Appeal Nos
1301 07 of 1991 From the Judgment and Order dated 31 3 89 of the Income Tax Settlement Commission Bombay in Settlement Application No 1054178IT
Ashok Desai Debi Pal BK Mehta NK Sahu UK Sagar and PH Parekh for the Appellant
Dr V Gaurishankar and section Rajappa for the Respondents
The Judgment of the Court was delivered by BP JEEVAN REDDY J
These appeals are preferred against the orders of the Settlement Commission dated March 31 1989 in pursuance of the offers of settlement made by the appellant
Civil Appeals 1301 07 of 1991 relate to the assessment years 1964 65 to 1970 71 while Civil Appeals 1288 1300 of 1991 relate to the assessment years 1970 71 to 1982 83
Under its orders the Settlement Commission computed the taxable income of the appellant s father who died on August 22 1969 and of the appellant for the aforesaid assessment years and gave certain directions applying which the ITO was directed to compute the total income for each of the said assessment years and raise demand for the tax due
The main issue in all these matters is the assessability of income from five foreign trusts created by the appellant s father Sri Vikramsinhji
Sri Vikramsinhji Ex ruler of Gondal executed three deeds of settlements trusts deeds in the United States of America on December 19 1963 and two deeds in the United Kingdom on January 1 1964
The three settlements executed in US are in identical terms
Similarly the two settlements executed in UK are similar
The two sets of settlements however differ from each other in certain particulars though both the sets are meant for the benefit of the settlor and the members of his family
We may refer to the relevant clauses in the settlements executed in US in the first instance
946 Under the US settlements The National City Bank New York is constituted the sole trustee
The trust is created for the benefit of the grantorsettlor his wife and children and their spouses referred to as family members and their descendants
The trustee is empowered to collect the income from the trust properties and to apply the same among the family members andor their descendants in such manner as he thinks appropriate
He is also authorised to terminate the trusts for any reason including tax reasons and to transfer convey and pay off the property held thereunder to any person or persons then eligible to receive the income of the trusts
On such termination the entire assets in the hands of the trustee are to be paid over to the then Maharaja Ruler or to his living male descendants in equal shares per stripes
The clause which is relevant herein which according to the Revenue makes the trusts revocable ones we may refer to it as para 12 for the sake of convenience reads thus Anything hereinabove to the contrary notwithstanding at any time and from time to time the Trustee shall transfer convey and pay over any portion of the income of the trust fund and any portion or all of the principal held in trust to or to the use of such one or more members of a class composed of the Grantor the wife or widow of the Gran tor the children of the Grantor living from time to time the spouse of any child of the Grantor then living or deceased hereinafter referred to as the Family Members and the descendants of the Family Members living from time to time in such amounts shares and proportions either absolutely or in trust and upon such terms and conditions including the grant of a further power to appoint as the Trustee and a Maharaja who shall have attained the age of eighteen 18 years shall at any time and from time to time appoint and direct in a written instrument which refers to and specifically exercises this power and which is duly executed by the Maharaja and by the Trustee then acting here under
The foregoing power to appoint may be released in whole or in part by the Maharaja or by the Trustee or by both at any time by one or more written instruments duly executed by the Maharaja or by the Trustee or by both and delivered to 947 the Trustee then acting here under provided however that if either the Maharaja or the Trustee but not both of them shall release such power then the party not so releasing shall continue to have the power to appointment hereinbefore provided acting alone
 Clauses 2 and 3 of the deeds confer an absolute discretion upon the trustee to pay over or apply in his discretion any part or whole of income or any part of or whole of the principal to any person then eligible to receive the income of this trust at such time and in such manner as he may decide in his absolute discretion
Clause 3 says further that the Trustee may omit eligible members of the class from any and all such payments and applications and no such payment or application or commission of a person from participation therein shall cause a charge against or otherwise effect the future interest or share of any person here under Any determination made by the trustee in good faith in exercising the said discretion is held to be binding and conclusive
It is not necessary to notice other clauses of these settlements except to say that the object of these trusts is to provide for the education maintenance and up keep of the members of the settlor s family and their descendants
The settlor died on August 22 1969
During his lifetime the settlor Vikramsinhji was filing returns of his income in India including therein whole of the income arising from the US trusts
The returns were filed by him for the assessment years 1964 65 to 1969 70 both years inclusive
Since he died in the middle of the accounting year relevant to the assessment year 1970 71 two returns were filed for the said assessment year one upto the date of the death of the settlor and the other from the date of the death of settlor to the end of the accounting year
These returns were filed by his elder son Jyotendrasinhji appellant in these appeals
In these returns too the appellant included whole of the income from the US trusts in the respective returns
At this stage the appellant says
he was advised that the income from US trusts was not taxable in India either in the hands of settlor or in his hands and that inclusion of the said income in the returns by the settlor and by the appellant was a mistake
Urging the said contention the appellant filed appeals against the assessment orders pertaining to the AYs
1965 66 and 1966 67
Inasmuch as the appeals were barred with respect to other assessment orders he preferred revisions 948 before the Commissioner of Income Tax
It may be mentioned at this stage itself that the income from UK trusts was included in the aforesaid returns just as the income from US trusts was included
Similarly the plea of non taxability was urged with respect to the income from UK trusts on the same basis as was urged with respect to the income from the US trusts The Appellate Assistant Commissioner Rajkot admitted additional grounds and allowed the aforesaid appeals by his orders dated April 4 1975 and August 20 1975
The Revenue went up in appeal to Tribunal
The Tribunal allowed the appeals holding that the AAC acted contrary to Rule 462 of the Income Tax Rules in admitting the additional grounds and in looking into new material
Accordingly it set aside his orders and remitted the appeals back to AAC
It is at this stage that the appellant approached the settlement commission under chapter XIXA of the Income Tax Act 1961
We may now notice the relevant clauses in the deeds of settlements executed in UK Under these settlement deeds one Mr Robert Hampton Robertson McGill was designated as the trustee referred to in the deeds as the original trustees
