TaxTMI 
TaxTMI 
1962 (12) TMI 62
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....d by the settlement deed in making an assessment upon the income of the assessee. The Commissioner, in exercise of his suo motu powers of revision, revised the assessment, holding that the settlement fell within the mischief of section 9(1) of the Act. This revision was made after issuing a notice to the assessee and after hearing the assessee. The result was that the settlement was held to be a revocable settlement, falling within the proviso to section 9(1) of the Act, so that the assessee became liable to be assessed on the income of the properties covered by the settlement as well. On the application of the assessee under section 60(2) of the Act, the Commissioner has referred the following question for our decision: &nbs....
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...., this section envisages the following cases: (1) a person may effect a settlement revocable or otherwise of the agricultural income from his property while continuing to be the owner of the property; and (2) he may make a revocable transfer of the property itself but continue to be in receipt of the income therefrom. In the first of these cases, despite the revocability or otherwise of the settlement, so long as the property from which the income is derived continues to be in the ownership of the settlor, the income arising therefrom is deemed to be the agricultural income of the settlor notwithstanding that such income has been settled on any other person. In the second case, the asset itself is transferred, but the transfer being revocab....
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....hts which were to devolve after the death of the settlor in a particular manner upon the three sons. Since the first of the sons was a major, the A Schedule properties were to be immediately taken possession of by him. The wife of the settlor was to take possession of the B and C Schedule properties on behalf of the two minor sons. The "Kumara Bhavan" property was to be in the possession and enjoyment of the settlor during his lifetime. The document also set out that it was agreed between the parties that each of the three sons should contribute towards the maintenance of their mother, the wife of the settlor, from out of the income derived from the properties settled on the sons. The following part of the document is important for the purp....
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....A to C allotted to the three sons referred as individual Nos. 1, 2 and 3. The document specifically states that in order to enable a stridhanam deed to be executed, additional properties had been included in Schedules A to C. It specified that the document should be executed at an early date, but it did not indicate which properties were to be so gifted as stridhanam to the daughter, Ramalakshmi. It only stated that such of the properties of equal values which should be selected from each of the Schedules A to C. The last part of the extract above is of special importance. It clearly specifies that if the sons did not execute the document or caused obstruction or delay, then the settlor is given full right and authority to select the proper....
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....ontingencies, the sale was nevertheless a revocable transfer within the meaning of the first proviso to section 16(1)(c) of the Act. This decision would appear to apply fully to the present case, for, on the occurrence of the contingency, viz., the failure of the sons to execute the stridhanam deed, the settlor assumed the power to interfere with the settlement and to take away properties already allotted to the sons and to make a fresh allotment by way of stridhanam. Learned counsel for the assessee, however, refers to Commissioner of Income-tax v. S.M. Bose [1951] 21 I.T.R. 135. That was a case where it was held that the first proviso to section 16(1)(c) of the Income-tax Act could come into play only in cases where the settlor can lawful....
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.... proviso as well as to the substantive provision, section 16(1)(c). Even so, we fail to see how the conditions requisite for invoking the third proviso obtain in this case. The third proviso to section 9(1) of the Act takes a case out of the scope of section 9(1) if the settlement is not revocable for a period exceeding six years or during the lifetime of the settlor, and from which agricultural income the settlor derives no direct or indirect benefit. In order to invoke this third proviso both the above conditions should exist. It is true that the latter condition that the settlor derives no direct or indirect benefit from the agricultural income is satisfied. But the first condition that the settlement is not to be revocable for the perio....