l Appeals Nos 1133 and 11 34 of 1965
Appeal by special leave from the judgment and order dated November 18 1964 of the Mysore High Court in T R C No 4 of 11964
R Venkataram and R Gopalakrishnan for the appellant
SV Gupte Solicitor General R Ganapathy Iyer R H Dhebar and R N Sachthey for the respondent
The Judgment Of WANCHOO and SIKRI JJ
was delivered by SIKRI J SHAH J delivered a dissenting Opinion
Sikri J
These appeals by special leave are directed against the judgment of the Mysore High Court in a reference under section 271 of the Wealth Tax Act 27 of 1957 hereinafter referred to as the Act answering the question whether the sums of 421 Rs 430684 and Rs 413353 being the value of the shares transferred by the assessee to the Sandur Ruler s Family Second Trust could be included in the net wealth of the assessee for the assessment years 1958 59 and 1959 60 under the provisions of Section 41a iii of the Wealth Tax Act in favour of the Revenue
The question arose in the following circumstances The ap pellant
His Highness Yeshwant Rao Ghorpade hereinafter referred to as the assessee held 12750 shares in Sandur Manganese  Iron Ores Ltd on March 31 1957
On August 24 1957 he created two Trusts one may be called the Charitable Trust and the other the Sandur Rulers Family Second Trust may hereinafter be referred to as the Second Trust
The assessee transferred some shares to the Second Trust under conditions contained in the Trust Deed
The Wealth Tax Officer and the Appellate Assistant Commissioner in computing the net wealth of the assessee on March 31 1958 and March 31 1959 the valuation dates respectively for the assessment years 1958 59 and 1959 60 included the value of these shares held by the Trustees under the Second Trust
On appeal the Appellate Tribunal reversed the decisions of the authorities below and came to the conclusion that the value of the shares could not be taken into consideration in computing the net wealth of the assessee
The Tribunal however at the instance of the Department referred the question of law already set out above for the opinion of the High Court
The High Court as mentioned earlier answered the question against the assessee
The assessee having obtained special leave the appeals are now before us
The short question that arises is whether the shares in question held by the Trustees under the Second Trust are held for the benefit of the three minor children mentioned in the Second Trust deed
The answer to this question depends first on the interpretation of the words for the benefit of  minor child in section 41 aiii of the Act and secondly on whether on the true interpretation of the Second Trust these assets are held for the benefit of the minor children
Section 41aiii reads as follows 4
1 In computing the net wealth of an individual there shall be included as belonging to him athe value of assets which on the valuation date Eire held
iiiby a person or association of persons to whom such assets have been transferred by the individual otherwise than for adequate consideration for the benefit of the individual or his wife or minor child or
The learned Solicitor General Mr Gupte on behalf of the Revenue contends that the word benefit in this section means A the immediate or deferred benefit
He says that the amendment of the section made by the Wealth Tax Amendment Act 1964 46 of 1964 which came into force on April 1 1965 is in 422 effect declaratory
Section 4 of the Amending Act substituted a new clause for the clause set out above
The new clause is iii by a person or association of persons to whom such assets have been transferred by the individual otherwise than for adequate consideration for the immediate or deferred benefit of the individual his or her spouse or minor child not being a married daughter  or both or
We are unable to regard the new amendment as declaratory
The amendment makes a deliberate change and the addition of the words the immediate or deferred benefit before the words of the individual apart from other changes cannot be called a mere declaratory legislation and we must construe the word benefit  apart from the amendments made by Act 46 of 1964
It seems to us that the word benefit  in the context means for the immediate benefit of the individual or his wife or minor child
If a property is transferred to Trustees to hold in trust for the life of A and then for B we cannot hold that the property is held for the benefit of B during the life time of A As will appear later under the Second Trust the Trustees hold the trust property for the benefit of the Charitable Trust for a number of years before they start holding it for the benefit of the minor children
It is difficult to say that while the property is being held for the benefit of the Charitable Trust it is also being held for the benefit of the minor children
Coming to the second point namely whether the trust pro perty is held for the benefit of the minor children within section 41a iii it is necessary to carefully consider the terms of the Second Trust Deed because the High Court has differed from the interpretation placed upon it by the Income Tax Appellate Tribunal
It is common ground that the Trust Deed must be considered as a whole
