int) 1 => '1 to section 16(1',
		(int) 2 => '1 to section 16(1'
	),
	'NORP' => array(
		(int) 0 => 'Hindu',
		(int) 1 => 'Hindu'
	),
	'PRODUCT' => array(
		(int) 0 => 'Family'
	),
	'LANGUAGE' => array(
		(int) 0 => 'English'
	)
)
$desc = array(
	'Judgement' => array(
		'id' => '732798',
		'acts' => '<a href="/act/133687/income-tax-act-1922-complete-act">Income Tax Act, 1922</a> - Sections 16(1)',
		'appealno' => 'Income-tax Reference No. 19 of 1962',
		'appellant' => 'Commissioner of Income-tax, Gujarat',
		'authreffered' => '',
		'casename' => 'Commissioner of Income-tax, Gujarat Vs. Jayantilal Amratlal',
		'casenote' => 'Direct Taxation - assessment - Section 16 (1) of Income Tax Act, 1922 and Section 36 of Bombay Trust Act (XXIX of 1950) - applicability of Proviso to Section 16 (1) (c) in question - trust deed did not contain provision for re-transfer or right to resume power over income or assets directly or indirectly - clause 10 of deed conferred power on settlor to invest trust properties or their income - such power overridden by Section 36 of Bombay Trust Act (XXIX of 1950) - income of trust not includible in income of assessee - held, trust deed did not fall within Proviso to Section 16 (1) (c).


 -  -  upon trust, known as Jayantilal Amratlal Charitable Trust for the following objects, namely, For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind. The Tribunal came to the conclusion that the de facto position of the settlor, whatever it is, would fall clearly outside the scope of its investigation and so long as the trust deed did not contain any provision which had the effect of a retransfer or a right to reassume power over the income or the assets directly or indirectly, proviso 1 to section 16(1) (c) could not apply. Clause 4 also provides that the trustees should at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya and in applying the income of the trust property for the aforesaid objects, the trustees may also consider claims of any needy or poor person belonging to the Visa formed community. Clause 10, which has been relied upon most by the revenue, provides as follows :The trustees may either permit the whole or any part of the trust premises to remain in its present state of investment or shall at any time or times during the lifetime of the settlor at his discretion and may after his death at their discretion call the same or any part thereof and shall during the lifetime of the settlor at his discretion invest the moneys produced by such sale and all other moneys lying invested with them in such of the investments as are authorised by law for investment or trust premises or in ordinary or preference shares of joint stock companies, whether partly of fully paid, or in debentures or in giving loans to any public company of firm or firm good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the trustees with the like direction to vary or transpose the said investments into or for others of the same or a like n The learned judges there held that the object of the third proviso was to consider a revocable trust irrevocable provided the settlor enjoyed no benefit whatever in the trust for a period exceeding six years. During these six years, when he could not revoke the trust, the benefit was to be enjoyed solely by the beneficiaries, but it the settlor were to retain any benefit in the enjoyment of the income, then even during these six years the trust did not become irrevocable and the third proviso did not apply. But, as we have already stated, though section 54 applies no doubt to private trusts, the position of a settlor as also of a trustee in charitable trusts cannot be any better than a trustee under a private trust and we should, therefore, think that if a trustee of a charitable trust were to give a loan to himself, that would clearly be a case of a conflict of duty and interest and would amount to a breach of trust on his part.',
		'caseanalysis' => null,
		'casesref' => 'Ramji Keshavji v. Commissioner of Income;',
		'citingcases' => '',
		'counselplain' => ' J.M. Thakore, Adv. General',
		'counseldef' => ' R.J. Kolah, Adv.',
		'court' => 'Gujarat',
		'court_type' => 'HC',
		'decidedon' => '1963-09-05',
		'deposition' => '',
		'favorof' => null,
		'findings' => null,
		'judge' => ' J.M. Shelat and; P.N. Bhagwati, JJ.',
		'judgement' => '<p style="text-align: justify;">J.M. Shelat, C.J.