Revocable transfer under agricultural income-tax law keeps settled land income assessable in the settlor's hands.

A settlement deed that reserved to the settlor power to cancel, revoke or alter the arrangement on specified contingencies was treated as a revocable transfer under the first proviso to section 9(1) of the Madras Agricultural Income-tax Act, 1955. Because the settlor could reassume control over the assets or the income, the agricultural income from the settled lands remained assessable in the settlor's hands. The argument based on section 126 of the Transfer of Property Act was rejected on the footing that the gift was valid but revocable. The constitutional challenge to section 9(1) was not entertained because the taxing authorities lacked jurisdiction to decide its validity.

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Issues: Whether the settlement deed constituted a revocable transfer of assets within section 9(1) of the Madras Agricultural Income-tax Act, 1955, so that the agricultural income from the settled lands was includible in the settlor's assessable income.

Analysis: The deed expressly reserved to the settlor the power to cancel, revoke, or alter the settlement if the settlee failed to reside with him, acted prejudicially, or if any other circumstance required cancellation or alteration. That reservation enabled the settlor to reassume control over the assets or the income and therefore brought the settlement squarely within the first proviso to section 9(1) as a revocable transfer. The argument based on section 126 of the Transfer of Property Act did not assist the assessee, because the case proceeded on the footing that the gift was valid but revocable. The constitutional challenge to section 9(1) was not entertained, as the taxing authorities had no jurisdiction to decide the validity of the provision.

Conclusion: The settlement deed was a revocable transfer under section 9(1), and the income from the settled lands was rightly assessed in the hands of the assessee; the constitutional objection was not open to be raised in these proceedings.

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