These trusts too were created for the benefit of the settlor the members of his family and their descendants referred to as beneficiaries 
The deeds define the expression the trustees to mean and include the original trustee or the other trustees for the time being appointed in terms of the deeds of settlement
The expression the beneficiaries was defined to mean and include a the settlor b the children and remoter issue for the time being in existence of the settlor and c any person for the time being in existence who is the wife or widow of the settlor or the wife or widow or husband or widower of any of them the children and remoter issue of the settlor
The clauses which are relevant for our purposes read thus We have for the sake of convenient reference numbered them as clauses 3 and 4
THE Settlor hereby directs that the Trustee shall and accordingly the Trustees shall stand possessed of the Trust Fund and the income thereof upon the trusts following that it 1 to say  949 1 UPON TRUST to raise and pay out of the capital thereof any further estate duty which may still be payable thereon in respect of the death of the Settlor s father His Late Highness Shri Bhojrajji Maharaja Saheb of Gondal who died on the Thirty first day of July One Thousand nine hundred and fifty two and any interest payable on such duty and any costs incurred in connection with the ascertainment or payment of such duty and interest
2 Subject as aforesaid UPON TRUST for all or such one more and more exclusively of the others or other of the Beneficiaries at such age or time or respective ages or times if more than one in such shares and with such trusts for their respective benefit and such provisions for their respective advancement and maintenance and education at the discretion of the Trustees or of any other person or persons as the person who for the time being is the Maharaja or of the title is abolished would have been the Maharaja had the title not been abolished shall at any time during the specified period by any deed or deeds revocable or irrevocable appoint AND in default of and subject to any such appointment upon he trusts and with and subject to the powers and provisions hereinafter declared and contained concerning the same PROVIDED ALWAYS that the foregoing power of appointment shall not be capable of being exercised a by anyone other than the Settlor or the Elder son or the Younger Son or b in favour of the person making the appointment save with the consent of the Trustees being at least two in number or a trust Corporation such consent to be testified by their being parties to the deed of appointment and executing the same  4
SUBJECT aforesaid the Trustees shall stand possessed of the Trust Fund and the income thereof upon the trusts 950 following that is to say  1 The income of the Trust Fund accruing during the life of the Settlor shall belong and be paid to the Settlor 2 Subject as aforesaid the income of the Trust Fund accruing during the life of the Elder Son shall belong and be paid to the Elder Son  3 Subject as aforesaid the Trust Fund shall be held in Trust for the person who being a descendant of the Elder Son first during the specified period  a becomes the Maharaja or would become the Maharaja if his title had not been abolished and b attains the age of eighteen years 
It is not necessary to notice the other provisionsclauses of these deeds
During his lifetime the settlor Vikramsinhji was including the whole of the income from these trusts in his returns of income just as he was doing in the case of US trusts
The said income was also included in the two returns filed by his son for the AY1970 71
Thereafter however the appellant took the stand as mentioned hereinbefore that the income from these trusts is not includable in his income
He also took the stand that the inclusion of the said income in the returns submitted by his father for the AYs1964 65 to 1969 70 and by him in the returns relating to AY1970 71 was under a mistake
This submission too was the subject matter of the appeals and the revisions filed before the AAC and the Commissioner of Income Tax referred to hereinbefore
When the appellant approached the settlement commission with an application for settlement it related to the income from UK trusts as well
The Settlement Commission heard the arguments in extenso spread over several days and disposed of the matter under two elaborate orders
One order relates to AYs
1964 65 to 1970 71 Vikramsinhji and the other to AYs1970 71 to 1982 83 Appellant
The findings of the Commission which constitute the bases for its orders may briefly be stated as the following  951 iThough the US settlements are in the nature of discretionary trusts they fall within the mischief of sub clause ii of Clause a of Section 63 of the Act
For this reason the whole of the income arising from the trust properties was liable to be included and was rightly included in the income of the settlortransferor Sri Vikramsinhji
ii On the death of the settlor the US settlement deeds ceased to be revocable but inasmuch as the entire income thereunder was received by the appellant Sri Jyotendrasinhji it constitutes his income and could be and was lawfully
taxed in his hands
iii So far as the UK trusts are concerned clause 3 did never come into operation inasmuch as no additional trustees were appointed as contemplated by it
If so clause 4 sprang into operation where under the entire income under the settlements flowed to the settlor during his lifetime and on his death to his elder son the appellant herein
In other words these settlements are in the nature of specific trusts
In any event the entire income from these trusts was received by the settlor during his lifetime and after the settlor s death by the appellant
Therefore the said income was rightly included in the total income of the settlor and the assessee during the respective assessment years
On the above bases the Commission computed the taxable income of the settlor under both the sets of trusts for AYs1964 65 to 1970 71 upto the date of the death of the settlor as also the income of the appellant for the AYs1970 71 to 1982 83
The appellant then preferred these two sets of appeals against the two orders
At the stage of granting leave this court ordered vide the order dated March 22 1991 that the appellant shall not be entitled to question the jurisdiction of the settlement commission to decide the issues before it and that he will confine himself in appeal only to the questions relating to correctness or otherwise of the Commissioner s order Sri Ashok Desai learned counsel for the appellant urged the following contentions  1The settlement commission erred in law in holding that the US trusts are revocable trusts within the meaning of Section 63 of the Act
For attracting Section 63 the deed of transfer should give the transferor a right 952 to retransfer directly or indirectly whole or any part of the income or assets to the transferor or it must give him a right to re assum power directly or indirectly over the whole or any part of income or assets
In this case the relevant clause does not give thetransferor such a power
The power is given to the trustee to be exercised with the concurrence of the transferorsettlor
Even if for any reason the clause is construed as giving such a power to the settlortransferor Section 63 is not attracted inasmuch as the power is given not to him a such but jointly to him and the trustee