</p><p style="text-align: justify;">1. By a trust deed dated June 19, 1947, the assessee, Jayantilal Amratlal, settled 80 ordinary shares held by him in Messrs. Jayantilal Amratlal and Co. Ltd. upon trust, known as Jayantilal Amratlal Charitable Trust for the following objects, namely, 'For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind.' The trust deed was registered with the Charity Commissioner under the Bombay Trust Act (Act XXIX of 1950). Originally, as the recitals in the said deed of trust show, the trust fund consisted of the aforesaid 80 shares of the market value of Rs. 40,000. By his letter dated March 27, 1957, the settlor added to those 80 ordinary shares certain other shares held by him in other companies, bringing the total trust fund to about rupees three lakhs and a little more. Till the assessment year 1957-58, the income-tax department accepted the trust as a valid charitable trust and gave the necessary exemption to the trustees thereof in respect of its income. But while assessing the trust for the assessment year 1958-59, the Income-tax Officer came to the conclusion that section 16(1) (c), proviso I, applied and, therefore, the income of the trust could not be assessed in the hands of the trustees but was assessable in the hands of the settlor, the assessee Jayantilal Amratlal. The Income-tax Officer gave the reasons for so holding, (1) that the assessee had de facto control over the income and corpus of the trust and even the charities and temples to receive the benefit would be chosen by him, and (2) that the infringement of section 35(1) of the Bombay Trust Act, 1950, entailed a small penalty which was hardly deterrent. Finding that the assessment of Jayantilal Amratlal for the assessment years 1955-1956 and 1956-57 was still open, the Income-tax Officer assessed the income of the trust in the hands of the settlor and he passed the assessment orders for the assessment of Jayantilal Amratlal for the assessment of the trust for the assessment years 1958-1959 and 1959-1960 on the same day, i.e., on March 11, 1960. The assessee, Jayantial Amratlal, and the trust filed appeals against these orders before the Appellate Assistant Commissioner who confirmed the orders of the Income-tax Officer. The matters were then carried in appeal to the Tribunal and the Tribunal consolidated all the four appeals of the trust and the settlor, Jayantilal Amratlal, for all the assessment years and disposed them of by a single orders dated December 26, 1961. The Tribunal was of the view that the decision in the appeal before it had to be based on a proper construction of the trust deed as it stood and it would be its duty then to ascertain if the deed contained any provision for the retransfer directly or indirectly of the income or the assets of the trust to the settlor or in any way gave the settlor a right to reassume power directly or indirectly over the income or the assets. The Tribunal came to the conclusion that the de facto position of the settlor, whatever it is, would fall clearly outside the scope of its investigation and so long as the trust deed did not contain any provision which had the effect of a retransfer or a right to reassume power over the income or the assets directly or indirectly, proviso 1 to section 16(1) (c) could not apply. After analysing clauses (4), (10) and (21) of the deed of trust relied upon by the department, the Tribunal came to the conclusion that it did not see any thing in these clauses which conferred upon the assessee the right to retransfer directly or indirectly the income or the assets, or the right to reassume power over them. The Tribunal also was of the opinion that, though clause (10) of the deed conferred power upon the settlor to invest the trust properties or their income, and that under the provisions of that clause he could, if he so desired, invest them in his own companies, that power was overridden by section 36 of the Bombay Trust Act (XXIX of 1950). The Tribunal was also of the opinion that the fact that the settlor could offend against the provisions of that Act with impunity as the penalty thereunder was light, was a matter which was completely extraneous to the consideration before it. On these grounds, the Tribunal held that the trust deed did not fall within the mischief of the first proviso to section 16(1) (c) and, therefore, the income of the trust was not includible in the income of the assessee, Jayantilal Amratlal. </p><p style="text-align: justify;">2. Before the Tribunal reliance was placed upon the decision of this High Court in a case under section 23A of the Act, viz., Jayantilal Amratlal Private Ltd. v. Commissioner of Income-tax, where this High Court held, inter alia, that the promoters of the assessee-company there, i.e., Jayantilal Amratlal and his two brothers, Hariprasad and Ramanlal, were persons acting in union and when they subscribed to a portion of the capital, they could be said to have held the voting power in connection therewith as a block and that there was a community of interest and they could not be regarded as holding those shares as members of the public. As regards the aforesaid 80 ordinary shares, the High Court held that though they were settled upon trust by Jayantilal Amratlal as it was within his power as the settlor to give directions in connection with the voting right to be exercised by the trustees in respect of these shares and, therefore, these 80 shares also could not be regarded as shares held by members of the public. The High Court, therefore, held that the assessee-company was a company in which the public were not substantially interested within the meaning of the Explanation to section 23A. The Tribunal was of the opinion, and in our opinion rightly, that this decision had nothing to do with the question before it and, as we have already said held