Shah, J. - (1.) In a reference under section 66 of the Income Tax Act, 1922, the High Court of Judicature at Bombay answered the second question set out herein below in the negative, and declined to answer the first question :"1. Whether, on the facts of the case, the provisions of section 16(3)(a)(iv) are applicable to the two trusts created by Keshavji Morarji and Jaysinh Keshavji both on February 22, 1954 2. Whether, on the facts and in the circumstances of the case, the creation of a trust by Keshavji in favour of his minor grand-children concurrently with the creation of a trust by Jaysinh in favour of Keshavjis daughters constitute indirect transfers of assets by Keshavji and Jaysinh to their respective children for the purpose of section 16(3)(a)(iv) of the Act -
(2.) With special leave, the Commissioner of Income-tax has appealed to this court.
(3.) Keshavji, a resident of Bombay, has a son, Jaysinh, and three daughters, Indumati, Kusum and Dipika, of whom, in the relevant years of assessment, Dipika was a minor. Jaysinh has two infant children, Bipin and Kamla. On Junde 14, 1952, Keshavji transferred a sum of Rs. 5 lakhs to his son, Jaysinh. On February 22, 1954, by a deed, Keshavji settled a sum of Rs. 4,41,000 in favour of his minor grand-children, Bipin and Kamla, and on the same day Jaysinh, by another deed, settled a sum of Rs. 1,54,000 upon his three sisters, Indumati, Kusum and Dipika. In proceedings for assessment of tax for the assessment years 1955-56 and 1956-57 the Income-tax Officer held that Keshavji had by the settlement indirectly transferred assets belonging to him to his minor daughter and Jaysinh had transferred assets belonging to him to his minor children, and on that view directed that under section 16(3)(a)(iv) the income attributable to the share of Dipika be assessed in the hands of Keshavji and the income from the trust created by Jaysinh "being in reality" for the benefit of his minor children be assessed in his hands. The Appellate Assistant Commissioner upheld the view of the Income-tax Officer about the nature of the transactions. He, however, held that the income which could be included in the total income of the assessee was only that amount which "related to the interest in the assets conveyed in favour of the minors and not the income of the whole of the assets". The Income-tax Appellate Tribunal confirmed the order of the Appellate Assistant Commissioner.;