Such a power does not attract the mischief of Section 63
2 The US trusts are discretionary trusts
In such a case the assessment can be made only upon the trustees and not upon the beneficiaries recipients
The Revenue has no option in such a situation
It must necessarily tax the trustees and trustees alone
The Revenue cannot take advantage of the mistake of law on the part of the settlor or the appellant
3 At any rate with the death of the settlor the US trusts ceased to be revocable trusts assuming that they were so during his lifetime
So  far as the appellant is concerned he cannot be taxed on the income received by him from the said trust
Only the trustee can be taxed
4 So far as UK trusts are concerned the settlement commission has committee an error of law in holding that clause 3 could come into operation only if and when the settlor appointed the additional trustees as contemplated by it
In fact the trust had come into existence with the sole trustee McGill and it did not depend upon the appointment of additional trustees
Clause 3 prevails over clause 4
If so the UK trustssettlements are also discretionary trusts and not specific trusts as held by the Settlement Commission
In such a case again the assessment can be made only upon the trustees and not upon the beneficiaries recipients 5 So far as UK trusts are concerned no income was receivedby the settlor or the appellant either in UK or in India
So long as the trustees decided not to exercise the discretion to distribute the income no income arose to any of the beneficiaries
The deeds do not prescribe a time limit within which the trustees should exercise their discretion to distribute income
Until the trustees take a decision to distribute and distribute the incomethe beneficiaries have no right to income nor can it be said that the income accrues to them
The Settlement Commission committed a legal error in the income from the UK trusts in the total income of 953 the settlor and the appellant even though it was not paid out by the trustee nor received by the assessees
At any rate no income was received in India
6In both the US and UK tax has been levied upon the respective trust incomes under the laws of those countries
Levying tax over again in this country on the very same income amounts to double taxation
On this ground too the tax levied in India must be waived
On the other hand Dr Gauri Shankar the learned counsel for the Revenue made the following submissions iThe Settlement Commission is not a regular Tribunal
Its function is different from other quasi judicial authorities created by the Income Tax Act
Where an offer of settlement has been made the commission either accepts it or rejects it subject to such conditions and terms as it thinks fit to impose in that behalf
As the name itself suggests it is a settlement a sort of composition
It need not even give reasons for its order
Even if any principles are decided by the Commission they do not bind the Income Tax authorities in proceedings relating to subsequent years
The order of the commission is relevant to and is confined only to the assessment years to which it relates
The jurisdiction of this court under Article 136 in an appeal against the orders of settlement commission must be conditioned by above considerations
This court would not be able to go into the merits of the order
The commission s order cannot be dissected inasmuch as it is a package deal
Either it stands or falls as a whole
ii The interpretation placed by the commission on both US and UK trusts is perfectly in order and does not call for any interference by this court
Indeed under the impugned orders several benefits have been conferred upon the settlor and the appellant like waiving of penalties interest and other liabilities attaching to the assessees under the Act
While accepting the same the appellant cannot be allowed to disown those features of the order which go against him
iii The argumentof not receiving the income from UK trusts is a mere after thought and should not be given any credence
During his lifetime the settlor had declared that he had received income from both the UK and US trusts and had included the same in his returns of income for each of the assessment years relevant heroin
The appellant too acted similarly
954 iv A trustee or the trustees as the case may be are expected to act reasonably and in furtherance of the object of the trusts
They must apply the income for the purposes specified
They cannot just accumulate it
Applying the test of reasonableness it must be held that ordinarily the trustee ought to distribute the income each year
As a matter of fact it was so distributed If so it must be held that the income from these UK trusts has rightly been taken into account by the commission while passing its orders
The first question we have to answer is the scope of these appeals preferred under Article 136 of the Constitution against the orders of the Settlement Commission
The question is whether all the questions of fact and law as may have been decided by the commission are open to review in this appeal
For answering this question one has to have regard to the scheme of Chapter XIX A
The said chapter was inserted by the Taxation Laws Amendment Act 1975 with effect from April 1 1976
A somewhat similar provision was contained sub sections 1A to 1D of Section 34 of the Income Tax Act 1922 introduced in the year 1954
The provisions of Chapter XIX A are however qualitatively different and more elaborate than the said provisions in the 1922 Act
The proceedings under this chapter commence by an application made by the assessee as contemplated by Section 245 C Section 245 D prescribes the procedure to be followed by the commission on receipt of an application under Section 245 C Sub section 4 says after examination of the records and the report of the commissioner received under sub section 1 and the report if any of the commissioner received under sub section 3 and after giving an opportunity to the applicant and to the commissioner to be heard either in person or through a representative duly authorisedin this behalf and after examining such further evidence as may be placed before it or obtained by it the settlement commission may in accordance with the provisions of this Act pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application but referred to in the report of the commissioner under sub section 1 or sub section 3
 Section 245 E empowers the Commission to reopen the completed proceedings in appropriate cases while Section 245 F confers all the powers of an Income Tax authority upon the Commission
Section 245 H empowers the Commission to grant immunity from penalty and prosecution with or without conditions in cases where it is satisfied that the assessee has made a full disclosure of his income and 955 its sources
Under Section 245 HA the Commission can send back the matter to assessing
officer where it finds that the applicant is not cooperating with it
Section 245 1 declares that every order of settlement passed under sub section 4 of Section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall save as otherwise provided in Chapter XIX A be re opened in any proceeding under the Act or under any other law for the time being in force
Section 245 L declares that any proceedings under chapter XIX A before the settlement commission shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purposes of Section 196 of the Indian Penal Code
