Transfer of beneficial trust interest and karta's gift upheld where no restraint existed and tax reduction did not make the arrangement invalid.

A beneficiary's beneficial interest in trust property was treated as transferable where the trust deed imposed no restraint, and the assignment did not alter the trustees' obligations under the trust; it was therefore not invalid merely because it reduced tax exposure. The analysis also recognised that a sole surviving coparcener, acting as karta, could validly gift the family's remainder interest in the trust corpus, subject to ordinary limitations on alienation. The revenue, being a stranger to the family, had no locus to impeach that transfer, and the arrangement was not invalidated by perpetuity concerns or by the fact that it produced wealth-tax relief.

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Issues: (i) Whether the beneficiary of a trust can transfer or assign his beneficial interest in the trust property without the trustee's consent and whether such transfer could be treated as a device of tax evasion; (ii) Whether Shashikant B. Garware, as karta of the Hindu undivided family, could validly gift the family's interest in the corpus of the trust fund.

Issue (i): Whether the beneficiary of a trust can transfer or assign his beneficial interest in the trust property without the trustee's consent and whether such transfer could be treated as a device of tax evasion?

Analysis: The trust deed contained no prohibition against transfer of the beneficiary's interest. Section 11 of the Indian Trusts Act, 1882 was held inapplicable because the assignment did not alter the trustees' obligations or modify the trust terms; the trustees were still bound to deliver the corpus according to the trust, only to the assignee designated by the beneficiary. Section 58 of the Indian Trusts Act, 1882 was treated as recognising the beneficiary's competence to transfer his beneficial interest, subject only to other applicable law. The transaction was found to be a lawful transfer of beneficial interest and not a colourable arrangement invalid merely because it resulted in tax reduction.

Conclusion: The beneficiary could validly transfer or assign his beneficial interest without the trustees' consent, and the transfer was not invalid as tax evasion.

Issue (ii): Whether Shashikant B. Garware, as karta of the Hindu undivided family, could validly gift the family's interest in the corpus of the trust fund?

Analysis: The transfer related to the family's remainder interest in the corpus after 25 years. As the sole surviving coparcener, Shashikant B. Garware was treated as having power to alienate the family property as his own, subject to recognised limitations. The gift was held not void ab initio but at most voidable at the instance of affected family members, and the revenue, being a stranger to the family, had no locus to challenge it. The court also held that the object of securing future wealth-tax relief did not render the transfer illegal, and the restriction against perpetuity under Section 10 of the Transfer of Property Act, 1882 did not invalidate the transaction.

Conclusion: The karta could validly gift the family's interest in the corpus of the trust fund, and the revenue could not challenge the transfer in the wealth-tax assessments.

Final Conclusion: The beneficiary's assignment and the karta's gift were both upheld as legally valid, with the consequence that the value adopted by the first appellate authority remained undisturbed.

Ratio Decidendi: A beneficiary's beneficial interest in trust property is transferable under Section 58 of the Indian Trusts Act, 1882 unless restrained by other law, and a sole surviving coparcener may validly alienate family property so that the revenue cannot impeach the transfer merely because it reduces future tax liability.

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