LORD GODDARD C.J. - (1.)THIS is an appeal from a judgment of Vaisey J., who dismissed an appeal from a decision of the special commissioners given in favour of the taxpayer, Major Buchanan, though on a different ground. The question that is raised is whether Major Buchanan, who was then the husband of Lady Dufferin, is liable to surtax as her husband (her income, of course, being aggregated with his for surtax purposes) and whether, he being, as I say, liable to surtax, there must be brought into the computation sums of money, which were paid to the children of Lady Dufferin by her first marriage, by reason of the conditions of section 21 of the Finance Act, 1936. [His Lordship stated the facts and continued :] Now, section 21 of the Finance Act of 1936 -which was passed, as is well known, because parents were entering into covenants with trustees to apply a certain sum of money for the benefit of their children and that was a way of tax avoidance of which Parliament did not approve -provides that : '(I) Where, by virtue or in consequence of any settlement to which this section applies and during the life of the settlor, any income is paid to or for the benefit of a child of the settlor in any year of assessment, the income shall, if at the commencement of that year the child was an infant and unmarried, be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person.' By subsection (9) of that section it is provided that : 'the expression settlement includes any disposition, trust, covenant, agreement, arrangement or transfer of assets.'
(2.)NOW , perhaps I ought to say, in order to mention and get rid of it, that the Finance Act of 1943 made special provision by section 20 with regard to settlements where there was more than one settlor, and the special commissioners decided this case in favour to the taxpayer by having recourse to that Act of 1943 and holding that the income in this case originated form Lord Iveagh. They regarded Lord Iveagh and his grand -daughter, Lady Dufferin, as both of them being settlors. Therefore, the special commissioners thought that the provisions of the Finance Act, 1943 (which I do not intend to go into in any detail), applied and, as the income derived from Lord Iveaghs will, they said that Lord Iveagh was the settlor and not Lady Dufferin. Vaisey J. did not take that view, and I cannot take that view, because I do not think for a moment that a will of a testator comes within section 20 at all; it is not a settlement to which the Act applies, and I think that that is a sufficient answer and gets rid of any argument based on the Finance Act, 1943. Section 21 (9) provides that 'the expression settlement includes any disposition, trust, covenant, agreement, arrangement or transfer of assets.' and Mr. Russell has argued very strenuously that a surrender is not a disposition. I should have great difficulty in holding that : I think it clearly is a disposition. A person can dispose of his interest in a fund or in a chattel or n anything else in a variety of ways, but if, having an interest in a fund, although the interest may not then be in possession, he surrenders that interest, it seems to me that he disposes of that interest. Still more is it clear in my mind that if he surrenders the interest the persons next entitled to that interest or to the income under the interest become thereby advanced. In my opinion, when Lady Dufferin executed the surrender n question she did dispose of her interest under her grandfathers will, and she could only dispose of it to her children as otherwise she would have forfeited the interest altogether and then it would have become subject to various trusts under which, no. doubt, the trustees might have applied it in favour of the children, but they would not have been obliged to do so. She exercised the power which the will had given her to surrender in favour of her children and, therefore, I think she disposed of the interest to her children. Under those circumstances, looking at the clear words of section 21, it seems to me that it is in consequence of that disposition that income is paid for the benefit of the children of the settlor, because, if a disposition is a settlement, the person who disposes is, of course, the settlor and, therefore, the income is being paid for the benefit of her children. It seems to me, therefore, that the section entirely covers the facts of the case.
The terms of Lord Iveaghs will have been canvassed by counsel on both sides with great care, but what we are concerned with here is not so much the terms of Lord Iveaghs will as the terms of the section which was passed long after Lord Iveaghs will was made, but which was designed to catch this particular class of transaction under which a parent, by means of some form of settlement, settled money upon his children the income of which he or she otherwise would have had and which would, therefore, have increased the parents liability to surtax. It was for that very purpose that this transaction which we are now considering was carried out, and I think it is one that is obviously caught by the section. For these reasons I am of the opinion that we should allow this appeal. JENKINS L.J. I agree. Mr. Russell has persuasively argued that Lady Dufferin had no disposable interest under her grand -fathers will : she had no more than a protected life interest which might be brought to an end in a variety of ways : she might assign or charge it or attempt so to do or she might go bankrupt. In those cases, and, no doubt, in others, the ensuing forfeiture would give rise to a discretionary trust for a variety of persons including her children.

(3.)THE testator, says Mr. Russell, in dealing with the various cases of termination of life interest, dealt specially with one particular case that of providing for the persons entitled in remainder by means of a surrender; and he authorized a life tenant to make such a surrender provided that, in cases where this was done, the trusts should take effect as if the surrenderor was dead. In those circumstances, says Mr. Russell, Lady Dufferin had no disposable interest; all she could do was to get rid of her protected life interest under the will in one or other of the ways marked out by the testator, in which case the property would pass in accordance with the trusts of the will. So, says Mr. Russell, that which is here relied on as a settlement was not in truth a disposition made by Lady Dufferin at all, it was a disposition made by the testators will, a prior provision in favour of Lady Dufferin having been eliminated. Persuasive as that argument is, I find myself unable to accept it. It is true that Lady Dufferins interest was a protected life interest, but she was left free as regards dealing with it in one particular way : that is to say, by way of surrender in favour of persons entitled in remainder. She was entitled to the income under the protective trust, and it was for her to decide at her will and pleasure whether she should retain that income or surrender it for the benefit of those interested in remainder, namely, her three infant children. She chose to take the latter course, and the result was that the income she would otherwise have been enjoying as life tenant from the moment when her life interest fell into possession went to the children and became payable or applicable to them or for their benefit. Accordingly, I am unable to accept that part of Mr. Russells argument.