It is true that the finality clause contained in Section 245 I does not and cannot bar the jurisdiction of the High Court under Article 226 or the jurisdiction of this court under Article 32 or under Article 136 as the case may be
But that does not mean that the jurisdiction of this Court in the appeal preferred directly in this court is any different than what it would be if the assessee had first approached the High Court under Article 226 and then come up in appeal to this court under Article 136
A party does not and cannot gain any advantage by approaching this Court directly under Article 136 instead of approaching the High Court under Article 226
This is not a limitation inherent in Article 136 it is a limitation which this court imposes on itself having regard to the nature of the function performed by the Commission and keeping in view the principles of judicial review
May be there is also some force in what Dr Gauri Shankar says viz that the order of commission is in the nature of a package deal and that it may not be possible ordinarily speaking to dissect its order and that the assessee should not be permitted to accept what is favourable to him and reject what is not
According to learned counsel the Commission is not even required or obligated to pass a reasoned order
Be that as it may the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid
It may condone the defaults and lapses on the part of the assessee and may waive interest penalties or prosecution where it thinks appropriate
Indeed it would be difficult to predicate the reasons and considerations which induce the commission to make a particular order unless of course the commission itself chooses to give reasons for its order
Even if it gives reasons in a given case the scope of enquiry in the appeal remains the same as indicated above viz whether it iscontrary 956 to any of the provisions of the Act
In this context it is relevant to note that the principle of natural justice and alteram partem has been incorporated in Section 245 D itself
The sole overall limitation upon tire Commission thus appears to be that it should act in accordance with the provisions of the Act
The scope of enquiry whether by High Court under Article 226 or by this Court under Article 136 is also the same whether the order of the Commission is contrary to any of the provisions of the Act and if so has it prejudiced the petitionerappellant apart from ground of bias fraud  malice which of course constitute a separate and independent category
Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad vs Settlement Commission  which too was an appeal against the orders of the Settlement Commission
Sabyasachi Mukharji J speaking for the Bench comprising himself and SR Pandian J observed that in such a case this Court is  concerned with the legality of procedure followed and not with the validity of the order  The learned Judge added judicial review is concerned not with the decision but with the decision making process
 Reliance was placed upon the decision of the House of Lords in Chief Constable of the NW Police vs Evans 1982 1 WLR1155
Thus the appellate power under Article 136 was equated to power of judicial review where the appeal is directed against the orders  of the Settlement Commission
For all the above reasons we are of the opinion that the only ground upon which this Court can interfere in these appeals is that order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant The main controversy in these appeals relates to the interpretation of the settlement deeds though it is true some contentions of law are also raised
The commission has interpreted the trust deeds in a particular manner Even if the interpretation placed by the commission the said deeds is not correct it would not be a ground for interference in these appeals since a wrong interpretation of a deed of trust cannot be said to be a violation of the provisions of the Income Tax Act
it is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years
In view of the above though it is not necessary strictly speaking to go into the correctness of the interpretation placed upon the said deeds by the commission and it is enough if we confine ourselves to the question whether the order of the Commission is contrary to the provisions of the 957 Act we propose to for the sake of completeness examine also whether the order of Commission is vitiated by any such wrong interpretation U section TRUSTS
The sole trustee under this settlement deed is the First National City Bank New York
The deed empowers the trustee to hold manage invest and reinvest the principal of the trust fund to collect and receive the income thereof and to pay or apply so much of the net income as the trustee shall in his absolute and uncontrolled discretion deem advisable to or to the use of one or more members of the settlor s family
It is thus a discretionary trust
A discretionary trust is described as a trust where the trustees have been vested with a discretion in the matter of distribution of trust income among the specified class of beneficiaries
In the case of such trusts the trustees have a discretion to pay whole or part of the income to such member or members of the designated class as they think fit and it such proportion as they deem appropriate
Section 1641 sets out the same idea in the following words Where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown 
In Snell s Principles of Equity 25th Edn 1965 P129 a discretionary trust is defined in the following words A discretionary trust is one which gives the beneficiary no right to any part of the income of the trust property but vests in the trustees a discretionary power to pay him or apply for his benefit such part of the income as they think fit 
The beneficiary thus has no more than a hope that the discretion will be exercised in his favour
 That these trusts are discretionary trusts is not in controversy
The main question is whether Para 12 quoted hereinbefore makes it a revocable trust within the meaning of Section 63 The said clause begins with a non obstante clause anything hereinabove to the contrary
not withstanding  thereby giving it an overriding effect over what has been said in the earlier recitals
It then says that at any time and from time to time the trustee shall transfer convey and pay over any portion or of the income 958 of the trust fund and any portion or of all the principal held in trust  to such member of the settlor s family as the trustee and a maharaja who shall have attained the age of 18 years shall at any time and from time to time appoint and direct in a written instrument which refers to and specifically exercise this power and which is duly executed by the Maharaja and the trustee then acting here under  In other words the said clause empowers the settlortransferor and the trustee acting together to direct the trustee at any time to pay over the entire income andor entire corpus
or a pan thereof to such member of the settlor s family or their descendants as they may direct
The said power cannot be exercised by the settlor acting alone
The question is whether the said clause attracts Section 63 Section 63 defines the expressions transfer  and revocable transfer 
It says that for the purposes of Sections 60 61 and 62 a transfer shall be deemed to be revocable if i it contains any provisions for the retransfer directly or indirectly of the whole or any part of the income or assets to the transferor or ii it in any way gives the transferor a right to reassume power directly or indirectly over the whole or any part of the income or assets  The expression transfer is defined to include any settlement trust covenant agreement or arrangement