The preamble to the deed reads as follows This Deed of Settlement and Trust is made this 24th day of August 1957 between His Highness Maharaj Shri Yeshwant Rao Hindu Rao Ghorpade Ruler of Sandur now residing at Sandur House Palace Road Bangalore hereinafter called the SETTLOR of the one part and His Highness Maharaj Shri Yeshwant Rao Hindu Rao Ghorpade Ruler of Sandur and Captain Sardar Dattaji Rao Chander Rao Ranavare both of whom are hereinafter collectively called the TRUSTEES of the other part Whereas the SETTLOR is absolutely entitled to the shares set out and described in Schedules A B and C hereto as sole and absolute owner thereof Whereas the SETTLOR had been and is desirous of making a settlement on his two minor sons namely 423 Rajkumar Shri Shivarao Yeshwantrao Ghorpade aged 16 years and Rajkumar Shri Venkatrao Yeshwantrao Ghorpade aged 6 years hereinafter referred to as the First and the Second Beneficiary and on his minor daughter Rajkumari Shri Vijayadevi Yeshwantrao Ghor pade aged 10 years hereinafter referred to as the Third Beneficiary out of natural love and affection towards them of the shares set out in Schedules A B and C hereto respectively and with a view to make provision for them Whereas the SETTLOR intends and desires to give to his aforesaid minor sons and minor daughter from time to time further shares or other assets with the intention that such further shares or other assets be given should be held in Trust for the said minor sons and minor daughter in the manner in which they have respectively taken the shares set out and described in Schedules A B and C hereto as if the further shares or other assets had formed part of the said Schedules
 It is not necessary to set out the last para in the preamble
The learned Solicitor General attaches importance to the recitals in the preamble but in our view the recitals do not assist us in any manner
There is no doubt that the intention of the settlor was to make a settlement on his minor children but the whole question which arises in this case is whether the settlement made by him is for the benefit of the minor children within section 41aiii
The word settlement  is neutral and the question is what has been settled on the minor children
But there is no doubt that the assessee out of natural love and affection for his minor children created the Trust in question and that the minor children are the beneficiaries under the Trust
Clauses 1 2 and 3 of the Trust Deed grant transfer and convey the shares mentioned in the Schedules
A B and C to the Trustees
Clause 1 deals with the shares settled for the ultimate benefit of the first beneficiary clause 2 deals with the shares settled for the ultimate benefit of the second beneficiary and clause 3 deals with the shares settled for the ultimate benefit of the third beneficiary
These clauses are couched in the same language and it is only necessary to set out clause 1 which is in the following terms The Settlor doth hereby grant transfer and convey upto the Trustees the shares set out and described in Schedule A hereto to have and to hold the same in Trust both as to the corpus and income therefrom for a period of two years from the date of this Indenture for the benefit of Shri Yeshwantrao Maharaj Charitable Trust and on the expiry of the said period of two years to have and to hold the shares set out and described in Schedule A 424 nereto in Trust both as to the corpus and income received after the expiry of the aforesaid period of two years from the date of this Indenture for the benefit of Rajkumar Shri Shivarao Yeshwantrao Ghorpade the First Beneficiary herein as the full absolute and beneficial owner thereof but subject to the terms and conditions hereinafter set forth
Clause I thus purports to vest the shares in the Trustees and directs first that they shall hold the same in trust both as to corpus and income therefrom for a period of two years from August 24 1957 for the benefit of the Charitable Trust and secondly that on the expiry of the said period of two years to hold the shares in trust both as to corpus and income received after the expiry of the aforesaid period of two years from August 24 1957 for the benefit of the first beneficiary
It seems to us clear from reading this clause in isolation from the other clauses
which will be referred to later that for the first two years the beneficiary is the Charitable Trust and not the RaJkumar the first beneficiary
For the first two years there is an express direction that the corpus and the income should be held for the benefit of the Charitable Trust
There was some discussion as to why both the corpus and income are mentioned
The word income has been defined in clause 31 of the Deed as follows In these presents the expression income  with reference to any Beneficiary shall mean the income derived from the shares set out and described in the Schedule appropriate to such beneficiary and any income that may be derived from the investment of such income including any income that may be derived from any further shares or other assets that may be transferred either by the Settlor or by any other persons for the benefit of any such beneficiary including bonus shares if any
 It appears to us that in view of this definition it was perhaps necessary to mention the word income in Clause 1 because the idea of the settlor was that income accruing in the first year should be invested and further returns secured from it
But it is manifest that the Rajkumar the first beneficiary had no interest whatsoever in the income accruing during the first two years from the trust properties
It is true that clause I does not direct that the income during the first two years should be handed over to the charitable Trust but this is made clear in clause 21 which we shall presently consider
The next relevant clause is clause 9 which reads as under This Settlement and Trust is hereby declared to be irrevocable and shall take effect immediately and all trusts settlements and interests granted or created by these presents shall vest in the respective Beneficiaries immediately 425 Mr Gupte relied on this clause to show that the interest of the minor children was a vested interest and not a contingent interest
Assuming that it is so it still does not assist us in answering the question which we have posed above
Assuming the interest to be vested we still have to consider whether the Trustees hold the shares for the benefit of the minor children as on the valuation dates ie March 31 1958 and March 31 1959
