Vildirect: IncomeTax-caselaws-1976-VIL-453-BOM-DT

1976-VIL-453-BOM-DT

Equivalent Citation: [1977] 109 ITR 602, 1977 CTR 439

BOMBAY HIGH COURT

IT REFERENCE NO. 100 OF 1966

Date: 09.11.1976

YOGIRAJ CHARITY TRUST, YOGINDRAPRASAD N. MAFATLAL

COMMISSIONER OF INCOME-TAX, BOMBAY CITY I

BENCH

Judge(s) : DESAI., TULZAPURKAR

JUDGMENT

TULZAPURKAR J.-In this reference made by the Tribunal to this court under section 256(1) of the Income-tax Act, 1961, the following question has been referred to us for our determination :

Whether, on a proper interpretation of the provisions of the relevant trust deeds of the Kunti Family Trust, Aparna Family Trust and Gayatri Family Trust, the income accruing to the trusts amounting to Rs. 30,808 was includible in the total income of the assessee under section 64(v) of the Income-tax Act, 1961? "

The question relates to the assessment year 1962-63, the relevant previous year being 31st March, 1962. Assessee, Yogindraprasad N. Mafatlal, who is an individual, created three separate trusts by three deeds executed by him on the same day, namely, 26th March, 1959, in favour of his three minor daughters, (1) Kunti, (2) Aparna and (3) Gayatri. In the relevant accounting year all these three daughters were minors and unmarried. Under the first trust, which may conveniently be called "Kunti Family Trust", the assessee, in the first instance, settled 150 ordinary shares of Mafatlal Gagalbhai & Co. (Private) Ltd. and later on during 1960-61, 100 shares and 60 ordinary shares of the same company were further added to the trust fund; under the second trust, which may conveniently be called "Aparna Family Trust", the assessee settled 75 shares of the same company, while under the third trust, which may conveniently be called "Gayatri Family Trust", the assessee settled another 75 shares of the same company. The trustees to whom the shares constituting the trust fund were transferred under the three trusts were Arvind N. Mafatlal, Rajesh N. Mafatlal and Hemant B.Mafatlal. Since the provisions of the three trust deeds are almost similar to one another including the preamble, we may set out the preamble and the relevant portions of one of the trust deeds, namely, the trust deed relating to Kunti Family Trust. The preamble runs thus:

"Whereas the Settlor is desirous of settling the 150 ordinary shares in Mafatlal Gagalbhai & Co. (Private) Ltd., particularly described in the Schedule hereto, for the benefit of his daughter Kunti and her issue and in certain events for the benefit of his other children and their issue in the manner and subject as hereinafter stated."

The operative portions of each of the trust deeds which would be relevant for our consideration are to be found in clauses 2 and 3 of each of the deeds. In the Kunti Family Trust deed the following are the operative parts of the deed:

"2. For the consideration aforesaid, they the trustees hereby covenant with the Settlor his heirs executors and administrators that they the Trustees shall stand and be possessed of the said shares and the income thereof upon the trusts and with and subject to the powers and provisions hereinafter declared of and concerning the same.

3. IT IS HEREBY AGREED AND DECLARED between the parties to these presents that the Trustees shall stand and be possessed of the said shares prescribed in the Schedule hereunder written (and which shares and such stocks, funds and securities and other investments which may under the trusts of these presents, be substituted or added in the execution of the said trusts, are herein designated as "the said Trust Fund") upon trust to receive the annual and other income thereof and thereout in the first place to reimburse themselves or pay and discharge all the costs and expenses incurred in or about the administration of the trusts of these presents and subject thereto.

A. Until the said Kunti attains majority or until the death of the said Kunti whichever shall first happen :

To accumulate the whole residue of such income by investing the same and the resulting income thereof in any manner hereby authorised and so that such accumulations and the income thereof shall after the said Kunti shall attain majority or the death of the said Kunti whichever shall first happen be held upon the like trust, in all respects as are herein contained, of the fund from which such accumulations have arisen.

B. After the said Kunti attains majority to pay the whole residue of such income of the Trust Fund to the said Kunti during her life at the end of every calendar year absolutely."

Under sub-clause (C) of clause 3 it has been provided that after the death of said Kunti the trustees shall utilise the future income of the trust fund for all the male and female issues of said Kunti living at her death, etc., but if the said Kunti died unmarried or childless or without leaving any issue (male or female) her surviving, the future income of the trust fund shall be utilised for all or any of the daughters or daughter of the settlor living at the death of Kunti and the children or child then living of any then deceased daughter of the settlor, etc., and after making a couple of other provisions under the last sub-clause of clause (C) it has been provided that in the event of failure of any of the earlier provisions the trustees shall hold all the trust fund and the future income therefrom upon trust to spend and apply the same upon such one or more of such objects or purposes as the law deems public charitable as the trustees may think fit or in such manner as the trustees may think fit. Sub-clause (D) of clause 3 runs thus :

"D. Notwithstanding anything contained to the contrary in these presents, the trustees shall, after the said Kunti shall attain her age of majority pay when and so often as may be demanded by the said Kunti part or parts of the trust fund not exceeding in the aggregate one-half thereof, to the said Kunti absolutely freed and discharged from the trusts and provisions of these presents."

In the Aparna Family Trust the relevant operative part consisting in clause 3 thereof runs as follows:

3 . ......

A. Until the said Aparna attains majority or until the death of the said Aparna whichever shall first happen:

(i) Until Kunti daughter of the Settlor attains majority to accumulate the whole residue of such income by investing the same and the resulting income thereof in any manner hereby authorised and so that such accumulations and the income thereof shall after the said Aparna shall attain majority or the death of the said Aparna whichever shall first happen be held upon the like trust, in all respects as are herein contained of the fund from which such accumulations have arisen.

(ii) After Kunti daughter of the Settlor attains majority and until the said Aparna attains majority to pay the whole residue of such income to the said Kunti at the end of each calendar year absolutely."

B. After the said Aparna attains majority:

To pay the whole residue of such income of the Trust Fund to the said Aparna during her life at the end of every calendar year absolutely."

C . ......

D. Notwithstanding anything contained to the contrary in these presents, the Trustees, shall, after the said Aparna shall attain her age of majority, pay when and so often as may be demanded by the said Aparna part or parts of the said Trust Fund not exceeding in the aggregate onehalf thereof, to the said Aparna absolutely freed and discharged from the trusts and provisions of these presents."

In the Gayatri Family Trust the material provisions of clause (3) runs thus:

"3 . ......

A. Until the said Gayatri attains majority or until the death of the said Gayatri whichever shall first happen:

(i) Until Kunti daughter of the Settlor attains majority, to accumulate the whole residue of such income by investing the same and the resulting income thereof in any manner hereby authorised and so that such accumulation and the income thereof shall after the said Gayatri shall attain majority or the death of the said Gayatri whichever shall first happen be held upon the like trust, in all respects as are herein contained of the fund from which such accumulations have arisen.

