Revocable transfer rules under income tax law excluded trust income settled on the wife for her lifetime.

Income from the Ulster Road property settled under a trust deed was examined under section 16(1)(c) of the Indian Income-tax Act as a possible revocable transfer. Although the settlement was irrevocable in form, proviso 1 applied only where the deed provided for retransfer of income or assets to the settlor, or reassumption of power over them. The clauses relied on by the Revenue did not create such a present retransfer or reassumption, and the arrangement for the wife's maintenance and the contingent payment after her death did not alter that position. Proviso 3 was treated as covering transfers deemed revocable under proviso 1 as well. The income settled on the wife for her lifetime was therefore not assessable as the assessee's income.

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Issues: Whether the income from the Ulster Road property settled under the trust deed was includible in the assessee's total income under section 16(1)(c) of the Indian Income-tax Act as income from a revocable transfer, and whether proviso 3 excluded the settlement from that clause.

Analysis: The settlement was irrevocable in form, but proviso 1 to section 16(1)(c) applied where the deed contained a provision for retransfer of income or assets to the settlor or for reassumption of power over them. The clauses relied upon by the Revenue did not amount to a present retransfer or reassumption in respect of the settlor's residence, the maintenance arrangement for the wife and children, or the contingent payment of income to the settlor after the wife's death. Proviso 3 was held to govern not only transfers revocable in fact but also transfers deemed revocable under proviso 1. Since the settlement was not revocable during the lifetime of the beneficiary wife and the settlor retained no direct or indirect benefit in the income settled for her life, the conditions of proviso 3 were satisfied.

Conclusion: The income settled on the wife during her lifetime was not assessable as the assessee's income under section 16(1)(c).

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