The expression family members  occurring in the aforesaid clause in the trust deeds is defined in the deeds to mean the children of the grantor living from time to time the wife or widow of the grantor the spouse of any child of the grantor then living or deceased  The descendants of the family members  which expression also occurs in the aforesaid clause is defined in the deeds to mean the descendants of the family members living from time to time during the trust term  The contention of Sri Ashok Desai the learned counsel for the appellant is that Section 63 will be attracted only where the transferor is vested with the exclusive andor absolute power to give direction of the nature contemplated therein and not where such a power has to be exercised by the transferor jointly with another person or with the concurrence or consent of another person
Indeed he argues that the said power is really given to the trustee to be exercised in concert with the Settlor
We find it difficult to agree with the learned counsel
Firstly the power properly construed is given to the settlor to be exercised together with the trustee and not to the trustee to be exercised together with the settlor
The trustee is anyhow vested with an absolute discretion to distribute the income of or the principal of the trust to such member of the family as he 959 thinks appropriate under the clause preceding and paras following para 12
If so there was no point in saving that he can together with the settlor be empowered to pay over part or whole of incomeprincipal to such one or more members of a class composed of the family members living
It cannot also be forgotten that the trustee in this case is a Bank one of the largest in the USA and not an individual acquainted with the affairs of the settlor s family
Now coming to Section 63 it is equally not possible to agree with the learned counsel
Section 63 does not say that the power of revocation vesting in the transferor should be absolute or unconditional
As pointed out by Chagla CJ
in Behramji Sorubji vs Commissioner of Income Tar Bombay  the only question that has got to be asked is whether the transfer is capable of being revoked by the assessee or not  it may be that before the power is exercised the consent of two beneficiaries might have to be taken but even so although the revocation may be contingent or conditional still the deed remains a revocable deed of trust
 The same idea was reiterated by Tendulkar J in the said judgment in the following words It is urged by Sir Jamshedji on behalf of the assessee that the words revocable transfer in this section require that the transfer should be revocable absolutely and uncondi tional and that by reason of the fact that the transfer in this case could not be revoked under clause 10 of the trust deed without the consent of the wife and the children or any two of them it is not a revocable transfer within the meaning of Section 161c
Apart from any authority and reading the section by itself I am unable to agree with this contention
It would involve my reading into the section words which are not there and the Court is not entitled to do so unless it appears that giving effect to the section as it stands would lead to an obvious absurdity or inconvenience which could not have been contemplated by the legislature
No such position arises in this case
 We find ourselves in agreement with the said opinions
Section 63 of the present Act corresponds to the proviso appended to Section 161c of the 1922 Act
The first proviso read thus provided that for the purposes of this clause the settlement disposition or a transfer shall be deemed to be revocable if it contains any provision for the retransfer directly or 960 indirectly of the income or assets to the settlor disponer or transferor or in any way gives settlor disponer or transferor a right to
reassume power directly or indirectly over the income or assets  Section 631 also does not say that the deed of transfer must confer or vest an conditional or an exclusive power in the transferor to give the powerdirection of the nature contemplated by it
 Accordingly we hold that merely because the concurrence of the trustee had to be obtained by the transferorsettlor for giving the said direction it cannot be said that the deed does not contain a provision giving the transferor a right to reassume power directly or indirectly over the whole or any part of income or assets within the meaning of Section 63aiiof the Act In this view of the matter it is not necessary for us to refer to other decisions cited before us in any detail
The decision of this Court in commissionerof Income Tax Bombay City vs Ratilal Nathalal emphasisesthat the power of revocation must be given to the settlor as settlor and not in any other capacity
In the deeds before us the power is indisputably conferred upon the Settlor in the very same capacity and not in any different capacity
The other decision of this court in Sevantilal Maneklal vs CIT is distinguishable for the reason that the power of the settlor therein was merely to choose among the several objects of the trust and therefore it was held that it does not attract Section 63
On the other hand Tarunendra Nath Tagore vs Commr
of Income Tax Calcutta was a case where the trust deed empowered the settlor to cause a re transfer of the trust assets in certain specified contingencies
The question was whether such a provision makes the transfer a revocable one within the meaning of the first proviso to Section 161c of the 1922 Act
It was held that it does notwithstanding the fact that the power had to be exercised only in certain specified contingencies
The decision of the Madras High Court in K Subramania Pillai vs Agricultural Income For Officer Thukalay was also a case where the power of revocation was to be exercised in certain specified contingencies alone
Even so it was held that it was a revocable settlement
Commissioner of Income Tax Punjab vs Raghabir Singh was case where the trust deed provided for the application of the trust income for satisfying the debts which the settlor was under an obligation to discharge
The question was whether the provision makes the deed a 961 revocable one
It was held that it did not inasmuch as there was no provision for re transfer of the income or the assets to the settlor It was observed that the mere fact that the settlor s debts had to be discharged from the trust income did not bring it within the four corners of the first proviso to Section 161c
In the light of the above discussion it must be held that during the lifetime of the settlor the entire income arising from the three US trust deeds was bound to be and was rightly included in the income of the settlor by virtue of Section 63 read with Section 61
The commission was right in holding so
With the death of the settlor Section 63 ceased to apply even though the aforesaid clause empowers not only the settlor but also the Maharaja for the time being to exercise the said power
Section 63 is attracted only where such power is given to the transferor and the appellant the son of the settlor is not and cannot be called the transferor
It is not denied that so far as the income from the US trusts is concerned it was indeed received by the appellant
The only argument is that inasmuch these trusts are discretionary trusts the income therefrom must necessarily be taxed and can only be taxed in the hands of the trustees and not in the hands of the beneficiary
