COMMISSIONER OF INCOME TAX Vs. NEVILLE N WADIA
HIGH COURT OF BOMBAY
COMMISSIONER OF INCOME TAX
NEVILLE N. WADIA
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K.K.DESAI, J. -
(1.) THIS is a reference under S. 66(1) of the Indian INCOME TAX ACT, 1922 and S. 25(1) of the Expenditure -tax Act. The questions of law referred to us for decision run as follows :
"1. Whether, on the facts and in the circumstances of this case, the surrender, release and yielding up of his life interest by the assessee in the Neville Ness Trust Fund No. 2, created by late Sir Nusserwanjee Nowrosjee Wadia in 1947 amounted to a transfer of assets to Miss Diana Wadia and Master Nusli Wadia within the meaning of S. 16(3)(a)(iv) of the Indian IT Act ?
2. Whether, on the facts and in the circumstances of this case, the expenditure incurred on the education of the minor children of the assessee out of their income which they derived from the trust made by their grand -father, late Sir Nusserwanjee Nowrosjee Wadia, in 1947 is liable to be added and included in the expenditure of the assessee under S. 4 and if so, under which sub - section of S. 4 of the Expenditure -tax Act ?"
(2.) THE only facts which need to be noticed are as follows : By a deed of settlement, dated 30th January, 1947, Sir Ness Wadia settled 1,001 fully paid ordinary shares of the Bombay Dyeing and
Manufacturing Co. Ltd. upon trusts mentioned in the deed. The main trusts which need to be
noticed were as follows : The net dividends, interest and income of the trust were in the first
instance payable to the settlor's son, Neville Ness (the assessee in this case), for the period of his
life. After his death the dividends, interest and income were directed to be divided in equal half for
payment over of the one half of the net dividends, interest and income respectively to one Diana
Claire Wadia, being the daughter of the assessee, for the period of her life for her sole and
separate use and after her death for payment of the moiety or the corpus and income to all the
children or any child of Diana absolutely and if more than one in equal shares. The other half of the
net dividends, interest and income were directed to be paid over to Musli, the son of the assessee,
for the period of his life and after his death the other moiety and, or half of the corpus and income
were directed to be paid over to all the children or any child of the said Nusli absolutely and if more
than one in equal shares.
During the asst. year 1958 -59 by a deed dated 30th March, 1957, in order to accelerate the respective life estates of his next succeeding life tenants being his daughter, Diana, and son, Nusli,
provided as under :
CI. 2. I. ". . . . . Releasor doth hereby surrender release and yield up all that the interest in the said Neville Ness Trust Fund No. 2 . . . . . and in the interest dividends and income thereof by the said Indenture of settlement dated 30th January, 1947, limited to him the Releasor for and during the term of material life and in all those several trusts, rights, interests, authorities, powers and provisions by and in the said Indenture of Settlement dated 30th January, 1947, reserved and contained in favour of him the releasor to the intent that the subsequent life estates or interest in the said Neville Ness Trust No. 2 on the decease of the Releasor may be accelerated and take effect in possession as from the date hereof to the entire exclusion of the Releasor and of any benefit to him."
(3.) THE cl. 2 in the deed provided : "The Releasor doth hereby release and discharge the trustees . . . from and of the Trust Fund and every part thereof and from all actions, proceedings, accounts,
claims and demands in respect of the same or any part thereof . . . . and he the releasor doth
hereby covenant with the Trustees that he will at all times hereafter keep the Trustees and each of
them . . . . . indemnified against all actions, proceedings, accounts, claims and demands . . . . . in
the execution of the trusts declared by the said indenture of Settlement.";
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