Clause 21 to which reference was made a short while ago and the provisos thereto are as follows
We may mention that the High Court thought that the provisos were irrelevant but in our view they throw a great deal of light on the question before US
The Trustees may in their absolute discretion accumulate the income accruing under this settlement to the benefit of Shri Yeshwantrao Maharaj Charitable Trust for a period of two years from the date of this Indenture as respects the shares set out and described in Schedule A hereto and for a period of twelve years from the date of this Indenture as respects the shares set out and des cribed in Schedule B hereto and for a period of eight years from the date of this Indenture as respects the shares set out and described in Schedule C hereto
Provided that aThe Trustees may at any time and from time to time during the aforesaid period of two years from the date of this Indenture pay to the Trustees of Shri Yeshwantrao Maharaj Charitable Trust the whole or any part of the income accruing under this settlement in res pect of shares set out and described in Schedule A hereto during the said period of two years as the Trustees may from time to time deem fit and on the expiry of the said period of two years the Trustees shall pay over to the Trustees of the said Shri Yeshwantrao Maharaj Charitable Trust t he whole or the balance of the said in come as the case may be and thereupon the Trustees shall stand discharged of all their obligations to the aforesaid Charitable Trust and thereafter the said Chantable  Trust shall
have no right or claim whatsoever either to the income or the corpus of the said shares set out and described in Schedule A hereto
 Provisos b and c are in similar terms and deal with the shares set out in Schedule B and Schedule C respectively the only difference being about the period during which the income accruing could be paid to the Charitable Trust and the period after which the Trustees were under an obligation to pay to the Charitable Trust the whole or the balance of the said income
It seems to us quite clear from clause 21 that the intention of the settlor was that the income from the shares mentioned in 426 Schedule A should be either paid over to the Charitable Trust during the period of two years or if it is not paid over during the two years it should be paid over to the Charitable Trust on the expiry of the said two years
Now reading clause 1 and clause 21 with proviso a it seems to us that it is the charitable trust which is entitled to the income of the shares in Schedule A during the first two years
Reading clause 2 and clause 21 with proviso b it is equally clear that it is the charitable trust which is entitled to the income from the shares set out in Schedule B for a period of 12 years
Further it is manifest that reading clause 3 and clause 21 with proviso c it is the charitable trust which is entitled to the income from the shares set out in Schedule C during the first eight years
During these periods the first second and third beneficiary had no interest whatsoever in that income
The learned Solicitor General says that this may be so if we only consider clauses upto 21 but if we consider clauses 22 23 24 25 and 26 they override the intention manifested until now
Clauses 22 23 and 24 enable the Trustees to accumulate the income accruing under the settlement to the first second and the third beneficiary respectively till July 31 1975
We may only set out clause 22 which deals with the first beneficiary
Clause 22 reads as follows The Trustees may in their absolute discretion accumulate the income accruing under this Settlement and Trust to the First Beneficiary herein until the 31st July 1975 and on the aforesaid date shall make over to him all the Trust funds in the possession of the Trustees as may belong to the said Beneficiary
 In our view clause 22 enables the Trustees to accumulate only the income accruing to the first beneficiary does not say what income accrues to the first beneficiary
For that we have to look to the other clauses
It is only under the latter part of clause 1 of the Trust Deed that income accrues to the first beneficiary
Clause 25 deals with the eventuality of the first second or the third beneficiary dying before July 31
It does not really throw much light on the question
The next clause 26 Is important and Mr Gupte strongly relies on this clause
This clause reads as follows Notwithstanding anything contained in clause 21 to 25 supra the Trustees shall have full power during the currency of this Settlement and Trust to expend from out of the income accruing under this Settlement to each of the Beneficiaries herein such amount as the Trustees may in their discretion deem fit for the maintenance education
health marriage and advancement of each of the Beneficiaries herein
 427 Mr Gupte says that this clause shows that all the previous clauses are a smoke screen to enable the Trustees to spend the money for the benefit of the beneficiaries even during the aforementioned periods of 2 12 and 8 years and he says that the non obstante clause overrides everything contained in clauses 21 to 25
There is no doubt that clause 21 is mentioned in the non obstante clause but we agree with Mr Venkataraman the learned counsel for the assessee that the mention of clause 21 seems to be a typographical mistake for the meaning of the clause is quite clear that the Trustees cannot under this clause expend from out of the income accruing under the settlement to the charitable trust for their power to spend is limited to the income accruing under the settlement to each of the beneficiaries and as we have mentioned before while dealing with clause 21 the only income that accrues to the three beneficiaries under the settlement is after it ceases to be accumulated for or given to the Charitable Trust