that section 16(1) (c) proviso 1, did not apply to the facts of the case and that the income of the trust should not be assessed in the hands of the settlor and was entitled to exemption under section 4(3) (i) of the Act. </p><p style="text-align: justify;">3. The department mainly relied upon, as seen from the order of the Income-tax Officer and the Assistant Commissioner, two facts, (1) that Jayantilal Amratlal had utilised those 80 shares for the purpose of controlling Jayantilal Amratlal and Co. Ltd.; and (2) that the income of the trust properties had been invested by Jayantilal Amratlal in three companies in which he and his two brothers had a shareholding. The department also was of the view that though section 35 of the Bombay Trust Act, 1950, as amended in 1954, prohibited investment in any manner other than prescribed there, the assessee, under the proviso thereto, could obtain sanction of the Charity Commissioner and that even if he did not do so and transgressed the provisions of section 35, the penalty was only Rs. 1,000, which was not a deterrent one and, therefore, the provisions of that section did not tend to prevent such contravention. The question that arises before us is whether these facts attract the application of proviso 1 to section 16(1) (c) of the Act. </p><p style="text-align: justify;">4. The deed of trust appointed Jayantilal Amratlal, his wife, his two brothers, Hariprasad and Ramanlal, and one Kasturlal Chandulal Parikh and Bhagubhai Chandulal, as trustees thereunder. Clause 1 of the deed provides that the trustees shall stand possessed of the said shares and all other moneys held by the trustees subject to the powers, provisions, agreements and declarations therein declared. Clause 4 provides that the trustees should hold the net residue of the income of the trust premises in trust to utilise the same for the objects therein above set out or for any other objects beneficial to mankind as the settlor may, during his lifetime, in writing direct and on and after his death as the trustees may in their absolute discretion think fit. Clause 4 also provides that the trustees should at the direction of the settlor during his lifetime and after his death at their discretion set aside any portion of the income of the trust premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya and in applying the income of the trust property for the aforesaid objects, the trustees may also consider claims of any needy or poor person belonging to the Visa formed community. Clause 5 gives power to the trustees to accept contributions or donations to the trust premises from any person or person and directed the trustees to hold the same upon the same trust and subject to the same powers, provisions and stipulations contained in the trust deed. Clauses 6, 7 and 8 provide for the powers to the trustees to utilise the trust fund for the aforesaid charitable objects or any one of them. Clause 10, which has been relied upon most by the revenue, provides as follows : </p><p style="text-align: justify;">'The trustees may either permit the whole or any part of the trust premises to remain in its present state of investment or shall at any time or times during the lifetime of the settlor at his discretion and may after his death at their discretion call the same or any part thereof and shall during the lifetime of the settlor at his discretion invest the moneys produced by such sale and all other moneys lying invested with them in such of the investments as are authorised by law for investment or trust premises or in ordinary or preference shares of joint stock companies, whether partly of fully paid, or in debentures or in giving loans to any public company of firm or firm good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the trustees with the like direction to vary or transpose the said investments into or for others of the same or a like nature......'</p><p style="text-align: justify;">5. The clause also provides that on and after the death of the settlor the trustees may permit the whole or any part of the trust premises to remain in the state of investment in which the same are at the time of the death of the settlor or may at any time or times sell the same or any part thereof and invest the moneys produced by such and all other moneys lying invested with them in such of the investments as are authorised by section 20 of the Indian Trusts Act (11 of 1882). Lastly, clause 21 provides that all questions arising in the management and administration of the trust and all differences of opinions amongst the trustees shall be disposed of in accordance with the opinion of the settlor during his lifetime and on and after the death of the settlor, in accordance with the opinion of the majority of the trustees. </p><p style="text-align: justify;">6. The arguments utilised by the Income-tax Officer in his assessment order and which seem to have found favor with the Assistant Commissioner cannot, on examination, be held to be valid, for, they cannot be a ground for holding that proviso 1 to section 16(1) (c) applies. It the settlor, Jayantilal