(ii) After Kunti daughter of the Settlor attains majority and until Aparna daughter of the Settlor attains majority, to pay the whole residue of such income to the said Kunti at the end of each calendar year absolutely.

(iii) After the said Aparna attains majority to pay the whole residue of such income to the said Aparna at the end of each calendar year absolutely until the said Gayatri attains majority:

B. After the said Gayatri attains majority:

To pay the whole residue of such income of the Trust Fund to the said Gayatri during her life at the end of every calendar year absolutely.

C . ......

D. Notwithstanding anything contained to the contrary in these presents, the Trustees shall, after the said Gayatri shall attain her majority pay when and so often as may be demanded by the said Gayatri part or parts of the said Trust Fund not exceeding in the aggregate one-half thereof, to the said Gayatri absolutely freed and discharged from the Trusts and provisions of these presents."

Two or three aspects which are material for our consideration under each of the said three trust deeds are these : It is clear that under the scheme of these three trust deeds the trustees are enjoined upon to hold the trust fund under each of the deeds so as to accumulate the accruing income and add the same to the corpus of the trust fund till the eldest daughter Kunti attains majority; in other words, none of the daughters, not even the eldest daughter, Kunti, will have any beneficial interest in the income of the trust fund right up to the time she attains majority and during this period the accruing income has to be accumulated and added on to the corpus of the trust fund. The scheme of the trust deeds, therefore, appears to be that so long as all the three daughters are minors, the income under each of the deeds is accumulated for the benefit of the principal beneficiary concerned when she attains majority. As soon as Kunti attains majority, in the Aparna Family Trust she will get income until Aparna attains majority and in the Gayatri Family Trust she will get income till Gayatri attains majority. Similarly, Aparna would get income in the Gayatri Family Trust until Gayatri attains majority; in other words, in each of the trusts until the principal person attains majority the income would be going to some other person for some years. Under clause (D), however, which appears in each of the deeds, it is provided that notwithstanding anything contained to the contrary in the document, after the principal person concerned shall attain her age of majority, the trustees shall pay when and so often as may be demanded by the said principal person part or parts of the said trust fund not exceeding in the aggregate one-half thereof absolutely freed and discharged from the trusts and the provisions of the document.

It appears that during the previous year relevant to the assessment year 1962-63, the following income accrued to the trustees under the three trust deeds:

Rs.

(1) Kunti Family Trust 20,700

(2) Aparna Family Trust 5,054

(3) Gayatri Family Trust 5,054

------

Rs. 30,808

------

The Income-tax Officer included the aforesaid income in the total income of the assessee presumably under the provisions of section 64(v) of the Act. It is also not clear whether such inclusion was objected to before the Income-tax Officer or not, for, there is no discussion about this aspect of the matter in the assessment order. However, in the appeal which was preferred by the assessee before the Appellate Assistant Commissioner, the assessee objected to the inclusion of the aforesaid income in his total income. It was contended that the net income of the trusts for the relevant accounting year was not to be paid to the beneficiaries at all but that such net income in each of the trusts was required to be added on to the corpus and what the beneficiaries were entitled after they attained majority was the net income from the enlarged corpus and, therefore, the net income of the trusts under consideration could not be regarded as "deferred benefit" within the meaning of that expression as used under section 64(v). The Appellate Assistant Commissioner did not accept this contention. He took the view that the assessee had transferred certain shares to the trustees and such transfer was for the ultimate benefit of his three minor daughters and that though during the period of their minority no income was payable to them, the income that was received was for their ultimate benefit, in that the income on the assets originally transferred and the income on the additions to the corpus by way of annual incomes would be receivable by them for their own benefit, after they attained majority. He, therefore, held that the provisions of section 64(v) of the Act squarely caught this income that had accrued daring the previous year for the purpose of inclusion in the assessee's total income. The matter was carried further by the assessee in second appeal to the Tribunal and before the Tribunal the self-same contention was urged. The argument was that the expression "deferred benefit" used in section 64(v) meant "benefit which had been deferred during the minority" and since in the instant case the net income under each of the trusts was to be accumulated and added on to the corpus, it would lose its character as "income" and, therefore, it could not be "deferred" income for the purpose of this section. Relying on the decision of the Supreme Court in the case of Manilal Dhanji [1962] 44 ITR 876 (SC), it was also contended that emphasis should also be laid on the character of the person who was entitled to receive the income and it was contended that the minor concerned during the period of her minority was not entitled to receive the income and, therefore, unless this character of a minor was established, the income from the trust, though made for the benefit of the particular daughter, could not be included in the total income. In other words, the contention was that the income may not arise in the year of account but still it must arise to the minor child, that is to say, it must arise during the minority of the child and not after the minority had ceased and the child had become major. For pressing the character of "beneficiary" reliance was also placed upon the decision of the Supreme Court in Philip John Plasket Thomas v. Commissioner of Income-tax [1963] 49 ITR 97 (SC). The Tribunal, on a comparison of the language of section 16(3)(b) of the Indian Income-tax Act, 1922, under which the decision of the Supreme Court in Manilal Dhanji's case [1962] 44 ITR 876 had been rendered, and the provisions of section 64(v) of the present Income-tax Act, 1961, which applied to the facts of the case, took the view that the expression "deferred" did not refer to the period of the minority of the child but referred to the benefit of the child which could be deferred even beyond the period of minority. Principally relying upon the amendment that had been effected by addition of the words "immediate or deferred" in the relevant provision (section 64(v)) the Tribunal held that the income accruing to the trusts which were admittedly made for the benefit of daughters (who in the accounting years were minors and unmarried) was properly includible in the total income of the assessee. The Tribunal further held that an interpretation which would render a provision (amended provision) meaningless, was generally not to be accepted and that the words "minor child" meant a child who was a minor at the relevant time, the relevant time being the year of account. It also held that the word "minor" was only descriptive of child and the material word was "deferred" and that word had been used with regard to the year of account. The Tribunal, therefore, on the aforesaid construction which it placed upon the amended provision which was to be found in section 64(v) negatived the contention of the assessee and upheld the inclusion of income of Rs. 30,808 in the total income of the assessee. At the instance of the assessee the question set out at the commencement of the judgment has, therefore, been referred to us for our determination.

