The judgment of the court was delivered by
B. P. 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 Nos. 1301 to 1307
of 1991, relate to the assessment years 1964-65 to 1970-71 while Civil Appeals
Nos. 1288 to 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
Income-tax Officer 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 settlement (trust 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 the United States are in identical terms. Similarly, the
two settlements, executed in the United Kingdom 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 the U. S. in
the first instance.
Under the U. S. settlements, the National City Bank, New
York, is constituted the sole trustee. The trust is created for the benefit of
the grantor/ settlor, 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
and/or 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 stirpes.
The clause which is relevant herein, which, according to the Revenue, makes the
trusts revocable ones-we may refer to it as paragraph 1(2) 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 grantor, 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 hereunder. 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 the trustee then acting
hereunder, 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 the whole
of the income or any part of or the 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 or all such
payments and applications, and no such payment or application or omission of a
person from participation therein shall cause a charge against or otherwise
affect the future interest or share of any person hereunder 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 the other clauses of
these settlements except to say that the object of these trusts is to provide
for the education, maintenance and upkeep 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 the whole of the income arising from the U. S. 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 up to the
date of the death of the settlor and the other from the date of the death of the
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 the whole of the income from the U. S. trusts in the
respective returns. At this stage, the appellant says, he was advised that the
income from the U. S. trusts was not taxable in, India either in the hands of
the 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
assessment years 1965-66 and 1966-67. Inasmuch as the appeals were barred with
respect to other assessment orders, he preferred revisions before the
Commissioner of Income-tax. (It may be mentioned at this stage itself that the
income from the U. K. trusts was included in the aforesaid returns just as the
income from the U. S. trusts was included. Similarly, the plea of non-taxability
was urged with respect to the income from the U. K. trusts on the same basis as
was urged with respect to the income from the U. S. trusts).
The Appellate Assistant Commissioner, Rajkot, admitted the
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 the Tribunal. The
Tribunal allowed the appeals holding that the Appellate Assistant Commissioner
acted contrary to rule 46(2) 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 the Appellate Assistant Commissioner. It is at
this stage that the appellant approached the Settlement Commission under Chapter
XIX-A of the Income-tax Act, 1961.
We may now notice the relevant clauses in the deeds of
settlement executed in the U. K. 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).
"3. THE settlor hereby directs that the trustee shall
and accordingly, the trustee shall stand possessed of the trust fund and the
income thereof upon the trusts following that is to say :
(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 (if 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 the 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 as aforesaid the trustees shall stand possessed
of the trust fund and the income thereof upon the trusts 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 provisions/clauses
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 the U. S. trusts. The said income was also
included in the two returns filed by his son for the assessment year 1970-71.
Thereafter, however, the appellant took the stand, as mentioned hereinbefore,
that the income from these trusts is not includible in his income. He also took
the stand that the inclusion of the said income in the returns submitted by his
father for the assessment years 1964-65 to 1969-70 and by him in the returns
relating to the assessment year 1970-71 was under mistake. This submission too
was the subject-matter of the appeals and the revision filed before the
Appellate Assistant 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 the U. K. 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 the assessment years 1964-65 to 1970-71 (Vikramsinhji and
the other to the assessment years 1970-71 to 1982-83 (the appellant The findings
of the Commission which constitute the bases for its orders may briefly be
stated as the following :
(i) Though the U. S. 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 settlor/transferor, Sri Vikramsinhji.
(ii) On the death of the settlor, the U. S. 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 U. K. 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 whereunder 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 the assessment years
1964-65 to 1970-71 (up to the date of death of the settlor) as also the income
of the appellant for the assessment years 1970-71 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
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
the correctness or otherwise of the Commission's order
Sri Ashok Desai, learned counsel for the appellant, urged
the following contentions:
(1) The Settlement Commission erred in law in holding that
the U. S. 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 to retransfer directly or indirectly the whole or any part of the income
or assets to the transferor or it must give him a right to reassume power
directly or indirectly over the whole or any part of the income or assets. In
this case, the relevant clause does not give the transferor such power. The
power is given to the trustee to be exercised with the concurrence of the
transferor/settlor. Even if, for any reason, the clause is construed as giving
such a power to the settlor/transferor, section 63 is not attracted inasmuch as
the power is given not to him as such but jointly to him and the trustee. Such a
power does not attract the mischief of section 63.
