COMMISSIONER OF INCOME TAX Vs. RANI BHUWANESHWARI KUER TEKARI RAJ

JUDGEMENT

(1.) IN this case the assessee was the proprietress of an estate known as 7 annas Tekari Raj, having inherited it from the maternal side. Later on she acquired the major portion of the 9 annas share of Tekari Raj by purchase. On the 20th January, 1941, the assessee made an indenture of the trusts which was subsequently rectified by a deed of rectification dated the 23rd December, 1941, the trustees being the settlor herself, her husband and certain other persons to be appointed later. By these two trust deeds the major portion of the Tekari Raj and other Zamindari properties was transferred by the assessee to the trustees to be held upon certain trusts subject to the conditions specified in the two trust deeds. The beneficiaries were the settlor, her husband and her five sons. The object of the trust was to liquidate the debts of the Tekari Raj estate and to make provision for the assessee, her husband and the children. By a deed of amendment dated the 12th January, 1942, the assessee cancelled some of the paragraphs of the original deed and amended certain other paragraphs and also added paragraphs 42(a), 44 and 45. It was contended on behalf of the assessee before the INcome-tax Officer that the trust was an irrevocable one and that the income of the property transferred by the assessee should not be assessed in the hands of the assessee but it should be assessed in the hands of the trustees under section 41 of the INcome-tax Act. This objection was rejected by the INcome-tax Officer, who held that the trust was a revocable one and so the income of the trust property should be assessed in the hands of the assessee under the provisions of section 16(1) (c) of the INcome-tax Act. The order of the INcome-tax Officer was upheld by the Appellate Assistant Commissioner on the appeal. The assessee took the matter on further appeal before the INcome-tax Appellate Tribunal, which took the view that the provisions of section 16(1) (c) of the INcome-tax Act did not apply to the case and the income of the trust properties should not be assessed in the hands of the assessee.

(2.) AS directed by the High Court, the Income-tax Appellate Tribunal has stated a case on the following questions of law :

(3.) PROVIDED always that paragraph 43 of the indenture of trust dated 20th January, 1941, shall henceforth be read subject to this paragraph.