If we were to accept Mr Gupte s argument we would have to omit the words to each of the Beneficiaries herein occurring in the clause
Mr Gupte contends that the word beneficiary  would include the Charitable Trust
We are unable to agree because the latter portion of the clause deals with education marriage etc and these can have reference only to the first second and the third beneficiary ie his minor children
Mr Gupte urges that it would be natural on the part of the settlor to provide for the maintenance education health marriage and advancement of each of the beneficiaries during their minority and it would be unnatural to attribute intention to him to leave them without any means of sustenance during their minority
There is no force in this contention
The settlor may well have thought that he would look after the minor children during heir minority and what he wanted to provide was for their expenses after they had attained the age of about 18
It would be recalled that the effect of the earlier provisions is that income starts accruing under the settlement to each of the minor children when they reached the age of about 18
We are accordingly of the opinion that clause 26 does not cut down the interest which had been settled on the Charitable Trust
We may mention that in this connection Mr Venkataraman drew our attention to the rule of construction laid down by this Court in Sahabzada Mohammed Kamgar Shah vs Jagdish Chandra Deo Dhabal Deo 1 and Ramkishore Lal vs Kamal Narain
2 In the latter case Das Gupta J speaking for the Court observed as follows Sometimes it happens in the case of documents as regards disposition of properties whether they are testamentary or non testamentary instruments that there is a clear conflict between what is said in one part of the docu ment and in another
A familiar instance of this is where in an earlier part of the document some property is given 1  611
2 1963 Supp 2 section CR 417 425
423 absolutely to one person but later on other directions about the same property are given which conflict with and take away from the absolute title given in the earlier portion
What is to be done where this happens It is well settled that in case of such a conflict the earlier disposition of absolute title should prevail and the later directions of disposition should be disregarded as unsuccessful attempts to restrict the title already given
See Sahabzada Mohd Kamgar Shah vs Jagdish Chandra Deo Dhabal Deo1 It is clear however that an attempt should always be made to read the two parts of the document harmoniously if possible
It is only when this is not possible eg where an absolute title is given is in clear and unambiguous terms and the later provisions trench on the same that the later provisions have to be held to be void
 In our opinion these observations would apply to the facts of this case if it is held that there is conflict between clauses 1 and 21 on the one hand and clause 26 on the other
But in our view all these clauses can be read harmoniously by holding that the mention of clause 21 in clause 26 is a typographical mistake and clause 26 deals only with the income which accrues to the first second and third beneficiary after the interest of the Charitable Trust has ceased
In conclusion we hold that considering the document as a whole the shares were not held for the benefit of the three minor children as on March 31 1958 and March 31 1959
Accordingly the answer to the question referred by the Appellate Tribunal and set out above must be against the Revenue
The appeals are accordingly allowed judgment of the High Court set aside and the question referred to the High Court answered in the negative
The assessee will be entitled to costs here and in the High Court
One hearing fee
Shah J The High Court of Mysore answered the following question referred under section 271 of the Wealth Tax Act 27 of 1957 in the affirmative Whether the sums of Rs 430684 and Rs 413353 being the value of the shares transferred by the assessee to the Sandur
Ruler s Family Second Trust could be in cluded in the net wealth of the assessee for the assessment years 1958 59 and 1959 60 under the provisions of section 41aiii of the Wealth Tax Act The Wealth Tax Bill was moved before the Parliament on May 15 1957 and was enacted as law after receiving the assent of the President
on September 12 1957
The two trust deeds which fall to be construed in these appeals were executed on August 24 1957
The object of the settlor of the two deeds of trust was to 1  611
429 evade the charge of wealth tax on the properties covered thereby
It was so found by the High Court and that was not denied before us
But it is open to a taxpayer to so order his affairs that incidence of tax may lawfully be avoided
Attempts at evading incidence of taxation though not commendable are not illegal
In each case the Court must take the taxing statute as it stands subject to all its imperfections If a transaction does not fairly fall within the letter of the law the Court will not Seek to put a strained construction to bring it within the law
The Court will not also stretch a point in favour of the taxpayer to enable him to get by his astuteness the benefit which other taxpayers do not obtain
The two trust deeds were executed on August 24 1957
One is a trust deed styed Shri Yeshwant Rao Maharaj Charitable Trust hereinafter called the Charitable Trust  and the other is styled The Sandur Ruler s Family Second Trust hereinafter called the Family Trust 
Of both these Trusts Yeshwant Rao Ghorpade Ruler of Sandur is the settlor and the trustees are the settlor and Captain Sardar Dattaji Rao Chender Rao Ranavare
Under the Charitable Trust the income and all the assets of the Trust funds are liable to be utilised for advancement of knowledge education health safety or any other object of general public utility or beneficial to mankind