(2) The U. S. 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 U. S.
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 the U. K. trusts are concerned, the
Settlement Commission has committed 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 U. K. trusts/
settlements are also discretionary trusts and not specific trusts as held by the
Settlement Commission. In such a case again, the assessments can be made only
upon the trustees and not upon the beneficiaries-recipients.
(5) So far as the U. K. trusts are concerned, no income
was received by the settlor or the appellant either in the U. K. 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 income, the beneficiaries have no right to the income nor can it
be said that the income accrues to them. The Settlement Commission committed a
legal error in including the income from the U. K. trusts in the total income of
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.
(6) In both the U. S. and the U. K., 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, learned counsel for
the Revenue, made the following submissions :
(i) The Settlement Commission is not a regular Tribunal.
Its function is different from those of 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 the Settlement Commission must be conditioned by the 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
the U. S. and the U. K. 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 argument of not receiving the income from the U.
K. trusts is a mere afterthought and should not be given any credence. During
his lifetime, the settlor had declared that he had received income from both the
U. K. and the U. S. trusts and had included the same in his returns of income
for each of the assessment years relevant herein. The appellant too acted
similarly.
(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 U. K. trusts has
rightly been taken into account by the Commission while passing its orders.
The first question we have to answer is on 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 in sub-section (1A) to (1D) of section 34 of the Indian 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 245C. Section 245D prescribes the
procedure to be followed by the Commission on receipt of an application under
section 245C. 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 authorised in 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 245E empowers the Commission to reopen the
completed proceedings in appropriate cases, while section 245F confers all the
powers of an income-tax authority upon the Commission. Section 245H 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 its sources. Under section 245HA, the Commission
can send back the matter to the Assessing Officer, where it finds that the
applicant is not co-operating with it. Section 245-1 declares that every order
of settlement passed under subsection (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 reopened in any proceedings under the
Act or under any other law for the time being in force. Section 245L 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
245-1 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 the
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 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 is contrary to any
of the provisions of the Act. In this context, it is relevant to note that the
principle of natural justice (audi alteram partem) has been incorporated in
section 245D itself. The sole overall limitation upon the Commission thus
appears to be that it should act in accordance with the provisions of the Act.
The scope of enquiry, whether by the 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, apart from ground of
bias, fraud and malice which, of course, constitute a separate and independent
category, has it prejudiced the petitioner/appellant. Reference in this behalf
may be had to the decision of this court in R. B. Shreeram Durga Prasad and
Fatechand Nursing Das v. Settlement Commission (I. T. and W. T.) [1989] 176 ITR
169, which too was an appeal against the orders of the Settlement Commission.
Sabyasachi Mukharji I., speaking for the Bench comprising himself and S. R.
Pandian J., observed that, in such a case, this court is " concerned with
the legality of the 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 North Wales Police
v. Evans [1982] 1 WLR 1155 (HL). Thus, the appellate power under article 136 was
equated with the 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 the 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 particular manner. Even if the interpretation
placed by the Commission on 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 Act, we
propose, for the sake of completeness, to examine also whether the order of the
Commission is vitiated by any such wrong interpretation.
U. S. 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 the trust income
among the specified class of beneficiaries. In the case of such trusts, the
trustees have a discretion to pay the whole or part of the income to such member
or members of the designated class as they think fit and in such proportion as
they deem appropriate. Section 164(1) 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), p. 129,
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 paragraph 1(2), 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
notwithstanding" 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 of the
income of the trust fund and any portion or all of 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
by the trustee then acting hereunder ". In other words, the said clause
empowers the settlor/transferor and the trustee, acting together to direct the
trustee, at any time, to pay over the entire income and/or entire corpus or a
part 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 provision 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, learned counsel for the
appellant, is that section 63 will be attracted only where the transferor is
vested with the exclusive and/or 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 learned counsel. Firstly, the power, properly construed, is given to
the settlor to be exercised together with the trustees 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 or the principal of the trust to
such member of the family as he thinks appropriate, under the clause preceding
and paragraph following paragraph 1(2). If so, there was no point in saying that
he can, together with the settlor, be empowered to pay over a part or the whole
of the income/principal 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 U. S. A. and n