Amratlal, used the aforesaid 80 shares for the purpose of controlling Jayantilal Amratlal and Co. Ltd., as the Income-tax Officer argued, the share would still be remain the trust assets and no question of the right to reassume power over them or over their income or of retransferring them can possibly arise, for he would utilise their voting power as assets of the trust. Similarly, the investments of the income of the trust funds in the three aforesaid companies mentioned in his order would not bring in the application of proviso 1 to section 16(1) (c). The learned Advocate-General, in any event, did not employ these arguments as part of his contention. Instead, the structure of his contention depended solely upon the construction of clauses 10 and 21 of the trust deed and their effect. When read together, there can be no doubt that Jayantilal Amratlal, as the settlor, had absolute discretion during his lifetime to invest under the provisions of clause 10 the assets and the income of the trust fund and the other trustees had no power to overried his wishes. But that by itself would not be a relevant factor as held in Commissioner of Income-tax v. Sir Kikabhai Premchand, at page 211, a case relied upon to some extent by the learned Advocate-General himself. But the contention of the learned Advocate-General did not depend solely upon the deplitude of powers reserved to the settlor in the investments under clauses 10 and 21 but the resultant effect thereof. His submission was that we should consider the absolute discretion given to the settlor under these clauses, including the power to invest the trust funds and the income thereof in such public companies, firms, etc., as he chose and to grant loans to them on such terms and conditions as he might think proper and fit. The power reserved to him as the settlor to give loans to public companies and/or firms, coupled with the absolute voice given to him in the matter of management and administration of the trust under clause 21 would, in the view of the learned Advocate-General, result in a right in his favour to reassume control over the trust funds and the income thereof which he had over them before he made the trust deed and settled them on trusts specified therein. For instance, argued the learned Advocate-General, the settlor could grant under their clauses a loan to a firm in which he was interested which, by virtue of the partners being jointly and severally liable, would in substance be a loan to himself. He could grant such loans perhaps to the detriment of the trust on such terms and conditions which he decided. Once such a loan was thus made, the settlor would have all the powers over the fund so advanced which he had over that fund before he settled it on trust. Thus, according to the learned Advocate-General, the powers under clauses 10 and 21 coupled with the power to give loans, constituted a right to reassume power over the trust funds and income thereof which he had over these funds before the trust deed was made, bringing into operation proviso 1 to section 16(1) (c), and it was this very mischief which the legislature wanted to prevent and which was the reason for inserting section 16(1) (c) and the proviso thereto in the Act. The learned Advocate-General relied upon the case of Commissioner of Income-tax v. Sir Kikabhai Premchand, which we have already referred. That was a case, however, under proviso 111 to section 16(1) (c) and not proviso 1. The question debated there was whether the settlor derived any benefit in the income of the trust fund directly or indirectly. The learned judges there considered clause 8 of the trust deed which was the clause dealing with investment and which gave power to the settlor to grant a loan to any person including himself and which was regarded as a power to give loan to himself with or without security and even without interest. The learned judges there held that the object of the third proviso was to consider a revocable trust irrevocable provided the settlor enjoyed no benefit whatever in the trust for a period exceeding six years. During these six years, when he could not revoke the trust, the benefit was to be enjoyed solely by the beneficiaries, but it the settlor were to retain any benefit in the enjoyment of the income, then even during these six years the trust did not become irrevocable and the third proviso did not apply. On an examination of clauses of the deed, they came to the conclusion that the settlor was at liberty to lend part of the income to himself without security and without interest which led one to the conclusion that he derived at least an indirect benefit. They negatived the contention on behalf of the assessee that so long as the settlor did not lend any moneys to himself and did not actually derive any benefit, the third proviso would apply and the income therefore would not be liable to tax in the hands of the settlor. The court held that a proper construction of the trust deed did not and could not and could not depend upon what the settlor actually did or what he refrained from doing. It could only depend upon the