The settlor is to be the Chairman of the Board of Trustees during his lifetime and he has power to fill up the vacancy in the office of a trustee
In case of his death the Ruler of Sandur for the time being is entitled to fill the vacancy of the office of trustee
Under this deed no property is settled for the Trust
By cl 3 the assets and the funds of the Trust are to be such sums as the Founder Trustees may contribute or in any manner provide to the Trust such sums or assets as may be contributed gifted or donated by any person or company to the Trust all interest or income arising out of the said sums and assets all assets that may be purchased or acquired from out of the said funds or otherwise acquired for
the Trust all investments and realisations therefrom out of the said funds and assets and all sums and assets which have by any means become the property of the Trust
By cl 4 the trustees are authorised to accept any donation or other sums of money or other assets from any person or company subject to any special conditions as may be agreed upon but not so as to be inconsistent with the intent and purposes of the Trust
Simultaneously with the Charitable Trust the Family Trust was executed
Initially the settlement was to operate in respect of 30 ordinary shares of the Sandur Manganese and Iron Ores Private Ltd ten shares described in Sch
A to be held in trust for the benefit of Rajkumar Shivarao the First Beneficiary ten shares described in Sch
B to be held in trust for the benefit of Rajkumar Venkatrao the Second Beneficiary and the remaining ten shares described in Sch
C to be held in trust for the benefit of Rajkumari Vijayadevi the Third Beneficiary
By paragraph 2 of the preamble it is declared that the settlor was desirous of making a settlement on his 430 two minor sons namely Rajkumar Shri Shivarao Yeshwantrao Ghorpade aged 16 years and Rajkumar Shri Venkatrao Yeshwantrao Ghorpade aged 6 years and on his minor daughter Rajkumari Shri Vijayadevi Yeshwantrao Ghorpade aged 10 years out of natural love and affection towards them and with a view to make provision for them and by the third paragraph of the preamble it was declared that the settlor intended and desired to give to his minor sons and daughter from time to time further shares or other assets with the intention that such further shares or other assets should be held in trust for the minor sons and daughter to be taken by them as set out and described in Schedules A B  C as if such shares or other assets had formed part of the said Schedules
The primary intention disclosed by the preamble of the deed of trust was that the settlor settled properties described in Schedules A B  C and declared his intention to settle other properties in future with the object of making provision for his three named children
The quantum of the estate settled must undoubtedly be determined by the habendum clause but the preamble may in case of ambiguity be resorted to for ascertaining the object of the deed and the intention of the executant
By the first clause the settlor conveyed to the trustees the shares described in Sch
A and to hold the same in trust both as to the corpus and income therefrom for a period of two years from the date of this Indenture for the benefit of the Charitable Trust and con the expiry of the said period of two years to have and to hold the shares set out and described in Sche dule A in Trust both as to the corpus and income received after the expiry of the period of two years for the benefit of the First Beneficiary as the full absolute and beneficial owner thereof but subject to the terms and conditions hereinafter setforth
Similarly the shares described in Sch
B were conveyed for twelve years for the benefit of the Charitable Trust and thereafter for the benefit of the Second Beneficiary and by cl 3 the settlor conveyed the shares described in Sch
C for a period of eight years for thebenefit of the Charitable Trust and thereafter to the Third Beneficiary By cl 4 it is declared that other shares or assets given to all or any of the beneficiaries and transferred to the trustees will be held in trust for all or any of the beneficiaries as may in accordance with the settlement and trust be specified and subject to the same limitations interests and conditions as relate to the shares specified in Schedules A B  C as if those other shares or assets so transferred had formed part of the Schedule A B  C as may be specified by the settlor or such other person
Clause 31 of the deed of trust dens tie expression income with reference to any beneficiary as meaning income derived from the shares set but and described in the Schedule appropriate to such beneficiary and any income that may be derived from the investment of such income including any income that may be derived from any further shares or other assets that may be transferred for the benefit of any such beneficiary
431 The scheme of cls
1 2 3  4 of the Family Trust may first be examined
The shares initially settled and any other shares or assets subsequently settled for the benefit of the beneficiaries or any of them are by cl 4 to be dealt with as if they formed part of the three Schedules
The Charitable Trust is to obtain the benefit of the property in Schs
A B  C both as to the corpus and income approximately for the periods during which the three beneficiaries do not attain their respective ages of eighteen years and income therefrom is to be held for the benefit of the Charitable Trust and on the expiry of the periods mentioned the shares and the assets are to be held in trust both as to the corpus and income therefrom for the benefit of the First Second or the Third Beneficiary
