Case: The Commissioner Of Income-Tax, Punjab Vs. Shri Thakur Das Bhargava, Advocate, Hissar

appeared for the appellant the proper legal inference is that the amount was received by the assessee as his professional income in respect of which he later created a trust by the deed of trust dated August 6, 1945. He has submitted that there was no trust nor any legal obligation imposed on the assessee by the persons who paid the money, at the time when the money was received which prevented the amount from becoming the professional income of the assessee. He has also contended that even the existence of a trust will make no difference, unless it can be held that the money was delivered to that trust before it could become professional income in the hands of the assessee.7. We think that the question raised in this case can be decided by a very short answer, and that answer is that from the facts found by the Tribunal the proper legal inference is that the sum of Rs. 32,500/- paid to the assessee was his professional income at the time when it was paid and no trust or obligation in the nature of a trust was created at that time, and when the assessee created a trust by the trust deed of August 6, 1945, he applied part of his professional income as trust property.If that is the true conclusion as we hold it to be, then the principle laid down by the Privy Council in Bejoy Singh Dudhurias case, (1933) 1 ITR 135 : (AIR 1933 PC 145 ), has no application. It is indeed true, as has been observed by the High Court, that a trust may be created by any language sufficient to show the intention and no technical words are necessary. A trust may even be created by the use of words which are primarily words of condition, but such words will constitute a trust only "where the requisites of a trust are present, namely, where there are purposes independent of the donee to which the subject matter of the gift is required to be applied and an obligation on the donee to satisfy those purposes". The findings of the Tribunal show clearly enough that the persons who paid the sum of Rs. 32,500/- did not use any words of an imperative nature creating a trust or an obligation. They were anxious to have the services of the assessee in the Farrukhnagar case; the assessee was at first unwilling to give his services and later he agreed proposing that he would himself create a charitable trust out of the money paid to him for defending the accused persons in the Farrukhnagar case. The position is clarified beyond any doubt by the statements made in the trust deed of August 6, 1945.The assessee said therein that he was reserving his professional income as an advocate accruing after June, 1944 for payments of taxes and charity and, accordingly, when he received his professional income in the Farrukhnagar case he created a charitable trust out of the money so received.The clear statement in the trust deed, a statement accepted as correct by the Tribunal, is that the assessee created a trust on certain conditions etc. It is not stated anywhere that the persons who paid the money created a trust or imposed a legally enforceable obligation on the assessee. Even in his affidavit the assessee had stated that "it was agreed that the accused would provide Rs. 40,000/- for a charitable trust which I would create in case I defend them, on an absolutely clear and express understanding that the money would not be used for any private and personal purposes". Even in this affidavit there is no suggestion that the persons who paid the money created the trust or imposed any obligation on the assessee. It was the assessees own voluntary desire that he would create a trust out of the fees paid to him for defending the accused persons in the Farrukhnagar case.Such a voluntary desire on the part of the assessee created no trust, nor did it give rise to any legally enforceable obligation. In the circumstances the Appellate Assistant Commissioner rightly pointed out that "if the accused persons had themselves resolved to create a charitable trust in memory of the professional aid rendered to them by the appellant and had made the assessee trustee for the money so paid to him for that purpose, it could, perhaps, be argued that the money paid was earmarked for charity ab initio but of this there was no indication anywhere".In our opinion the view taken by the Appellate Assistant Commissioner was the correct view. The money when it was received by the assessee was his professional income, though the assessee had expressed a desire earlier to create a charitable trust out of the money when received by him. Once it is held that the amount was received as his professional income, the assessee is clearly liable to pay tax thereon. In our opinion the correct answer to the question referred to the High Court is that the amount of rupees 32,500/- received by the assessee was professional income taxable in his hands.8. Learned counsel for the respondent has referred us to a number of decisions where the principle laid down in Bejoy Singh Dudhurias case, (1933) 1 ITR 135 : (AIR 1933 PC 145 ), was applied, and has contended that where there is an allocation of a sum out of revenue as a result of an overriding title or obligation before it becomes income in the hands of the assessee, the allocation may be the result of a decree of a court, an arbitration award or even the provisions of a will or deed. In view of the conclusion at which we have arrived, the decisions relied upon can hardly help and it is unnecessary to consider them. Our conclusion is that there was no overriding obligation imposed on the assessee at the time when the sum of Rs. 32,500/- was received by him.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. We think that the question raised in this case can be decided by a very short answer, and that answer is that from the facts found by the Tribunal the proper legal inference is that the sum of Rs. 32,500/- paid to the assessee was his professional income at the time when it was paid and no trust or obligation in the nature of a trust was created at that time, and when the assessee created a trust by the trust deed of August 6, 1945, he applied part of his professional income as trust property.If that is the true conclusion as we hold it to be, then the principle laid down by the Privy Council in Bejoy Singh Dudhurias case, (1933) 1 ITR 135 : (AIR 1933 PC 145 ), has no application. It is indeed true, as has been observed by the High Court, that a trust may be created by any language sufficient to show the intention and no technical words are necessary. A trust may even be created by the use of words which are primarily words of condition, but such words will constitute a trust only "where the requisites of a trust are present, namely, where there are purposes independent of the donee to which the subject matter of the gift is required to be applied and an obligation on the donee to satisfy those purposes". The findings of the Tribunal show clearly enough that the persons who paid the sum of Rs. 32,500/- did not use any words of an imperative nature creating a trust or an obligation. They were anxious to have the services of the assessee in the Farrukhnagar case; the assessee was at first unwilling to give his services and later he agreed proposing that he would himself create a charitable trust out of the money paid to him for defending the accused persons in the Farrukhnagar case. The position is clarified beyond any doubt by the statements made in the trust deed of August 6, 1945.The assessee said therein that he was reserving his professional income as an advocate accruing after June, 1944 for payments of taxes and charity and, accordingly, when he received his professional income in the Farrukhnagar case he created a charitable trust out of the money so received.The clear statement in the trust deed, a statement accepted as correct by the Tribunal, is that the assessee created a trust on certain conditions etc. It is not stated anywhere that the persons who paid the money created a trust or imposed a legally enforceable obligation on the assessee. Even in his affidavit the assessee had stated that "it was agreed that the accused would provide Rs. 40,000/- for a charitable trust which I would create in case I defend them, on an absolutely clear and express understanding that the money would not be used for any private and personal purposes". Even in this affidavit there is no suggestion that the persons who paid the money created the trust or imposed any obligation on the assessee. It was the assessees own voluntary desire that he would create a trust out of the fees paid to him for defending the accused persons in the Farrukhnagar case.Such a voluntary desire on the part of the assessee created no trust, nor did it give rise to any legally enforceable obligation. In the circumstances the Appellate Assistant Commissioner rightly pointed out that "if the accused persons had themselves resolved to create a charitable trust in memory of the professional aid rendered to them by the appellant and had made the assessee trustee for the money so paid to him for that purpose, it could, perhaps, be argued that the money paid was earmarked for charity ab initio but of this there was no indication anywhere".In our opinion the view taken by the Appellate Assistant Commissioner was the correct view. The money when it was received by the assessee was his professional income, though the assessee had expressed a desire earlier to create a charitable trust out of the money when received by him. Once it is held that the amount was received as his professional income, the assessee is clearly liable to pay tax thereon. In our opinion the correct answer to the question referred to the High Court is that the amount of rupees 32,500/- received by the assessee was professional income taxable in his hands.view of the conclusion at which we have arrived, the decisions relied upon can hardly help and it is unnecessary to consider them. Our conclusion is that there was no overriding obligation imposed on the assessee at the time when the sum of Rs. 32,500/- was received by him.