It is argued that the Revenue has no choice to tax either the trustees or the beneficiaries in such a case
We are unable to agree The trustees in the case of a trust declared by a duly executed instrument in writing are treated as representative assessees Section 1601iv
It is equally true that in the case of a discretionary trust trustees are liable to be taxed in respect of the income received by them at the rate specified in Section 1641
Section 1641 has undergone several changes since 1962 The sub section as introduced by the Finance Act 1970 with effect from April 1 1970 provided that in such case tax shall be charged i as if the relevant income or part of relevant income were the total income of the association of persons or ii 65 Whichever course would be more beneficial to the Revenue
 For the purpose of this case it is not necessary to notice the provisos appended to sub section 1 or the subsequent amendments to the sub section
At the same time Section 166 expressly declares that nothing in the foregoing sections in this chapter shall prevent either the direct assessment 962 of the person on whose behalf or for whose benefit income therein referred is receivable or the recovery from such person of the tax payable in respect of such income Language of this section is clear
The opening words nothing in the foregoing sections in this chapter which means chapter XV wherein Sections 159 to 165 among other sections occur give it an over riding affect over the preceding provisions in the chapter
The Section states in unmistakable terms that nothing contained in the preceding provisions in the chapter shall preclude the Revenue from making a direct assessment upon the beneficiary andor from recovering the tax payable from such person
The Revenue has thus been given an option to tax the income from a discretionary trust either in the hands of the trustees or in the hands of the beneficiaries
This Court in Nagappa vs CI T and the majority of High Courts have understood this Section in this manner
In Nagappa the appellant had executed seven separate trusts setting specific properties for the benefit of his minor children
He appointed himself his wife and his married daughter as the trustees
Under each deed a portion of the income was to be utilised immediately for the benefit of the beneficiary and the balance accumulated for his or her benefit and handed over to the beneficiary on the specified date
The entire income of the trusts including the income accumulated was included in the income of the appellant Nagappa which was questioned by him
His contention was that the ITO was bound to assess the income under each deed of trust separately in the hands of the trustees as representative trustees and was incompetent in view of the express enactment of sub section 2 of Section 161 to assess the income in the hands of Nagappa or of the beneficiaries The contention was rejected with reference to Section 1611 and Section 166 by Shah J speaking foe the Bench comprising Shah Ramaswami and Grover JJ in the following words It is implicit in the terms
of sub section 1 that the Income tax Officer may assess a representative assessee but he is not bound to do so
He may assess either the representative assessee or the person represented by him
That is expressly so enacted in section 166 which states Nothing in the foregoing sections in this Chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred 963 to is receivable or the recovery from such person of the tax payable in respect of such income  The Income tax Officer may therefore assess the person represented in respect of the income of the trust property and the appropriate provisions of the income tax Act relating to the computation of the total income and the manner in which the income is to be computed will apply to that assessment
The Income tax Officer may in appropriate cases assess the representative assessee in respect of that income and limited to that extent and tax may be levied and recovered from him to the same extent as may be leviable and recoverable from the person rep resented by him
The contention raised by counsel for Nagappa that since the trustees were assessable in respect of the income of the beneficiaries under Section 1611 that income could not by virtue of sub section 2 of Section 161 be assessed in the hands of the beneficiary is contrary to the plain terms of Section 166
Sub section 2 of Section 161 does not purport to deny the Income tax Officer the option to assess the income in the hands of the person represented by the representative assessee it merely enacts that when a representative assessee is assessed to tax in exercise of the option of the revenue he shall be assessed tinder Chapter XV and shall not in respect of that income be assessed under any other provision of the Act
We will presently state the reasons why the rule was so enacted by Parliament
But on the plain words used by Parliament the plea raised by counsel that the
representative assessee alone may be assessed as regards income in respect of which he is
a representative assessee cannot be accepted
The learned Judge then went to explain the reasons for which section 166 among other provisions was enacted
In another case arising under the Bihar Agricultural Income Tax Act 1948 a Bench of this Court comprising JL Kapur M Hidayatullah and 964 JC Shah JJ took a similar view in Ram Swaroop Das vs The State of Bihar  even though that Act and did not contain a provision similar to Section 166
Section 13 of the Bihar Act provided Where any person holds land from which agricultural income is derived as a common manager appointed under any law
from the time being in force or under any agreement or as receiver administrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom the aggregate of the sums payable as agricultural income tax by each person on the agricultural income derived from such land and received by him shall be assessed on such common manager receiver administrator or the like and he shall be deemed to be the assessee in respect of the agricultural incometax so payable by each such person and shall be liable to pay the same
 It was urged that because of Section 13 the Receiver alone can be assessed in respect of the income of the estate under his charge and that no assessment can be made upon the person who actually received such income from the receiver
The said contention was rejected by Shah J speaking for the Bench in the following words In our view there is no substance in the contention raised by the appellant
The liability to pay tax is charged on the agricultural income of every person
The income though collected by the Receiver was the income of the appellant
By S13 in addition to the owner the Receiver is to be deemed to be an assessee
But the fact that the Receiver may because he held the property from which income was derived in the year of account be deemed to be an  assessee and liable to pay tax does not absolve the appel lant on whose behalf the income was received from the obligation to pay agricultural income tax
Section 13 merely provides a machinery for recovery of tax and is not a charging section
When property is in the possession of the Receiver common manager or administrator the taxing authorities may but are not bound to treat such 965 persons as assessee and recover tax
The taxing authorities may always proceed against the owner of the income and assess the tax against him