The scheme devised by the settlor is that during the minority of each beneficiary the property in Schedules A B  C qua each beneficiary is to remain vested in the trustees for the benefit of the Charitable Trust and after expiry of the period specified the corpus and income is to be held for the full absolute and beneficial ownership of the respective beneficiaries
By cls
6 7  8 provision is made for appointment of trustees
It may suffice to mention that the settlor during his lifetime is to be the trustee and has in case of vacancy power to appoint new trustee by writing or by will and by cl 10 the custody of the Trust assets and every portion thereof is to remain with the settlor and the trustees have full power to alter the investments in their absolute discretion
Clause 9 reads as follows This Settlement and Trust is hereby declared to be irrevocable and shall take effect immediately and all trusts settlements and interests granted or created by these presents shall vest in the respective beneficiaries immediately
 It is not clear whether in cl 9 the charity is intended to be designated as a beneficiary
From the Schedules and cls
1 2  3 it appears that the beneficiaries were to be the three children of the settlor
Even granting that charity was intended to be a beneficiary within the meaning of cl 9 the instrument vests the interests granted or created in the respective beneficiaries immediately on execution and therefore the interest which endures to the three children of the settlor under the instrument vests in them immediately
By cl 21 it is directed that the trustees may in their absolute discretion
accumulate the income accruing under the settlement for the benefit of the Charitable Trust for a period of two years from the date of the indenture as respects the shares set out and described in Sch
A for a period of twelve years as respects the shares set out and described in Sch
B and for a period of eight years as respects the shares set out and described in Sch
The direction is not obligatory but permissive
By the first proviso the trustees are authorised to pay at any time and from time to time during the period of two years to the trustees of the charity the whole or any part of the income accruing under the settlement in respect of shares 432 set out in Sch A and on the expiry of the said period the trustees are enjoined to pay over to the trustees of the charity the whole or the balance of the income as the case may be and thereupon the trustees stand discharged of all their obligations to the charity
Similar provision is made by provisos b  c with regard to payment of income from the shares during the period A twelve years in respect of shares set out in Sch
B and during the period of eight years in respect of shares described in Sch
C Prima facie this may indicate that the income to be received from the shares is to be applied for the benefit of charity in respect of the shares set out in Schedules A B  C during the specified periods and that the children of the settlor are not to have any interest in that income
By cls
22 23 and 24 an absolute discretion is conferred upon the trustees to accumulate the income until July 31 1975 in respect of the shares mentioned in each of the Schedules and on the expiry of that period to make over to the Trust funds as may belong to the beneficiaries
This is clearly intended to maintain the control of the settlor over the properties settled in trust till July 31 1975
By cl 25 it is directed that the trustees shall have control over the trust funds and the income even if any of the beneficiary dies before July 31 1975
Clause 26 provides Nothwithstanding anything contained in clauses 21 to 25 supra the Trustees shall have full power during the currency of this Settlement and Trust to expend from out of the income accruing under this Settlement to each of the Beneficiaries herein such amount as the Trustees may in their discretion deem fit for the maintenance education health marriage and advancement of each of the Beneficiaries herein
 Clause 26 confers upon the trustees full power during the currency of the settlement and trust to expend the income accruing under the settlement to each of the beneficiaries therein for the maintenance education health marriage and advancement of the beneficiaries
This power is exercisable notwithstanding any provision to the contrary made in cls
21 to 25
It may be recalled that cl
21 confers upon the trustees power either to use the income accruing under the trust for the benefit of Trust during the period prescribed or to accumulate the income and deliver it on the expiry of the periods specified to the trustees of the Charitable Trust
But by cl 26 the trustees under this trust are competent to expend the income not for charity nor to pay it over to the trustees of the Charitable Trust but for maintenance education health marriage and advancement of the beneficiaries
The relevant provisions of the Wealth Tax Act may now be surmmarised
By section 3 wealth tax is charged for every financial year commencing on and from April 1 1957 on the net wealth on the 433 corresponding valuation date on every individual Hindu undivided family
and company
By section 4 net wealth is to include certain assets
Clause 1aiii of section 4 provides that In computing the net wealth of an individual there shall be included as belonging to him a the value of assets which on the valuation date are held
iiiby a person or association of persons to whom such assets have been transferred by the individual otherwise than for adequate consideration for the benefit of the individual or his wife or his minor child
 Section 5 provides for exemptions of certain assets in the computation of net wealth