Mr. Kolah, appearing for the assessee, has raised three or four contentions before us in support of the assessee's case that the income that has arisen during the year of account could not and should not be included in the total income of the assessee. In the first place, he contended that clause (v) of section 64 creates an artificial liability and, therefore, has to be strictly construed, with the result that unless the income in question can be said to properly fall within the said provision, the same could not be included in the total income of the assessee and if there was any doubt on the proper interpretation of the expression "deferred benefit" occurring in that clause, the doubt must be resolved in favour of the assessee by giving him the benefit thereof. Secondly, he contended that on a proper construction or interpretation of the expression "deferred benefit" occurring in section 64(v), that expression would mean a benefit deferred to a year subsequent to the accounting year but not so as to defer the same beyond the minority of the child, both because the expression "minor child" occurs in the provision and also because of the scheme and the object of the enactment. He, therefore, contended that section 64(v) would not apply if the income is required to be accumulated during the minority and the corpus with accumulated income is to be given to the child after attaining majority; and in support reliance was placed on certain passages in Kanga & Palkhivala's Treatise on Income-tax Law (7th Edn) where the learned authors have expressed a view supporting the above construction. Lastly, he contended that the benefit referred to in clause (v) of section 64 must be a benefit which the minor is certain to get and must not be dependent upon the fulfilment of any contingency. According to him, having regard to the provisions of the three deeds in question, it was quite clear that the benefit or interest which the minor daughters were to get was not a vested one but was contingent upon each of the daughters attaining majority and to such a case section 64(v) would be clearly inapplicable.

On the other hand, Mr. Joshi, appearing for the revenue, invited our attention to the fact that originally the relevant provision was to be found in section 16(3)(b) of the 1922 Act, where the provision merely was that in computing the total income of any individual for the purpose of assessment, there shall be included so much of the income of any person or association of persons (trustees) as arises from assets transferred otherwise than for adequate consideration to the person or association of persons (trustees) by such individual for the benefit of his minor child and the words "for the immediate or deferred benefit of the minor child" were absent and the decision in Manilal Dhanji had been rendered both of this court in [1959] 35 ITR 467 (Bom) as well as of the Supreme Court when the matter was carried to that court in [1962] 44 ITR 876 (SC) by having regard to the earlier provision which was to be found in section 16(3)(b) and he further invited our attention to the fact that since the decision in that case had been rendered by this court the legislature has made an amendment to the relevant provision which is to be found now in section 64(v) of the 1961 Act and that this amendment, by insertion of the words "for the immediate or deferred benefit of the minor child", had been deliberately made with a view to get over the effect of the said decision. As against the view expressed in Kanga & Palkhivala's Treatise, he placed reliance on the view expressed by Sampath Iyengar in his book on Income-tax, 6th edition, on the construction and the effect of the addition of the words "for the immediate or deferred benefit" in section 64(v) of the 1961 Act. He urged that the expression "immediate benefit" has reference to such benefit as may accrue during the year of account itself and the expression "deferred benefit" means benefit which has been deferred up to any period and not necessarily synchronising with the cessation of minority of the child concerned. In other words, he contended that there was no warrant to give a restricted meaning to the expression "deferred benefit" and it must mean benefit which has been deferred up to any time. He, therefore, contended that though the income of the trust fund was required to be accumulated during the minority of the three minor daughters and was actually payable to each one of them after the minority had ceased, that aspect was hardly relevant, for it could still be said that the income from the trust fund was for deferred benefit of the minor daughters and as such the same was rightly included in the total income of the assessee. He also contended that on a proper construction of the deeds the interest or benefit created in favour of the minor daughters by the assessee under the three deeds will have to be regarded as vested interest or vested benefit, the enjoyment or possession whereof has been merely postponed and, therefore, the net income under the three trusts which accrued during the year of account was properly held to be includible in the total income of the assessee.

There is no doubt that the question posed for our determination in the case really turns upon the proper interpretation of the expression "for the immediate or deferred benefit" occurring in clause (v) of section 64 of the 1961 Act and the real question is whether "deferred benefit" means benefit deferred to a year subsequent to the accounting year in which the income is taxable, so long as it is not deferred beyond the minority of the child or it means benefit which has been deferred even beyond the minority of the child and the question would also be what was the intention of the legislature in amending the old provision by addition of the words "for the immediate or deferred benefit" while enacting the new provision. It may be stated that clauses (i), (ii), (iii) and (iv) of section 64 of the present Act, more or less, correspond to sub-clauses (i), (ii), (iii) and (iv) of clause (a) of section 16(3) of the 1922 Act and clause (v) of section 64, more or less, corresponds to clause (b) of section 16(3) of the old Act, of course, with an addition of the words "immediate or deferred". It was not disputed before us that section 16(3) of the old Act as also the present section 64 aimed or aim at foiling an individual's attempt to avoid or reduce the incidence of tax by transferring assets to the spouse or minor child, or admitting the spouse as a partner, or getting a minor child admitted to the benefits of partnership in a firm, or adopting any of the other modes covered by the section and it was also not disputed before us that since both the old section 16(3) as well as the present section 64 created or create artificial liability to tax, the provision thereof must be construed strictly. The object with which the aforesaid provisions have been incorporated in the taxing statute has been clearly indicated by the Supreme Court in the case of Tulsidas Kilachand v. Commissioner of Income-tax [1961] 42 ITR 1 (SC), where the observations of Lord Macmillan in Chamberlain v. Inland Revenue Commissioners [1943] 25 TC 317, 329 (HL) have been set out with approval as indicating the object of a similar provision which is to be found in an English statute. At page 4 of the report this is what the Supreme Court has stated:

"The object of framing section 16 (of the 1922 Act) can almost be taken from the observations of Lord Macmillan in Chamberlain v. Inland Revenue Commissioners [1943] 25 TC 317, 329 (HL), where he stated as follows :

'This legislation ............ (is) designed to overtake and circumvent a growing tendency on the part of taxpayers to endeavour to avoid or reduce tax liability by means of settlements. Stated quite generally, the method consisted in the disposal by the taxpayer of part of his property in such a way that the income should no longer be receivable by him, while at the same time he retained certain powers over, or interests in, the property or its income. The legislature's counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should, notwithstanding, be treated as still his income and taxed in his hands accordingly.'

These observations apply also to the section under consideration, and the Indian provision is enacted with the same intent and for the same purpose."