The definition in the connota tion of person  undoubtedly include a Receiver trustee common manager administrator or executor and by such inclusion it is open to the taxing authorities to assess tax against any such persons but on that account the income in the hands of the owner is not exempt from liability to assessment of tax
 The principle of this decision does support our view notwithstanding certain variance between the provision concerned in the said decision and those concerned herein
Sri Ashok Desai however placed strong reliance upon a Full Bench decision of the Gujarat High Court in CL T vs Kamalini Khatau where the majority Divan CJ and BK Mehta J with PD Desai J dissenting appears to take a contrary view
Before we deal with the decision it would be interesting to note that the counsel for the appellant Sri NA Palkhivala who appeared for the appellant before the Settlement Commission had himself repudiated this argument though another counsel who appeared for the appellant at a later stage did not agree with the view expressed by Sri Palkhivala
The Commission has recorded the submission of Sri Palkhivala in the following words We may mention here that when Shri NA Palkhivala appeared before us on behalf of the applicant he had stated that although according to the Gujarat High Court s decision in the case of Smt
Kamalini Aatau the income of a discretionary trust is assessable only in the hands of a representative assessed and not in the hands of the beneficiaries he would not object to assessment of the amounts received by the beneficiaries in their hands in the present case for two reasons
Firstly according t o Shri NA Palkhivala the Gujarat High Court s decision in question was erroneous and it was dissently judgment in that case to the contrary which was correct
Secondly in the case before us the representative assessees namely the trusts being situated outside India could 966 not be taxed in India and in such cases it would not be proper not to assess the beneficiaries for that will lead to the entire income escaping the Indian income tax in the case of both the representative assessees and the beneficiaries
 Be that as it may we have been taken though both the opinions in the Full Bench decision in extensor We are told that an appeal is pending against the said decision in this Court
In the circumstances we are not inclined to deal with the said opinions in any detail except to say that we are inclined to agree with the dissenting
opinion of PD Desai J and are not concerned with the reasoning of the majority
For the above reasons we cannot agree with Mr Ashok Desai
We hold that by virtue of Section 166 the Revenue has an option in the case of a discretionary trust either to make an assessment upon the trustees or to make an assessment upon the beneficiaries
Of course both the trustee and the beneficiary cannot be simultaneously taxed in respect of the same income
The assessments made by the Commission on the deceased settlor and the appellant are thus unexceptionable
UK TRUSTS The first contention urged with respect to UK trusts is that the commission has wrongly construed clause 3 which we have extracted hereinbefore
Sri Desai argues that the trust had already come into existence with the appointment of the sole trustee Mr McGill and that the coming into existence of the trust did not depend upon the appointment of additional trustees
The commission was wrong in holding that until and unless the additional trustees are appointed the trust in clause 3 does not come into existence
Properly construed says Sri Desai clause 3 creates a discretionary trust
Inasmuch as the sub clause does not prescribe any time limit within which the trustees must decide to distribute the income among the beneficiaries says the counsel clause 4 has not and had never come into operation
In this case the trustees never did decide not to exercise their discretion under clause 3
If so no income ever arose or accrued to the Settlor or the appellant under clause 4
If the trustees fail to exercise their discretion under clause 3 the only remedy for the beneficiaries is to approach the court to compel the trustees to exercise their discretion one way or the other but they cannot say that the trust 967 income has accrued to them
Clause 4 comes into operation says the counsel only where the trustees decide not to distribute the income among the specified beneficiaries only then does the trust income belongs to and has to be paid over to the settlor and after the death of the settlor to his elder son the appellant
Accordingly the counsel says the Commission was wrong in law in treating these trusts as specific trusts
in our opinion however the question urged is academic in the facts and circumstances of the case
As a matter of fact both the settlor and the appellant have been receiving the income from these trusts during the several assessment years concerned herein
Sri Vikramsinhji had voluntarily included the entire income from the UK trusts in his income in the returns filed by him for the assessment years 1964 65 to 1969 70
It is unlikely that he would have so included unless he really received it
The Commission treated those declarations as proof of the settlor s real intention
The Commission also relied upon certain other circumstances including the manner in which the accounts of these trusts were maintained in support of their opinion that all concerned with the trusts acted on the basis that the trust income was flowing to the settlor and after his death to the appellant
The Commission also referred specifically to similar declarations made by the appellant in his returns
It referred to his statements made in the two returns filed for the assessment year 1970 71 one relating to the income received by his father till his death and the other with respect to the income received by him during the accounting year after the death of his father
Even subsequent to the death of Sri Vikramsinhji the Commission pointed out the appellant has been making similar declarations from time to time
For instance in the letter dated March 3 1975 written by the appellant to the ITO A Ward Rajkot relating to the AY 1972 73 he had stated as per statement of UK sent herewith the trustees have arrived at income of 13027 pounds for the benefit of Sri Jyotendrasinhji
According to our opinion this income is not taxable as UK trust is discretionary
However as it has been taken last the income may be included in the hands of Sri Jyotendrasinhji subject to our appeal
It is significant to notice the ground of non taxability put forward in the said letter
The appellant did not say that he did not receive the income
All he said was since it is a discretionary trust its income is not taxable in his hands
If he had not received the income he would have put forward that fact in the forefront
But he did not
Similarly in the return relating to the AY 1973 74 a note was appended by the appellant to the following effect 968 Late HH Maharaja Vikramsinhji of Gondal has created trusts in UK
The assessee has been informed that income falling in the hands of the assessee is 12627 pounds
This is therefore shows as income in his return  emphasis added
It is true that the appellant had argued before the commission that the settlor as well as himself had included the said income in their returns out of ignorance and on the basis of wrong legal advice but the said explanation has not been accepted by the commission and we must go by the findings of the commission
It is not brought to out notice that during any of the years concerned herein did the appellant ever say that he did not receive the income from these trusts
