Revocable transfer under section 16(1)(c) covers conditional revocation, but later absolute entitlement takes income outside the deeming rule.

A transfer remained revocable for section 16(1)(c) even though the settlor's power of revocation could be exercised only with the consent of named beneficiaries; income arising to the beneficiary during that arrangement was therefore treated as the settlor's income. However, where the deed on Phiroz's death made Freny and Feroza absolutely entitled to the relevant property in equal shares, the trust ended as to that property and the trustees became bare trustees. Income arising thereafter came from Freny's absolute ownership, not from the original revocable transfer, and fell outside section 16(1)(c).

---

---

Issues: (i) Whether the trust deed was a revocable transfer so that the income arising to Freny during the lifetime of the settlors fell within section 16(1)(c); (ii) Whether the income received by Freny from the property originally earmarked for Phiroz, after his death, remained income arising by virtue of a revocable transfer within section 16(1)(c).

Issue (i): Whether the trust deed was a revocable transfer so that the income arising to Freny during the lifetime of the settlors fell within section 16(1)(c).

Analysis: Section 16(1)(c) applies where income arises by virtue of a transfer that is capable of revocation. The deed reserved a power of revocation to the settlor, though exercise of that power required the consent of named beneficiaries. The absence of words limiting revocability to an absolute or unconditional power meant that a transfer did not cease to be revocable merely because consent of others was required. The trust therefore remained a revocable transfer for the purpose of the section.

Conclusion: The income falling to Freny under the trust during the subsistence of that revocable arrangement was covered by section 16(1)(c) and was liable to be treated as the income of the settlor.

Issue (ii): Whether the income received by Freny from the property originally earmarked for Phiroz, after his death, remained income arising by virtue of a revocable transfer within section 16(1)(c).

Analysis: On the true construction of the deed, the clause dealing with devolution on Phiroz's death made Freny and Feroza absolutely entitled in equal shares to the relevant property when Phiroz died without widow or issue. Once that event occurred, the trust, so far as that property was concerned, came to an end and the trustees became mere bare trustees. The income then arose from Freny's absolute ownership and not by virtue of the original revocable transfer.

Conclusion: Section 16(1)(c) did not apply to the income from the property that devolved absolutely on Freny after Phiroz's death.

Final Conclusion: The reference was answered by holding that the trust was revocable as to the income first question, but that the later-acquired income from Phiroz's share stood outside the deeming provision, leaving the assessee successful only in part.

Ratio Decidendi: A transfer remains revocable for section 16(1)(c) even if revocation can be exercised only with the consent of named persons, but income arising after a beneficiary becomes absolutely entitled to the property is not income arising by virtue of the original revocable transfer.

---