Law:

Section:

Section 4 of the Income-tax Act, 1961 (Corresponding to section 3 of the Indian Income-tax Act, 1922) - Income - Chargeable as - Assessment years 1952-53 to 1954-55 - Certain amount settled by assessee for benefit of his daughter-in-law 'N' was, under an agreement, deposited with Government of India on a nominal rate of interest free of income-tax and other taxes - Apart from that, an amount of Rs. one lakh payable to 'N' every year out of corpus was also tax-free as per agreement - 'N' under a release deed, transferred her right to receive yearly payment in favour of assessee, on getting lump sum amount - Whether exemption from tax under agreement was of a general and comprehensive nature and was not restricted to 'N' alone as dominant intention of parties was that said payment was to be free from tax - Held, yes - Whether, moreover, consideration which weighted with Government of India in agreeing to grant exemption in matter of tax was deposit of amount with it, and therefore, it held equally good whether person to whom yearly payment was to be made was 'N' or assessee - Held, yes - Whether, therefore, assessee was also entitled to exemption from tax under agreement - held, yes FACTS The assessee made a settlement of Rs. 30 lakhs by transferring that amount to a trust for the benefit of his daughter-in-law 'N'. An agreement was then entered into between the Government of India, the a assessee as the settler and the trustees for deposit of that amount with the Government of India, and the latter would, out of its revenue, pay to the trustees interest at one per cent per annum free of income-tax, super tax and all other taxes and other assessments whatsoever. The Government of India would, out of the said corpus, pay to the trustees up to a maximum of Rs. one lakh per annum. The Government further declared that interest payable would be free from income-tax, Super tax, all other taxes etc. and assessments, and that it would not at any time assess or levy on the settlor or the trustees or on any of the beneficiaries any of the above taxes, duties or assessments in respect of any income or corpus so deposited, and any such income or corpus or part thereof would…

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