It will thus appear clear that the legislation, particularly the provision which is to be found in old section 16(3)(b) as also the provision as now to be found in new section 64(v) has been enacted with a view to get over the method adopted by the taxpayers in disposing of part of their property in such a way that the income should no longer be receivable by them while at the same time they retained certain powers or control or interest in the property or its income and, therefore, the legislature enacted that such income of which the taxpayers had thus sought to disembarrass themselves be treated as still their income and taxed in their hands accordingly. This aspect of the object or purpose with which the relevant provision has been enacted will become abundantly clear if the provision of section 64(v) (equivalent to old section 16(3)(b)) is carefully scrutinised. Under clause (v) of section 64 it has been provided that in computing the total income of any individual, there shall be included all such income as arises directly or indirectly to trustees from assets transferred to them otherwise than for adequate consideration to the extent to which the income from such assets is for the immediate or deferred benefit of the settlor's minor child; in other words, by interposing another person or association of persons (trustees) who are enjoined upon to hold assets transferred to them upon certain trusts which are made for the benefit of the settlor's minor child or children (not being his married daughters) the settlor would be in no position to avoid the incidence of tax over such income which is for the immediate or deferred benefit of his minor child and that such income will be added to the total income of the settlor. That being the main object or purpose of the enactment, the question that really arises for our consideration is whether the expression "deferred benefit" which occurs in clause (v) of section 64 means benefit deferred to a year subsequent to the accounting year in which the income is taxable, so long as it is not deferred beyond the minority of the child or means benefit deferred even beyond the minority of that child. The question is whether even the income falling within the latter category was intended to be caught by the legislature within the mischief of section 64(v) by addition of the words "immediate or deferred" or, was the intention to catch only such income as would be falling within the first category? Since, in our view, the expression "deferred" as a matter of plain meaning can mean either, the same will have to be regarded as ambiguous and not sufficiently clear and, therefore, while construing or interpreting the expression "deferred benefit" recourse will have to be had to the legislative history of a particular enactment, the main object with which the provision has been enacted and the mischief which the provision was intended to remedy and the surrounding circumstances, and this would be the correct way to approach the construction has been clearly stated by the Supreme Court in the case of Commissioner of Income-tax v. Sodra Devi reported in [1957] 32 ITR 615 (SC). At page 621 of the report this is what Bhagwati J., speaking for the majority, observed:

"It is clear that unless there is any such ambiguity it would not be open to the court to depart from the normal rule of construction which is that the intention of the legislature should be primarily gathered from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and construed in the light of surrounding circumstances and constitutional principle and practice. In the latter event the following observations of Lord Lindley M. R. in Thomson v. Lord Clanmorris [1900] 1 Ch 718, 725 (CA) would be apposite:

'In construing any ...... statutory enactment, regard must be had not only to the words used, but to the history of the Act, and the reasons which led to its being passed. You must look at the mischief which had to be cured as well as at the cure provided '."

Having regard to the observations of Lord Macmillan in Chamberlain's case [1943] 25 TC 317, 329 (HL), which we have quoted above, the object and the intendment of particular provision becomes abundantly clear. It would, therefore, now be necessary to consider what was provided by the earlier enactment and in comparison what has been now provided for in the present section 64(v) in order to understand the legislative history and the purpose of making the amendments in the old provision. Section 16 of the 1922 Act principally deals with the topic of "exemptions and exclusions in determining the total income" and the material provision which is to be found in section 16(3)(b) of the Act ran thus:

"16. (3) In computing the total income of any individual for the purpose of assessment, there shall be included-...

(b) so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both."

This provision came up for consideration before this court in Manilal Dhanji's case [1959] 35 ITR 467 (Bom). In that case, the assessee had created a trust of the sum of Rs. 25,000 and had directed that the interest on that amount should be accumulated and added to the corpus and his minor daughter was to receive the income from the corpus increased by the addition of the interest when she attained the age of 18 years. The daughter was then to receive the income during her lifetime and after her the corpus was to go to certain other specified persons. Under this trust the assessee received an amount of Rs. 410 as trustee and the question was whether this amount could be included in the total income of the assessee under section 16(3)(b) of the 1922 Act. This court took the view that under section 16(3)(b) of the Act, in order that an amount could be included in the total income of the assessee an income or benefit must be received or derived by the minor child in the year of account : what was sought to be taxed under that section was an existing income, and that as the sum of Rs. 410 was never received by his daughter and his daughter could not claim any benefit in respect of that amount, it did not form part of the total income of the assessee. The contention on behalf of the revenue was that in a case where there was a transfer of assets to trustees and the transfer was admittedly for the benefit of the minor child, the conditions specified in this section were satisfied and one had not to look to anything further and the income derived by the trustees from the transfer of such assets would constitute part of the total income of the settlor. This court negatived the contention on two grounds. In the first place, this court took the view that the very object of the section and the scheme thereof required that an assessee could only be taxed on the income from a trust deed for the benefit of the minor provided in the year of account the income was either received by the minor or the benefit was derived by the minor under the trust deed and if no income was received, if no benefit was derived and there was no income at all, then it was difficult to accept the contention that the assessee could be liable to be taxed in respect of that amount. In other words, this court took the view that the proper way to interpret and consider clause (b) was to accept the position under that sub-section that an income or benefit must be received or derived by the minor in the year of account and what could be taxed could not be a non-existent income. The other ground on which the contention on behalf of the revenue was rejected was that having regard to the provisions of the deed it could not be suggested that the assessee had received the amount of Rs. 410 for the benefit of the minor, inasmuch as, the said sum of Rs. 410 was impressed with a trust and that trust was that it should be added on to the corpus created under the trust deed, and the court observed that it was difficult to understand as to how it could be said that the assessee could be assessed to Rs. 410 which was never received by his daughter and in respect of which his daughter could not claim any benefit. On both the aforesaid grounds, therefore, this court held that on a true construction of section 16(3)(b) the amount of Rs. 410 did not form part of the total income of the assessee. It may be stated that when this very case was carried further to the Supreme Court, that court in its decision reported in [1962] 44 ITR 876 (Commissioner of Income-tax v. Manilal Dhanji) upheld the construction that was placed by this court on section 16(3)(b) in its judgment. We might observe that the Supreme Court accepted the construction placed upon that provision by this court by relying upon one of the two grounds set out by this court in its judgment. The Supreme Court took the view that clause (b) of section 16(3) must be read in the context of the scheme of section 16 and the two clauses (a) and (b) of sub-section (3) thereof must be read together and, so read, the only reasonable interpretation was that an assessee could only be taxed on the income from a trust fund for the benefit of his minor child, provided that in the year of account the minor child derived some benefit under the trust deed-either he received the income, or the income accrued to him, or he had a beneficial interest in the income in the relevant year of account. The Supreme Court also observed that if no income accrued, or no benefit was derived and there was no income at all, so far as the minor child was concerned, then it was not consistent with the scheme of section 16 that the income or benefit which was non-existent so far as the minor child was concerned, should be included in the income of his father. It may be stated that on behalf of the revenue a contention was raised before the court that the provision of section 16(3)(b) should be construed having regard to the new provision which is to be found in section 64(v) of the 1961 Act and which enactment by then had come on the statute book and reliance was placed upon the addition of the words "immediate or deferred benefit" occurring in clause (v) of section 64, but the Supreme Court rejected the contention on the basis that section 64 of the 1961 Act could not be taken as declaratory of the law which existed previously nor could section 64(v) be taken as determinative of the true scope and effect of clause (b) of sub-section (3) of section 16 of the 1922 Act. It would be significant to note that while rejecting the aforesaid contention of the revenue based on the new provision contained in section 64(v) of the 1961 Act, the Supreme Court has nowhere observed, even casually, that the position under the new provision of section 64(v) may be different. Even such observation has not been made by the Supreme Court when for the purpose of construing section 16(3)(b) reliance was placed upon the new provision which is to be found in section 64(v). As stated earlier, the aspect about the income losing its character as "income" of the corpus in respect whereof the original trust had been created was not gone into by the Supreme Court but the court accepted the construction placed by this court on section 16(3)(b) on the only ground that the income from the trust which had been created for the benefit of the settlor's minor child could be included in the settlor's income under the said provision provided that in the year of account the minor child derived some benefit under the trust deed and it is on this basis that the construction put upon the relevant provision by this court was approved by the Supreme Court.