It provides insofar as it is material that Wealth tax shall not be payable by an assessee in respect of the following assets and such assets shall not be included in the net wealth of the assessee iany property held by him under trust or other legal obligation for any public purpose of a charitable or religious nature in India Under the instrument of Family Trust the assets included in the Schedules A B  C were on the valuation date held by an association of persons and those assets were transferred by the settlor otherwise than for adequate consideration  But says the settlor on the valuation date the assets were not held for the benefit of himself his wife or minor children since they were held both as to corpus and income for the benefit of charity during the minority of his children
If on a true interpretation of the deed this plea be correct the assets are not liable to be included in the net wealth of the settlor for the levy of wealth tax
I agree with counsel for the settlor that the amendment made in section 41 a iii by Act 46 of 1964 which sought to include in the computation of net wealth assets transferred for the immediate or deferred benefit of the individual his or her spouse or minor child is not declaratory of preexisting law
Under the clause as originally enacted assets transferred for the immediate benefit of the individual his wife or minor children alone may be included in the net wealth of the individual and the liability of the settlor must be determined under the provision as it stood enacted in 1957
The question then is Are the assets transferred by the settlor under the Family Trust instrument for the immediate benefit of his minor children That question can only be answered on a determination of the total effect of the instrument in the light of the diverse clauses
By the Family Trust the primary intention of the settlor as disclosed in the preamble is to make provision for his children and 434 for that purpose property is set apart by the Schedules read with cls 1 2  3
By cl 4 it is contemplated that other property will also be settled for the benefit of the children of the settlor
By cl 9 the interest created under the deed vests immediately in the beneficiaries and by cl 26 notwithstanding the provisions made in cls
21 to 25 directing application of the income from property set out in Schedules A B  C for limited periods in favour of charity the trustees have the power during the currency of the settlement to expend from out of the income accruing under the settlement to each of the beneficiaries such amount as the trustees may in their discretion deem fit for their maintenance education health marriage and advancement of each of the beneficiaries therein
If by this clause power is conferred upon the trustees to direct the income of the property in Schdules A B  C for the benefit of the children even during the periods specified in cls
1 2  3 the assets are unquestionably transferred for the immediate benefit of the children
But it was urged that the inclusion of figure 21 in cl 26 is the result of a typographical error and it should have read as cl 22
But even cl 25 refers to the application of the income for limited periods in the event of death of any of the beneficiaries and thereafter for the heirs of the beneficiary and that is not said to be an efforts typographical or otherwise
Again the argument that reference to cl 21 was due to an error was never raised before the High Court if there was any substance in that agreement the settlor would have executed a deed of rectification correcting the error after setting out the circumstances in which that error came to be made
It was urged that the power which the trustees could exercise is to expend the income accruing under the settlement for each of the beneficiaries under the Trust and since no income accrued to the beneficiaries during the periods for which the income was to be applied or accumulated for the benefit of charity reference to cl 21 in cl 26 had no meaning
It is implicit in this submission that the settlor intended that the income arising from the Trust property was to be utilized after the children attained the age of majority for their maintenance education health marriage and advancement and not during their minority
The children stood in greater need of provision for maintenance education health and advancement during their minority than after they attain their majority but it is said contrary to the plain terms of cl 26 that the interest was intended to be given to them after they attained the age of majority and not during their minority
In the deed of settlement charity is not directly mentioned as one of the beneficiaries and the income is directed to be given for limited periods to charity and thereafter to the beneficiaries named therein
Clause 26 in terms confers power upon the trustees to expend from out of the income accruing under the settlement to each of the beneficiaries such amounts for the maintenance education health marriage and advancement of the beneficiaries or any of 435 them as the Trustees deem fit and there is nothing in that clause which implies that this power is to be exercised after expiry of the periods specified in cls
1 2  3
The expression beneficiary in cl 26 clearly refers not to charity but to the three children of the settler because the trustees are invested with power to expend from out of the income accruing under the settlement for the maintenance
education health marriage and advancement of each of the beneficiaries therein
Reading cls
9  26 together it appears that the settlor intended that the trustees shall have power notwithstanding other provisions in the deed of Trust that the income of the property settled may be applied during the currency of the settlement for the benefit of the beneficiaries named therein and in the event of death of any of the beneficiaries for the benefit of his or her heirs
There was therefore a vested interest immediately arising on the execution of the instrument and the children of the settlor were the real beneficiaries
