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Section 61 of the Income-tax Act, 1961 - Revocable Transfer - Assessment years 1959-60 to 1963-64 - Assessee constituted a trust authorising trustees to defray expenses of Haj of settlor and also to make religious offerings and spent monies on charitable purposes according to settlor's absolute discretion - Whether section 61 was attracted to trust - Held, no FACTS The assessee had constituted a trust known as 'The Nizam's Pilgrimage Money Trust'. Clause 3(c) of the trust deed authorised the trustees to utilise the income of the trust, inter alia, to defray the expenses of Haj of the Settlor and to make religious offerings and spent money for charitable purposes as the settlor may require. It was contended by the department that this clause gave the settlor/assessee the right to reassume power directly or indirectly over the income or assets which had been transferred to the trustees under the trust deed, and, therefore, income of the trust for the assessment years 1959-60 to 1963-64 was taxable in the assessee's hands by reason of section 16(1)(c) of the 1922 Act/ sections 60 and 61 of the 1961 Act. The High Court answered this question in favour of the assessee, following its earlier decision in CIT v. Nawab Sir Mir Osman Ali Bahadur [1985] 153 ITR 514 (AP)(App.). On appeal: HELD Relying upon the exposition of section 16(1)(c ) in the decisions of this Court in CITv. S. Raghbir Singh [1965] 57 ITR 408 , CIT v. Jayantilal Amratlal [1968] 67 ITR 1 andHrishikesh Ganguly v. CIT [1971] 82 ITR 160, the High Court came to the conclusion that though, under the clause, the settlor had a wide discretion to decide upon the manner in which the income from the trust could be paid for the above purposes, such power was conferred on him only in his capacity as trustee and did not attract the first proviso to section 16(1)(c) of the 1922 Act/section 61 of the 1961 Act. Further, the department had preferred a special leave petition against the in Nawab Sir Mir Osman Ali Bahadur's case (supra) but the said petition was dismissed by the Supreme Court. In the circumstances mentioned above, the High Court answered the question correctly and that there were no grounds to…

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