Revocable trust under income tax law requires an express deed-based power to retransfer assets or reassume control.

For sections 61 to 63 of the Income-tax Act, a trust is revocable only if the deed itself reserves a direct or indirect right to retransfer the income or assets, or to reassume control over them. Mere benefit to the settlor, or a possible advantage arising from trustee conduct, does not make the trust revocable unless such power is expressly reserved in the instrument. Clauses on investment, alteration of objects, or devolution on failure of beneficiaries are not, by themselves, a reserved power of revocation. On this construction, the trust deed did not permit the settlor to take back the property as owner or to reassume control in the statutory sense.

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Issues: Whether, on a proper construction of the trust deed, the trust was a revocable trust so as to attract inclusion of the trust income in the settlor's hands.

Analysis: For purposes of sections 61 to 63 of the Income-tax Act, 1961, a transfer is revocable only if the instrument itself contains a provision for retransfer, directly or indirectly, of the income or assets to the transferor, or confers a right to reassume power, directly or indirectly, over the income or assets. Mere receipt of some benefit by the settlor, or a possible advantage flowing from the trustees' conduct, does not by itself make the trust revocable unless such power is reserved by the deed. On the construction of the trust deed, the clauses relating to investment, alteration of objects, and devolution on failure of beneficiaries did not reserve to the settlor a legal right to take back the trust property as owner or to reassume control in the sense required by section 63. The Court further held that clauses enabling the trustees to manage or invest the trust property, or contingencies operating upon the extinction of beneficiaries, could not be equated with a reserved power of revocation.

Conclusion: The trust was not a revocable trust, and the question was answered in the negative, in favour of the assessee.

Ratio Decidendi: A trust is revocable only when the deed itself contains a provision for retransfer of the income or assets, or a reserved right in the transferor to reassume power over them; indirect benefit or trustee action contrary to the deed is insufficient.

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