In seeking to evade the application of the Wealth Tax Act clumsy and inconsistent directions are made in the Family Trust the trustees are initially directed to apply the income accruing from the shares for certain specified periods to charity and if the income is not so applied during the periods the accumulated income is directed to be handed over to charity but the direction is immediately followed by the clause that the trustees may apply the income notwithstanding the provision relating to the application of the income in favour of charity for the benefit of the minor children of the settlor
The High Court has held that the case fell clearly within section 41 a iii of the Wealth Tax Act and during the periods specified in cls
1 2  3 the property mentioned in Schedules A B  C was liable to be included in the computation of wealth tax of the appellant and in my view the High Court is right in so holding
The appeals fail and are dismissed with costs
ORDER In accordance with the opinion of the majority the appeals are allowed with costs here and in the High Court
One hearing fee


Summary:
In August 1957 the appellant created two Trusts by two sepa rate deeds one of which was a charitable trust and the other a family trust
He then transferred certain shares to the family trust the scheme of which was that during the minority of each of three children of the appellant the property in Schedules A B and C to the deed qua each beneficiary was to remain vested in the trustees for the benefit of the charitable trust and after the expiry of the period specified in each case the corpus and income was to be herd for the beneficial ownership of the three children
By Clause 9 of the family trust deed it was provided that the interests granted or created in the respective beneficiaries shall vest in them immediately upon execution of the deed Clause 21 conferred upon the trustees power either to use the income accruing under the trust for the benefit of the charitable trust during the period prescribed in each case upto the time that each of the three children attained majority or to accumulate the income and deliver it on the expiry of the periods specified to the trustees of the charitable trust
Clause 26 provided that notwithstanding anything
contained in Clauses 21 to 25 the trustees could expend the income accruing under the settlement to each of the beneficiaries therein for the maintenance education health marriage and
advancement of the beneficiaries
In computing the nett wealth of the assesses under the Wealth Tax Act 1957 as on March 31 1958 and March 31 1959 the valuation dates respectively for the assessment years 1958 59 and 1959 60 the Wealth Tax Officer and the Appellate Assistant Commissioner included the value of the shares held by the trustees under the family trust on the ground that these shares were held by them for the benefit of the minor children within the meaning of Section 41a iii of the Act
On appeal the Appellate Tribunal reversed this decision but
upon a reference the High Court decided the issue against the assessee
In the appeal to this court it was contended on behalf of the Revenue that the word benefit in the Section meant immediate or deferred benefit and the amendment of Section 41aiii by Act 46 of 1964 whereby the words immediate or deferred were introduced before the word benefit in the Section was in effect only declaratory and that in any event it was clear from the recitals in the preamble and the other terms of the family trust deed that the intention of the appellant was to make a settlement for the benefit of his minor children within the meaning of the Section prior to its amendment
420 HELD per Wanchoo and Sikri JJ
Considering the terms of the family trust deed as a whole the shares transferred to the trustees were not held for the benefit of the three minor children as on March 31 1958 and March 31 1959 within the meaning of section 41a iiiand could not therefore be included in the nett wealth of the as e 426E By the terms of the deed it war
the charitable trust which was entitled to the income of the shares in Schedules A B and C during the years before the minor children attained majority upto that time the children had no interest whatsoever in that income
It could not therefore be said that the settlement was for the immediate benefit of the minor children
426B C Although the non obstante clause 26 purported to override the provisions of Clauses 21 to 25 the inclusion of Clause 21 appeared to be a typographical error
In any event even assuming that there was a conflict between Clauses 21 and 26 the earlier disposition under Clause 21 would Prevail over the later directions contained in Clause 26
Sahabzada Mohammed Kamgar Shah vs Jagdish Chandra Deo Dhabal Deo   611
and Ramkishore Lai vs Kamal Narain 1963 Supp
2 SCR 417 425 referred to
427B C per Shah J dissenting The primary intention of the appellant as disclosed in the preamble of the family trust deed was to make provision for his children from the terms of the trust deed and particularly from reading Clauses 9  26 together it was clear that there was a vested interest immediately arising in favour of the children on the execution of the instrument and that they were the real beneficiaries
The High Court had therefore rightly held that the shares transferred to the family Trust were for the immediate benefit of the settlor s minor children within the meaning of Section 41aiii and were liable to be included in the computation of wealth of the appellant
435C E By the Court The words immediate or deferred introduced into Section 41 aiii by Act 1946 of 1964 were not merely declaratory
The amendment made a deliberate change
The word benefit  must therefore be construed apart from the amendments and in the context meant for the immediate benefit of the individual or his wife or minor child
422C D