Then we come to the material provision, viz., section 64(v) of the 1961 Act with which we are concerned in the instant case. As stated above, clauses (i), (ii), (iii) and (iv) of section 64 are, more or less, similar to sub-clauses (i), (ii), (iii) and (iv) of clause (a) of section 16(3) of the 1922 Act and clause (v) of section 64 contains provision similar to the provision of section 16(3)(b) of the 1922 Act. Section 64(v) of the 1961 Act runs thus :

"64. Income of individual to include income of spouse, minor child, etc.-In computing the total income of any individual, there shall be included all such income as arises directly or indirectly . ......

(v) to any person or association of persons from assets transferred otherwise than for adequate consideration to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit of his or her spouse or minor child (not being a married daughter) or both."

It is true that on a comparison of the language employed in section 16(3)(b) of the 1922 Act with the language of sub-clause (v) of section 64 (1961 Act), it is clear that the words "immediate or deferred" have been added before the words "benefit of his or her spouse or minor child or both" and it was contended by Mr. Joshi appearing for the revenue before us that the additions of the words "immediate or deferred" in clause (v) of section 64 had been deliberately made by the legislature for the purpose of getting over the decision of this court in Manilal Dhanji's case reported in [1959] 35 ITR 467 (Bom) and he urged that since the ratio of Manilal Dhanji's case [1959] 35 ITR 467 (Bom) as per decision of this court showed that since the item of Rs. 410 which had been received by the assessee in the year of account was not an income which had been received by the minor nor had the minor received any benefit therefrom during the year of account, the said item could not be included in the assessee's total income, the legislature in order to get over that difficulty thought fit to add the words "immediate or deferred" in the new clause (v) of section 64; in other words, what was contended by Mr. Joshi was that the intention of the legislature in adding these words, viz., "immediate or deferred" was to make it clear that irrespective of the question whether the benefit to the minor child accrued or arose in the year of account or at any time thereafter even beyond the minority of that child, such income was to be included in the total income of the assessee. To support his aforesaid contention Mr. Joshi invited our attention to the Statement of Objects and Reasons appended to the Income-tax Bill of 1961 and the notes on the various clauses therein as also to certain paragraphs of the Report of the Direct Taxes Administration Enquiry Committee 1958-59. The Statement of Objects and Reasons together with the notes on the clauses thereof appear from page 150 onwards in the Income Tax Reports (Supplement) at the end of [1961] 42 ITR and at page 164, so far as section 64, which was clause 64 in the Bill, this is what has been stated :

"Clause 64.-This clause corresponds to the existing section 16(3) with necessary changes to give effect to the recommendations of the Direct Taxes Administration Enquiry Committee contained in paragraphs 7.81(5) and 7.81(6) of its report."

We are not concerned with sub-paragraph (5) of paragraph 7.81 of the Report of the Direct Taxes Administration Enquiry Committee 1958-59, but the material sub-paragraph is sub-paragraph (6) of paragraph 7.81 and sub-paragraph (6) runs thus :

"(6) At present, in a case where a father creates a trust for the benefit of his minor daughter with a stipulation that the income of the trust should be accumulated and added to the corpus and that the daughter should be entitled to receive the income only after attaining majority, it has been held by the courts that the provisions of section 16(3)(b) of the Income-tax Act do not apply as the income is not receivable by the trustees on behalf of the minor but is merely added to the corpus. We recommend that the law should be modified so as to tax such income of the minors. There may, however, be cases in which the shares of the beneficiaries are not definite and tax as applicable to an association of persons is charged. Such cases should be excluded."

Relying upon the aforesaid material, namely, note on clause 64 of the Bill and sub-paragraph (6) of paragraph 7.81 of the Report of the Direct Taxes Administration Enquiry Committee, it was urged by Mr. Joshi that the intention of the legislature while making a provision which is to be found in section 64(v) clearly was to include the income of a trust created by a father for the benefit of his minor child as would accrue or arise but is directed to be accumulated and added to the corpus and not paid to the minor child immediately, in the total income of the settlor (assessee) and it was with such intention that the words "immediate or deferred" before the words "benefit (if his... ..or both" were added. It is obvious that the illustration which has been taken for consideration by the Direct Taxes Administration Enquiry Committee in its report in sub-paragraph (6) of paragraph 7.81 is the same illustration of a case which obtained in [1959] 35 ITR 467 (Bom) (Manilal Dhanji's case) and it is also clear that it was with a view to get over the reasoning adopted by this court in its judgment in that case that the words "immediate or deferred" were added in clause (v) of section 64. But, as we have discussed earlier, so far as limitation of time is concerned, the only ground on which this court had held that the item of Rs. 410 could not be included in the assessee's total income was that the minor daughter of the settlor did not receive any benefit of that item during the year of account. The other termini was never the subject-matter of the decision in Manilal Dhanji's case [1959] 35 ITR 467 (Bom). It is, therefore, clear that the words "immediate or deferred", if they were intended to get over the difficulty that had been created by this court's judgment in Manilal Dhanji's case [1959] 35 ITR 467 (Bom), will have to be considered for getting over the difficulty only with regard to that aspect of time, namely, that the minor did not receive any benefit during the year of account, for which reason that particular item was held not includible in the assessee's total income. The words "immediate or deferred" occurring in clause (v) of section 64, therefore, were inserted with the intention or object specified in sub-paragraph (6) of paragraph 7.81 of the Report of the Direct Taxes Administration Enquiry Committee and must be taken to have been inserted for the purpose of getting over the difficulty. What is sought to be urged by Mr. Joshi is that the word "immediate" has of course a reference to the year of account, but the word "deferred" should be construed at large without any limitation of time, that is to say, even when the benefit has been deferred beyond the minority of the child concerned, such income should be held to be includible in the total income of the assessee (settlor) for, according to Mr. Joshi, there is no warrant for placing any limitation on the word "deferred" as used in clause (v) of section 64. It is not possible to accept this contention of Mr. Joshi for two or three reasons. In the first place, as has been pointed out by Mr. Joshi, the words "immediate or deferred" were introduced for the purpose of getting over the decision of this court in Manilal Dhanji's case [1959] 35 ITR 467 (Bom) and this undoubtedly is clear from sub-paragraph (6) of paragraph 7.81 of the Report of the Direct Taxes Administration Enquiry Committee. Therefore, as we have stated above, the difficulty which was created by the decision of this court in Manilal Dhanji's case [1959) 35 ITR 467 (Bom) was that since the particular item of Rs. 410 in that did not arise or accrue to the minor child nor did the minor child receive any benefit thereof during "the year of account", the item was held to be not includible in the total income of the assessee and it was to obviate this difficulty which had been created by this decision that the legislature had introduced the words "immediate or deferred" in clause (v). Secondly, since the other termini or the point of limitation had not figured in the decision of this court in Manilal Dhanji's case [1959] 35 ITR 467 (Bom), the same could not have been present to the mind of the legislature when it added the words "immediate or deferred" in clause (v) of section 64. Thirdly, there would be no mischief which could be said to have been remedied by using the expression "deferred" in the widest possible sense, for, according to the scheme and the principal object of the enactment itself, it is only when the assessees seek to transfer the assets by means of a settlement for the benefit of their minor children that they seek to keep a control or interest in the said property or its income during the minority of the beneficiaries and there is no dispute that if the assets are transferred by the settlor for the benefit of his major children, there is no question of clubbing the income arising from such property so transferred with the income of the settlor or the assessee. In such a case there is no question of any mischief which is required to be remedied. Looked at from this point of view the expression "immediate or deferred" used in clause (v) of section 64 could not be regarded as having been added with the intention of covering a case where the benefit had been deferred beyond the minority of the child or the children concerned. Lastly, in our view, if the expression "deferred benefit" is construed to mean benefit deferred to a year subsequent to the accounting year in which the income is taxable, so long as it is not deferred beyond the minority of the child, it would be in consonance with the aim, object and purpose of the enactment itself.

