Law:

Section:

I. Section 63 of the Income-tax Act, 1961 [Corresponding to section 16(1)(c) of the Indian Income-tax Act, 1922] - Transfer and revocable transfer - Assessment year 1958-59 - Whether merely because settlor is entitled to give some directions to trustees and trustees are obliged to carry out those directions although such direction relates to handling over of income of trust to settlor, trust would not be revocable as longs as money so transferred to settlor is meant for purpose for which trust is created - Held, yes - Assessee settled on trust 3 per cent Government of Indian Conversion Loan, 1946 - He constituted himself as one of trustees - Trust deed provided that expenses of pilgrimage of settlor himself or members of his family would be defrayed as per directions of settlor in regard to purposes laid down therein, out of income of corpus of trust fund, as settlor may from time to time require - It was also provided that settlor was entitled to direct trustees to hand over income of trust to settlor - Whether on facts, trust was not revocable and therefore, its income was not taxable in assessee's hands - Held, yes II. Section 60 of the Indian Income-tax Act, 1922 - Exemption from Income-Tax - Assessment years 1953-54 and 1954-55 - Whether provisions of Nizam's Trust Deed (Validation) Act, 1950, override provisions of Income-tax Act - Held, yes - Assessee Nizam settled trust in favour of his daughter-in-law - Trustees deposited amount with Government - Government agreed that interest on such deposit would be tax free - By trust deed executed subsequently, beneficial rights were assigned to assessee - Whether trust deed under aforesaid trust Deed (Validation) Act, would have overriding effect over Income-tax Act and, therefore, amount representing interest on deposit with Government received by assessee was not assessable to tax-Held, yes FACTS-I The Nizam settled on trust 3 per cent Government of India Conversion Loan, 1946. The settlor constituted himself as one of the trustees and was to remain during his life, the President of the Board of Trustees. As per clause 3(c) of trust deed, during the lifetime of the settlor, the expenses of Haj of the settlor…

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