court coming to the conclusion that, as the trust deed stood, the settlor was entitled to certain benefits whether they were direct or indirect in nature and that there could be no doubt, looking at the clause as to investments, that the settlor was entitled to a benefit under the provisions of the trust deed and thereby derived an indirect benefit in the income of the trust and, therefore, the third proviso did not apply and the income of the trust was liable to tax in the hands of the settlor. As we said, the decision is one under proviso 111 to section 16(1) (c) and therefore had no application to the instant case. But we may observe before parting with this case that clause 7 of trust deed in that case gave power to the settlor to purchase the trust property, not withstanding that he was a trustee. With reference to that clause, a contention was urged before the learned judge that that power would not be lawful in view of section 53 of the Trust Act. But the learned judges negatived it observing that, whatever the legal consequences of the act of the trustee may be, the fact remained that the settlor had the power to purchase the trust property under the deed of trust. We may, however, observe that this fact was, as is clear from the judgment, not made a ground for the judgment against the assessee. The learned Advocate-General also referred to us the case of Abbay L. Khatau v. Commissioner of Income-tax. This decision also cannot help us in view of the fact that the department there had applied proviso 111 instead of proviso 1, although the trust was an irrevocable trust. That being the case, the learned judges there declined to decide the question whether the case fell within the first proviso, as the department had not at any time tried to bring the case under that proviso. The learned Advocate-General then pointed out to us an unreported decision of the High Court of Bombay in Commissioner of Income-tax v. Mathuradas Mangaldas Parekh (Income-tax Reference No. 4 of 1954), collected in Volume 1 of Unreported Income-tax Judgment of the Bombay High Court, at page 314, published by the Western India Regional Council of the Institute of Chartered Accountants of India, Bombay. There an undivided Hindu Family, through its karta, executed a deed of settlement in favor of his three minor daughters. The trustees were the karta and his wife in their individual capacity. Clause (4) of the trust deed gave trustees very wide powers including full and unrestricted power of investing and transposing the investments in all respects as if they were absolutely entitled thereto beneficially. The revenue contended that the trustees under that clause might make loans to themselves and without interest and, therefore, a right to reassume power over the income was conferred upon the settlor and, consequently, the case fell within the first proviso to section 16(1) (c) of the Act. The learned judges rejected this contention as being unsound on the ground that the trustees would be committing a breach of law if they advanced moneys to themselves which was prohibited by section 54 of the Trust Act. They also held that interest would be derived by the trustees and not by the settlor and, therefore, the income derived by the trustees could not be assessed in the hands of the assessee, Hindu undivided family. It will be thus seen that one of the reasons for refusing to apply proviso 1 to section 16(1) (c) in the decision was that if the trustees were to give a loan to themselves section 54 of the Trust Act would be a bar and such a loan would be in breach of law by the trustees and, therefore, the power conferred upon them was not a valid power which could be considered while determining whether proviso 1 applied or not. The learned Advocate-General tried to distinguish this case upon the grounds, (1) that the case was concerned with the private trust and therefore section 54 of the Trust Act applied, and (2) that the power to give loan included the power to give loan to the trustees and not to the settlor. Though section 54 of the Trust Act applies to private trusts, principles analogous to the provisions of that section must apply to trusts which are not private. The decision, therefore, in Mathuradas Mangaldas is of some use in so far as it can be said to lay down the principle that a power given to the settlor under a trust deed which is challenged as one granting to him the power to reassume control over the corpus or the income of the trust fund, should be a valid power. These decisions,</p><p style="text-align: justify;">7. however, do not directly apply to the facts before us and, therefore, cannot help us much in deciding the question before us and we must, therefore, turn to the provisions of section 16(1) (c), proviso 1, to answer them. </p><p style="text-align: justify;">8. Commenting on the provisions in the English Act corresponding to these provisions, the House of Lords in A. G. Chamberlain v. Commissioners of Inland Revenue stated that these provisions were designed to overtake and circumvent a growing tendency on the part of taxpayers to endeavour to avoid