There were two aspects which were pressed into service by Mr. Joshi as to why the expression "deferred benefit" should be interpreted to include benefit deferred even beyond the minority of the child concerned. In the first place, he urged that if the expression "deferred benefit" was interpreted in the manner suggested by Mr. Kolah, it would defeat the very object or purpose for which the amendment had been effected by insertion of the words "immediate or deferred" in clause (v) of section 64. Secondly, he urged that the word "minor" in the expression "minor child" should be regarded as descriptive and not as having been used for the purpose of laying emphasis upon the character which the child must possess while receiving the benefit of the income from the assets so transferred. It is not possible to accept either of these submissions of Mr. Joshi. In the first place, as we have indicated above, the object or intention with which the amendment was made, as is clear from sub-paragraph (6) of paragraph 7.81 of the Report of the Direct Taxes Administration Enquiry Committee, was to get over the difficulty that had been created by a decision of this court in Manilal Dhanji's case [1959] 35 ITR 467 (Bom), and the reason given by this court for the purpose of coming to the conclusion that the particular income could not be included in the total income of the assessee, namely, such income from the assets transferred to the trustees had neither arisen nor accrued to the minor nor had the minor received the benefit thereof "during the year of account" and not for the purpose of catching the income arising or accruing to the minor from the assets so transferred at any time even beyond the minority of such minor. Moreover, our construction does not render the amendment useless or otiose. If the construction which we are placing upon the words "immediate or deferred" benefit were going to lead to any absurdity as serving no purpose whatsoever, the question would assume different dimension. If the expression "deferred benefit" is construed as being a benefit deferred to a year subsequent to the accounting year in which the income is taxable, so long as it is not deferred beyond the minority of the child, it would still serve the purpose for which the amendment has been made. The Tribunal has, of course, taken the view that such an interpretation would defeat any possible intention on the part of the legislature to rope in certain income because, ordinarily, according to the Tribunal, in trusts for the benefit of minors, the benefit is postponed till attainment of the age of majority and not any earlier time and as such the aforesaid interpretation would render the amendment meaningless. It is not possible to accept this view of the Tribunal for, in the first place, no possible intention could be attributed to the legislature to rope in any kind of income, that is to say, even the income which may accrue or arise at any time. As we have indicated earlier, the rationale under section 16(3)(b) as also under section 64(v) was and is to club the income of a minor child with the income of the settlor, for, it cannot be disputed that if the assets are transferred to a major son, the income of the major would never be clubbed together with the income of the settlor. In other words, the clubbing of the minor's income with the income of the settlor in the case of transfer of assets under a settlement has been found necessary by the legislature so that the tendency to avoid the incidence of tax on such income over which the settlor continues to have control or overall interest is to be brought to taxation. Moreover, instances of settlements created by a settlor for the benefit of his minor children where the income of the property is made available to the minors during their minority for their maintenance and education, etc., are not unknown and when during the minority such obligation is cast upon the trustees such income from trust funds which are so transferred would come within the purview of section 64(v), even though no benefit thereof is either received or accrued to the minor during the year of account in which such income is intended to be taxed. Secondly, there is sufficient warrant to interpret or construe the expression "deferred benefit" as being referable to benefit which has been deferred to a year subsequent to the accounting year in which the income is taxable, so long as it is not deferred beyond the minority of the child. In the first place, the object of the provision and the scheme thereof as explained by Lord Macmillan [Chamberlain v. Inland Revenue Commissioners [1943] 25 TC 317, 329 (HL)] in his observations, which we have quoted above, clearly suggests that such construction should be placed on that expression. Further, the word "minor" in the expression "minor child" occurring in clause (v) of section 64 will have to be given a proper meaning and the word "minor" in that expression cannot be regarded as merely a word descriptive of the child. When the expression "minor child" has been used, it could be said that clause (v) of section 64 requires the income to be in terms for the benefit of a minor child even when it is deferred. Having regard to the above discussion, we are clearly of the view that the construction which Mr. Kolah has suggested seems to be the correct construction, which will have to be placed on the expression "deferred benefit" occurring in clause (v) of section 64 and, in our view, that construction accords with the object as well as the scheme of the provision.

