Revocable settlement principle: a reserved right to retransfer or reassume control makes the transfer revocable under tax law.

A settlement deed is treated as revocable where it reserves to the settlor a right, even on a contingent event, to retransfer property or reassume control over assets already allotted. On the facts discussed, the deed appeared to make an absolute allotment to the sons, but it also allowed the settlor to select and reallocate properties if the contemplated stridhanam deed to the daughter was obstructed or delayed. That reserved power was sufficient to bring the transfer within the proviso to section 9(1) of the Travancore-Cochin Agricultural Income-tax Act, 1950. The third proviso was not applicable because irrevocability for the required period was not shown.

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Issues: Whether the settlement deed created a revocable settlement within the meaning of section 9(1) of the Travancore-Cochin Agricultural Income-tax Act, 1950.

Analysis: The settlement deed, though couched as an absolute allotment of properties to the sons, reserved to the settlor a right to select and reallocate properties from the schedules if the contemplated stridhanam deed in favour of the daughter was obstructed or delayed. That clause enabled the settlor to take away properties already allotted and to execute the stridhanam deed at his free will, which amounted to a reserved power to reassume control over the transferred assets. A transfer falls within the proviso to section 9(1) when it contains a provision for re-transfer directly or indirectly, or gives the settlor a right to reassume power over the assets, even if the power arises only on a contingency. The analogy drawn from section 16(1)(c) of the Indian Income-tax Act supported this construction, while the third proviso to section 9(1) was inapplicable because the settlement was not shown to be irrevocable for the requisite period.

Conclusion: The settlement deed was a revocable settlement within the meaning of section 9(1) and its first proviso, and the question was answered in the affirmative against the assessee.

Ratio Decidendi: A settlement is deemed revocable if the deed reserves to the settlor, even on a contingent event, a power to retransfer property or reassume control over the transferred assets.

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