or reduce tax liability by means of settlements. The method consisted in the disposal by the taxpayer of part of his property in such a way that its income should no longer be received by him, while at the same time he retained certain powers over, or interest in, the property or its income. The legislature's counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should notwithstanding, be treated as still his income and taxed in his hands accordingly. The effect of the first proviso to section 16(1) (c) in substance is that a transfer should be deemed to be revocable, though apparently irrevocable, if it contains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or the assets of the trust premises. It is only if one or the other of these provisions is present in the transfer that an irrevocable transfer is, in the eye of the law, a revocable transfer. The learned Advocate-General has not relied upon the first part of the proviso, which deals with the case of retransfer of income or assets of the trust fund to the settlor, but upon the second part of it, namely, a case where the deed of trust gives the settlor a right to reassume power directly or indirectly over the income or the assets of the trust premises. </p><p style="text-align: justify;">9. The question, therefore, is whether clauses 10 and 21 of the present deed of trust relied upon by the learned Advocate-General, have the effect of giving a right to the settlor to reassume power directly or indirectly over the income or assets of the trust fund which he had before he made the trust deed. When proviso 1 talks about a right to reassume power, prima facie, that must mean that there is such a power lawfully given under the deed of trust. It obviously cannot be a right, against the mischief of which the legislature was constrained to make a provisions and which a settlor cannot lawfully exercise without either committing a breach of trust or a breach of some law. In the case of Mathuradas Mangaldas, the High Court of Bombay considered it an effective answer to the contention on behalf of the revenue that, though the deed of trust there contained power to the trustees to give loans to themselves, section 54 of the Trust Act would render such an act a breach of the law and, therefore, such a provision cannot be regarded as a right to reassume power. The same principle was also laid down by the High Court of Calcutta in Commissioner of Income-tax v. S. M. Bose. There the assessee settled certain property on himself as trustee to hold it in trust for his daughter. The deed provided that the trustee was to take possession and after paying outgoings, the income of the trust estate was to be paid to his daughter during the term of her natural life, for her sole and separate use. The deed also made provision as to how the income was to be dealt with on the death of the daughter but the settlor retained no right whatsoever over the corpus of the income and he had no power of revocation. Clause 3 of the deed provided that as long as the present trustee, namely, the settlor or persons named as trustees in addition or substitution acted as trustees, they should not be accountable to any of the beneficiaries relating to his or their dealing or the income of the trust estate. The question was whether the income from the trust property was taxable in the hands of the assessee as his income by virtue of the provisions of section 16(1) (c) of the Act. The High Court held that the settlor had by this trust put the income for ever out of his control and that being so, the income from the trust properties could not be assessed as part of the income of the assessee under section 16(1) (c). It also held that clause 3, which was relied upon by the department, did not give the settlor control over the income as it was merely a provision limiting the rights of the beneficiary to question certain acts of the trustee. Dealing with the first proviso to section 16(1) (c), the learned judges observed at page 141 of the report that that proviso only contemplated a case where 'the settlor can lawfully reassume power over the income or the assets and that unless that was so, the proviso would cover every trust where a settlor had made himself a trustee because a trustee acting dishonestly could always assume control over the income.' </p><p style="text-align: justify;">10. The argument of the learned Advocate-General was that no reliance should be placed upon the decision in the case of Mathurdas Mangaldas, because it was a case of private trust and to such private trust only section 54 of the Trust Act would apply. But, as we have already stated, though section 54 applies no doubt to private trusts, the position of a settlor as also of a trustee in charitable trusts cannot be any better than a trustee under a private trust and we should, therefore, think that if a trustee of a charitable trust were to give a loan to himself, that would clearly be a case of a conflict of duty and interest and would amount to a breach of trust on his part. In the present case, we are on somewhat safer grounds. The Bombay Public Trust Act (XXIX of 1950) came into force on August 14, 1950, and section 35 thereof, as it stood prior to its amendment in 1954, provided that where the trust property consisted of money and could not be applied immediately or at any early date to the purpose of the public trust, the trustee shall be bound, subject to any direction contained in the instrument of trust, to invest the money in public securities. The second proviso to that section laid down that the Charity Commissioner may, by general or special order, permit the trustee of any public trust or classes of such trusts to invest the money in any other manner. As section 35 stood before its amendment in 1954, a trustee of a public trust could invest the trust fund in securities other than public securities if the deed of trust permitted him to do so. But by Bombay Act LIX of 1954, section 35 was amended and, as so amended, it made it incumbent upon a trustee of a public trust to deposit the trust money in the manner provided therein 'notwithstanding any direction contained in the instrument of the trust'. Therefore, notwithstanding a provision in the deed of trust permitting the trustee to invest in securities other than those mentioned in the section, a trustee is prohibited from doing so and the penalty for contravention of the provisions of section 35 would be a prosecution and, on conviction, a fine of Rs. 1,000, as provided in section 66 of the Act. Giving a loan to himself by a trustee, although the deed might empower him to do so, would not only be a breach of trust but an illegal act resulting in a penal offence. In our view, even if a trust deed were to provide for power in favor of a settlor, who is also a trustee, to grant loan to himself, such a power cannot amount to a lawful right to reassume power and if there is such a provision in a trust deed, it has to be taken as ineffective. </p><p style="text-align: justify;">11. But the learned Advocate-General argued (1) that we are called upon in this case to consture the deed of trust and, to decide whether that deed of trust conferes a right to reassume power and, therefore, it would not be permissible to us to look at another statute to determine the proper construction of section 16(1) (c), proviso 1, and (2) that proviso 11 to section 35 of the Bombay Trust Act in any event gives authority to the Charity Commissioner to grant leave to trustees to invest otherwise than prescribed in sub-section (1) of that section. The answer, however, to both these contentions is fairly simple. When a statute talks about a right to reassume, it must mean a lawful right which can be lawfully exercised. This conclusion is fortified by the decisions in the case of Mathuradas Mangaldas and in the case of Commissioner of Income-tax v. S. M. Bose, already referred to above. So far as the second part of his contention is concerned, a right to reassume must be given to the settlor independently of any third party and department upon his own volition. It is true that the Charity Commissioner may grant leave to the settlor but he may or may not grant it. A right to reasssume cannot rest dependent upon whether the charity Commissioner may or may not grant sanction. Such a question arose in Ramji Keshavji v. Commissioner of Income-tax, where proviso 1 to section 16(1) (c) was relied upon by the Commissioner. The learned judges there held, on a reading of clause 5 of the deed of trust, that under that clause all the powers reserved thereunder for payment of the income of certain sale proceeds were in favor of one Kamalabai, the wife of the settlor, and not the settlor. It was true that under the provisions of that clause, the said Kamalabhai was given the right to apply to the trustees for payment for a change of air for the settlor, or if there was protracted illness of the settlor, but the High Court held that it was still a right given to Kamalabhai and not to the settlor and the amount under clause 5 was to be paid to Kamalabai and therefore, it was the volition of Kamalabai alone which could bring into operation, first the application, and, secondly, if it was acceded to, the payment to her. Mr. Justice Kania, as he then was, therefore, of the view that the provisions of clause 5 under these circumstances did not amount to either a retransfer of the assets or the income or a reassumption of power directly or indirectly in the settlor. In the case before us, the power under clause 10, even when read with clause 21, is, for the reasons aforesaid, rendered nugatory by the provisions of section 35 of the Bombay Trust Act. The power of investment in a manner other than that prescribed under section 35(1) of the Trust Act can obviously be exercised only with the sanction of the Charity Commissioner. The power is dependent for its exercise upon the volition of a public officer, i.e., the Charity Commissioner, who has to decide the question of sanction upon the terms of the statute or the rules made thereunder and it cannot amount to a right to reassume power over the income or the assets of the trust against the mischief of which the legislature has provided an express