Mr. joshi on behalf of the revenue invited our attention to a passage which occurs in Sampath Iyengar's Income-tax, 6th edition, volume II, pages 1198-1199, where under the heading "Benefit may be either immediate or deferred", the learned author has stated thus:

"The, 1961 Act has made a departure from the Act of 1922 by enacting that in a settlement even though income does not actually accrue or arise to the spouse or minor child of the settlor during the accounting year, but is deferred, nevertheless, it shall be aggregated with the income of the settlor. Thus, if the property be conveyed to trustees under a settlement for the benefit of the minor child of the settlor, but the settlement directs that the income from the property should be accumulated and added to the corpus till the minor child attained majority and thereafter the ex-minor should receive the income from the corpus increased by the addition of the income in between, still, the income arising from the property in each accounting year before the minor attained majority would be included in the income of the settlor, namely, the parent."

and a foot-note has been added below this passage which states that the decision in Commissioner of Income-tax v. Manilal Dhanji [1962] 44 ITR 876 (SC) (a case where there was a trust for accumulation till the donee, a minor or unmarried daughter, attained majority) has been superseded by the 1961 Act, in this respect. It is true that the learned author in his treatise has expressed his opinion as to what is the effect of the amendment that has been made in the 1961 Act by inserting the words "immediate or deferred" in clause (v) of section 64. But curiously enough the learned author has stated that the Supreme Court decision in Manilal Dhanji's case [1962] 44 ITR 876(SC) has been superseded by the 1961 Act in this behalf. As pointed out by us earlier, the Supreme Court decision had not been rendered when the report was submitted by the Direct Taxes Administration Enquiry Committee to the Government which led to the enactment of section 64(v) in the 1961 Act. It was only the Bombay High Court decision in Manilal Dhanji's case [1959] 35 ITR 467 (Bom) that had been rendered and we have already discussed how out of two grounds on which the decision was based, the reasoning in respect of only one ground was sought to be got over by amendment. It may be stated that just as this learned author has expressed this particular view about the effect of amendment that has been made while enacting section 64(v), another learned author, Mr. Palkhivala in his treatise The Law and Practice of Income-tax, 7th edition, has expressed the contrary view. In our view, the question must in the ultimate analysis depend upon the true interpretation of the expression "deferred benefit" occurring in section 64(v) of the 1961 Act and proper interpretation has to be placed on that expression after considering the legislative history, the purpose or object with which the amendment was made, the mischief which was sought to be remedied by the proposed amendment and the surrounding circumstances. We have already discussed the legislative history, sub-paragraph (6) of paragraph 7.81 of the Report of the Direct Taxes Administration Enquiry Committee setting out the reasons or the purpose for which the amendment was being effected in the relevant provision of the enactment and after considering all these aspects and the surrounding circumstances, we have come to the conclusion that the expression "deferred benefit" cannot refer to benefit which has been deferred up to any length of time but the other termini would be that such benefit must not be deferred beyond the minority of the child concerned and that such construction would be in accord with the object of the enactment and the scheme of the provision.

There is yet another hurdle in the way of the revenue clubbing this income of Rs. 30,808 with the total income of the assessee for the assessment year 1962-63. Mr. Kolah has contended that, apart from the aspect of construction of the expression "deferred benefit" occurring in clause (v) of section 64, it cannot be disputed that the benefit referred to in clause (v) of section 64 must be a benefit which the minor is certain to get and must not be one which depends on fulfilment of certain contingency. In other words, his contention has been that having regard to the relevant provision of the trust deeds, interest which has been given to the three minor daughters in the trust fund or income thereof must be regarded as a contingent interest and not a vested one and if that is the correct position, as regards the interest or benefit conferred upon the minor daughters under the three deeds such benefit could never be covered by section 64(v). In this behalf reliance was placed by him upon this court's decision in Manilal Dhanji's case [1959] 35 ITR 467 (Bom), where on a construction of almost similar provision which was found in that case, this court took the view that the minor daughter had merely a contingent interest depending upon attaining her majority. While discussing the aforesaid decision in another context we have indicated that the scheme of the trust that was created in respect of the sum of Rs. 25,000 in that case was that interest on the trust fund on Rs. 25,000 should be accumulated and added to the corpus and his minor daughter was to receive the income from the corpus increased by the addition of interest when she attained the age of 18 years and that she was then to receive the income during her lifetime and after her the corpus was to go to certain other specified persons; in other words, the significant feature of that trust deed was that the minor daughter was not to receive any income, any interest or any benefit whatsoever under the trust deed during her minority. Mr. Kolah pointed out that when such was the position under the trust deed which came up for consideration before the court in that case this is what Chief Justice Chagla has observed at pages 475 of the report :

"We should have mentioned that with regard to the amount of Rs. 410 the Tribunal seems to have proceeded on the basis that the daughter had a vested interest in the sum of Rs. 410. We do not accept that proposition at all. The interest does not vest in the daughter. It is contingent on her attaining majority, and it seems clear that even the Tribunal has proceeded to decide against the assessee with regard to the sum of Rs. 410 on the supposition that the daughter had some interest in this sum of Rs. 410. As we have already pointed out, the daughter has no present interest whatever in this sum of Rs. 410."

Likewise, Mr. Kolah has pointed out that under the three trust deeds in the instant case also during the minority of the principal person concerned in each of these trust deeds, the principal person, namely, the minor daughter, is not to get any interest or benefit of either the income accuring from the trust fund or in the trust fund itself but there is a direction that such income should be added on to the corpus and it is only if and when after Kunti, eldest daughter, attains majority, that interest or benefit in the income of the trust fund or the corpus itself is to be received by her. He has emphasised before us that in clause 3 of each of the trust deeds it has been provided that until the principal person concerned attains the age of majority or until the death of such person, whichever shall happen first, the trustees are directed to accumulate the whole residue of such income by investing the same and the resulting income thereof in any manner thereby authorised and under clause 3D it has been provided that after the principal person concerned in the deed attains majority, the trustees should pay the whole of the residue of such income of the trust fund to that person concerned. We have already referred to one of the peculiar features of the three trust deeds if they are considered together, namely, that in the Aparna Family Trust, Kunti will get income until Aparna attains majority and in the Gayatri Family Trust also Kunti will get income until Aparna attains majority; similarly Aparna will get the income of Gayatri Family Trust until Gayatri attains majority. All these provisions are subject to one overriding provision. It has been provided that, notwithstanding anything contained to the contrary in the document, the principal person concerned in each document after she attains her majority will receive from the trustees when and so often as may be demanded by that person part or parts of the said trust fund not exceeding in the aggregate one-half thereof absolutely freed and discharged from the trusts. Mr. Kolah has urged that in view of the aforesaid feature of the three trust deeds, it is abundantly clear that this is not a case where a vested interest in the income of the trust fund has been created in favour of the principal person with the enjoyment or possession being merely postponed to some future date but it is a case where the interest created in the person concerned is clearly contingent upon the happening of a particular event, namely, attaining of majority by that person. Besides, it is not a case where contingent interest is created with any kind of gift over in favour of the other persons. He, therefore, contended that whatever interest has been created by the settlor in favour of his minor daughters must be regarded as a contingent interest and not a vested interest, the interest being contingent upon the minor daughter attaining the age of majority and, therefore, the interest being not certain, section 64(v) would not be applicable. On the other hand, Mr. Joshi urged that this was a case where a vested interest has been created by the settlor, both in the income as well as the corpus of the trust fund in favour of the minor daughters but merely enjoyment or possession thereof has been postponed until the person concerned attains the age of majority.