If so the question of law urged is of mere academic interest and need not be dealt with by us
Section 5 of the Act is wide enough to bring all such income to tax
So far as the plea of double taxation is concerned the observation made by the Commission in that behalf is quite adequate
It has stated that in case appellant proves that any income has been taxed in US or UK the same income shall not be taxable over again in India
For the above reasons the appeals fail and are dismissed
No costs
VPR Appeals dismissed


Summary:
The prosecution case was that about 20 22 days prior to the occurrence the appellant and his brother removed the fencing over the field of the deceased
This resulted in a quarrel and created ill feelings between the deceased and the appellant and his brother
On the date of occurrence the deceased went to his field
Later on his wife PW1 and his son PW2 went to the field carrying meals for the deceased
The deceased took his meal and at about 1230 pm all the
three were returning to their village from the field near at the water course of the village the appellant who was coming from the village side gave a lalkara  to the deceased and he fired a shot from his pistol at the deceased
The appellant s brother exhorted him to kill the deceased
Thereupon the appellant fired three more shots from his pistol
The deceased fell down and died at the spot
PW1 accompanied by one Ganpatram went to police station and lodged the first information report at about 3 pm and the police investigation was commenced
The appellant and his brother were sent up for trial charging the former under section 302 IPC and the latter under section 302114 IPC
Both were also charged under section 27 of the Arms Act
The Trial Court acquitted the appellant and his brother of all the 850 charges as it found that the prosecution was unable to prove the case against them
The State s appeal was partly allowed by the High Court
The High Court set aside the acquittal of the appellant and convicted him for an offence under section 302 IPC and sentenced him to undergo life imprisonment
The High Court maintained the acquittal of the appellant s brother
Under section 2a of the Supreme Court Enlargement of Appellate Jurisdiction Act 1970 the present appeal was riled contending that the judgment of the Trial Court could neither be styled as perverse nor even as unreasonable and that there was no other substantial and compelling reasons which could justify the setting aside of the order of acquittal and therefore the High Court should not have interfered with the order of acquittal that the presence of undigested food in the stomach of the deceased belied the prosecutions case and that the Trial Court was right in holding that the deceased could not have taken the meals at the time stated by his wife PW1 and his son PW2 or murdered at 1230 pm as alleged that the inordinate delay in sending the empty cartridges to the ballistic expert went to show that the possibility that the same had been substituted by the investigating agency could not be ruled out and therefore the conviction of the appellant by the High Court was not justified
The State submitted that since it was an appeal under Section 2 of the Supreme Court Enlargement of Appellate Jurisdiction Act 1970 this court could itself appreciate the evidence to determine the guilt or otherwise of the appellant that the findings recorded by the Trial Court were based on surmises and conjectures and the High Court was perfectly justified in reversing the order of acquittal that the evidence of PW1 and PW2 conclusively established that the crime had been committed by the appellant by his pistol and their testimony had received ample corroboration not only from the statement of the doctor PW9 but also from the evidence of PW11l the ballistic expert who had opined that the four empty cartridges had been fired from the licenced pistol of the appellant and could not have been fired from any other weapon that being rustic villagers much importance could not be attached to the time given by PW1 and PW2 during their depositions about the exact time when the deceased may have had his meals and therefore it could not be said that the medical 851 evidence had in any way belied the prosecution case
Dismissing the appeal this Court HELD 101
The process of digestion depends upon the digestive power of an individual and varies from in individual to an individual
It also depends upon the type and amount of food taken
The period of digestion is different for different types of food
Some food articles like mutton chicken etc
would take more time for being digested as compared to vegetarian food
No question at all were asked from the wife of the deceased about the type of food served by her to her husband or the amount of food taken by the deceased
That apart the time stated by the witnesses as to when the deceased took his food was only an approximate time as it was not even suggested to PW1 that she had a wrist watch and had actually seen the time when her husband took his food
Too much play on such slippery factors goes against realism and is not enough to discredit the otherwise reliable testimony of PW1
856E F 102
The doctor opined that digestion begins in 1 or 1 12 hours
From this testimony what was sought to be made out by the defence was that had the occurrence taken place at 1230 noon the deceased would have had his meals before 1100 am as semi digested food was found in the stomach of the deceased
The emphasis on this aspect of the case by the Trial Court is misplaced because the medical evidence is only an evidence of opinion and is hardly decisive
856 D 103
The evidence of both the witnesses PW1 and PW2 the widow and son of the deceased shows that they are consistent in their versions not only about the assailants but also about the manner of assault
Both the witnesses have given a vivid description of the occurrence
The statement of PW1 that the deceased took his meals at about 1030 am and that the occurrence had taken at about 12 1230 in the noon cannot be taken to have been contradicted by the medical evidence
856 B 104
The first information report was lodged by PW1 at 300 pm at a distance of about 13 miles from the place of occurrence and was therefore lodged with great promptitude and the entire version of the occurrence rinds mention in that report
857 B 105
The testimony of the PWs 1 and 2 has impressed the Court and 852 they appear to be truthful witnesses and being the close relations or the deceased would in the ordinary course of things be the last person to screen the actual offenders and implicate the appellants falsely
Their testimony also receives ample corroboration from the medical evidence and the testimony of ballistic expert PW11
857 B C 106
No suggestion even was made to anyone of the PWs
6 7 8 10 12 that the sealed packets had allegedly been tampered with while in their custody
No such suggestion was even made to PW6 that he had either substituted the carriages sent to the ballistic expert or otherwise tampered with the sealed packets
There is no possibility of the substitution of the cartridges
859 F 107
Thus there are no suspicious features at all appearing in the evidence which may cast any doubt on the prosecution version that the deceased was shot at with the pistol by the appellant and that he died as a result of the injuries so received
The prosecution had successfully established the case against the appellant beyond any reasonable doubt
858 H 859 A