provision. Surely, it must be presumed that the Charity Commissioner would not grant his sanction to an investment which is bound to result in a conflict of duty and interest on the part of the settlor who is also a trustee. Therefore, such a right, if it can be called a right, is not one of any substance and cannot, therefore, be construed as a right to reassume power over the trust assets or the income thereof, as contemplated by proviso 1 to section 16(1) (c). </p><p style="text-align: justify;">12. A loan, by the very nature of it, cannot be said to amount to an exercise of dominion or control over its subjects-matter. It is repayable and is given on conditions as to the time of repayment and interest, if any. By taking a loan, a settlor does not exercise over its subject-matter power or dominion which, but for the trust or the settlement, he would have been able to exercise. Therefore, on this ground also, it cannot be held that, if the settlor were to give a loan to himself or to his firm, he would be exercising control over the trust fund or its income as he would have had over the fund or its income before he settled that fund upon the trust. Besides, a loan still remains an asset or the income of the trust and it is a subject-matter still governed by and is subject to the provisions of the trust. For these reasons, section 16(1) (c), proviso 1, is not applicable to the facts of this case. </p><p style="text-align: justify;">13. Our answers to the question referred to us are as follows : </p><p style="text-align: justify;">Question No. 1 - In the affirmative. </p><p style="text-align: justify;">Question No. 2 - In the affirmative. </p><p style="text-align: justify;">The Commissioner will pay to the opponent the costs of this reference. </p><p style="text-align: justify;">Questions answered in the affirmative.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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LAW: section 35(1, section 36, section 23A of the Act, section 35, section 20, the Indian Trusts Act, section 53, the Trust Act, section 54, the Trust Act, section 54, the Trust Act, section 54, the Trust Act, section 54, the Trust Act, section 16(1, section 54, the Trust Act, section 16(1, the Trust Act, section 54, section 35, section 35, section 35, section 35, section 66, section 16(1, section 35, section 35, section 35(1, the Trust Act

PERSON: J.M. Shelat, Jayantilal Amratlal, Jayantilal Amratlal, Jayantial Amratlal, Jayantilal Amratlal, Jayantilal Amratlal, Jayantilal Amratlal, Hariprasad, Jayantilal Amratlal, Jayantilal Amratlal, Jayantilal Amratlal, Jayantilal Amratlal, Jayantilal Amratlal, Hariprasad, Jayantilal Amratlal, Jayantilal Amratlal, Jayantilal Amratlal, Kikabhai Premchand, Kikabhai Premchand, Abbay L. Khatau v. Commissioner of Income-tax, Mathuradas Mangaldas Parekh, Mathuradas Mangaldas, A. G. Chamberlain v. Commissioners, disembarrass, Mathuradas Mangaldas, S. M. Bose, Mathurdas Mangaldas, Mathuradas Mangaldas, S. M. Bose, Keshavji, Kamalabhai, Justice Kania

DATE: June 19, 1947, 1950, March 27, 1957, 1957-58, year 1958-59, 1950, years 1955-1956, 1956-57, years 1958-1959, 1959-1960, the same day, March 11, 1960, all the assessment years, December 26, 1961, 1950, 1950, 1954, 11 of 1882, 21, 21, six years, these six years, these six years, 1954, 1950, August 14, 1950, 1954, 1954, 1954, 21

CARDINAL: 80, 80, 40,000, 80, three, 1, 2, four, 1, 4, 10, 21, 10, 2, two, 80, 80, 1, 3, two, 1, 80, 2, three, two, 1,000, 1, 4., two, one, 5, 6, 7, 8, one, 10, 21, 6., 80, three, 1, 10, 21, 10, 211, 10, 10, 21, 111, 1, 8, 111, 7, 111, 1, 4, 1, 314, three, 4, 1, 1, 1, 2, 1, 8, 9, 10, 21, 1, 3, 3, 141, 10, 1,000, 11, 1, 1, 2, 11, 1, 1, 5, one, 5, 10, 12, 1, 13, 2

ORG: Co. Ltd., Jayantilal Amratlal Charitable Trust, the Bombay Trust Act, the Bombay Trust Act, Appellate, Tribunal, Tribunal, Tribunal, Tribunal, Tribunal, Tribunal, the Bombay Trust Act, Tribunal, Tribunal, Tribunal, this High Court, Jayantilal Amratlal Private Ltd., this High Court, the High Court, The High Court, Co. Ltd., the Bombay Trust Act, Kasturlal Chandulal Parikh, Bhagubhai Chandulal, Visa, Co. Ltd., Advocate-General, Advocate-General, Advocate-General, Advocate-General, Advocate-General, Advocate-General, Advocate-General, Advocate-General, Advocate-General, the High Court, the Bombay High Court, the Western India Regional Council of the Institute of Chartered Accountants, Advocate-General, the House of Lords, Advocate-General, Advocate-General, the High Court, the High Court of Calcutta, The High Court, Advocate-General, The Bombay Public Trust Act, Bombay Act LIX, Advocate-General, the Bombay Trust Act, the High Court, the Bombay Trust Act

FAC: Jayantilal Amratlal, Jayantilal Amratlal, Jayantilal Amratlal

ORDINAL: first, third, third, third, third, first, first, first, first, second, first, second, second, third, first, secondly

GPE: Ramanlal, Ramanlal, Bombay, India, Bombay, Bombay, Kamalabai, Kamalabhai, Kamalabai, Kamalabai

QUANTITY: 1 to section 16(1, 1 to section 16(1, 1 to section 16(1

NORP: Hindu, Hindu

PRODUCT: Family

LANGUAGE: English