In our view, having regard to the provisions which are to be found in section 21 of the Transfer of Property Act and section 120 of the Indian Succession Act and certain illustrations given thereunder, it appears to us that the interest created in favour of the minor daughters in the three trust deeds will have to be regarded as contingent interest and not vested interest. Section 19 of the Transfer of Property Act deals with what is "vested interest" and reliance was placed by Mr. Joshi upon the Explanation to that section. Section 19 of the Transfer of Property Act runs thus:

19. Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer.

A vested interest is not defeated by the death of the transferee before he obtains possession.

Explanation.-An intention that an interest shall not be vested is not to be inferred merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person, or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular event shall happen the interest shall pass to another person."

On the other hand, Mr. Kolah relied upon the provisions of section 21 which defines "contingent interest" as well as the corresponding provision which is to be found in section 120 of the Indian Succession Act. Section 21 of the Transfer of Property Act runs thus:

"21. Where, on a transfer of property, an interest therein is created in favour of a person to take effect only on the happening of a specified uncertain event, or if a specified uncertain event shall not happen, such person thereby acquires a contingent interest in the property. Such interest becomes a vested interest, in the former case, on the happening of the event, in the latter, when the happening of the event becomes impossible.

Exception.-Where, under a transfer of property, a person becomes entitled to an interest therein upon attaining a particular age, and the transferor also gives to him absolutely the income to arise from such interest before he reaches that age, or directs the income or so much thereof as may be necessary to be applied for his benefit, such interest is not contingent."

It is not necessary to set out the provisions of section 120 of the Indian Succession Act which corresponds to section 21 of the Transfer of Property Act. Illustration (ii) given under section 120 of the Succession Act is as follows :

"(ii) A sum of money is bequeathed to A 'in case he shall attain the age of 18' or 'when he shall attain the age of 18'. A's interest in the legacy is contingent until the condition is fulfilled by his attaining that age."

Reliance was placed by Mr. Kolah upon the Exception to section 21 of the Transfer of Property Act and the aforesaid Illustration No. (ii) given below section 120 of the Indian Succession Act. Relying upon these provisions he contended that the instant case was exactly similar to illustration No. (ii) given below section 120 of the Succession Act. In this context it would be useful to mention that the position under the English law is somewhat different from the position which obtains under the Indian law and the difference between the two positions--one under the English law and another under the Indian law--has been succinctly brought out in the passage which occurs in Mulla's Transfer of Property Act, sixth edition, on page 142, where under the heading "Condition precedent construed as condition subsequent" the following statement of law is indicated :

"The English courts have adopted two rules of construction, namely, (1) that the gift of the income of the same fund, until the contingency happens, to the very person who will on attaining a particular age take the fund makes the gift of the fund, apparently contingent upon the attainment of that age, a vested interest, and (2) that a gift over upon failure of a prior gift may have the effect of converting the prior gift apparently contingent upon attainment of a particular age into a vested interest subject to be divested on the death before that age. The first of the above two rules of construction has been adopted in India by the Exception to section 21. The second rule has not been Adopted in anY section of this Act or the Succession Act. It is submitted that in such circumstances there is no reason for importing here the second rule about which the English courts have taken divergent views. This opinion has been expressed in a Calcutta case. (Kanai Lal v. Kumar Purendu Nath [1946] 51 CWN 227)."

It will appear from the above passage that though English courts have taken two rules of construction mentioned above, only first of the said rules of construction has been adopted in India, vide section 21 and the Exception thereto, while the second rule has not at all been adopted either under the Transfer of Property Act or under the Succession Act. Having regard to this position, it is quite clear that if a case does not fall within the Exception to section 21, then it would be a case of contingent interest under the main provision of section 21. Under the Exception it has been provided that where, under a transfer of property, a person becomes entitled to an interest therein upon attaining a particular age, and the transferor also gives to him absolutely the income to arise from such interest before he reaches that age, or directs the income or so much thereof as may be necessary to be applied for his benefit, such interest is not contingent. In the instant case, after effecting the transfer of interest in the trust fund to the three minor daughters, which they were entitled to obtain upon attaining the age of majority, the settlor has not given to the daughters the intermediate benefit arising from such interest before the daughters were to attain the age of majority nor any other intermediate income has been directed to be applied for the benefit of the minor daughters during their minority. It is, therefore, clear that this is a case of a simple transfer of interest to minor daughters upon condition of their attaining the age of majority and the case does not come within the Exception to section 21, with the result that interest created by the settlor under the three trust deeds in the instant case will have to be regarded as contingent depending upon happening of particular event, viz., attaining the age of majority by the three daughters. If that be so, the item of income of Rs. 30,808 which arose during the year of account in this case could not be included in the total income of the assessee as section 64(v) would be clearly inapplicable.

Having regard to the aforesaid discussion, the question referred to us will have to be answered in the negative and in favour of the assessee.

DESAI J.-I agree but would like to add a few words.

The reasoning to be found in the order of the Tribunal and the arguments of the learned counsel for the revenue were principally centred round the recommendation to be found in sub-paragraph (6) of paragraph 7.81 of the Report of the Direct Taxes Administration Enquiry Committee (Tyagi Committee). Even if it is accepted that the recommendation of the Tyagi Committee was for modification of the income-tax law so as to provide for taxing of the income of a trust created by the father for the benefit of his minor daughter, which trust contains a stipulation that the income should be accumulated and added to the corpus during the period of minority and that additional words "immediate or deferred" to be found in section 64(v) of the Income-tax Act, 1961, were added to serve that purpose, I am of opinion that the modification does not serve the object it was intended to serve. In other words, the attempt of the legislature to give effect to the recommendation of the Tyagi Committee has misfired.

I would hold that the question referred to us by the Tribunal must be answered in favour of the assessee for the following reasons :

In the first place, the benefit which may be immediate or deferred must still be a benefit of the minor child. In view of the fact that this expression is still retained in section 64(v), it is not possible to accept the argument that "deferment" can be beyond the minority of the child. It must be held that under the 1961 Act the benefit need not be available to the minor child in the year of account but that it must still be available during the period of minority. If the enjoyment of the benefit is postponed beyond the minority of the child, it cannot be fairly regarded and accepted. as a benefit, even deferred, for the minor child.

In the second place, I would hold that the minor child must have a direct benefit or interest in the income of the assets transferred to the trustees. Where the trust contains a stipulation that the income is to be accumulated and added to the corpus, it cannot be held that the child has any direct benefit in that income. Merely because such a stipulation would ensure accretion to the corpus and it is likely ultimately to generate a higher income by reason of such accretion, would not satisfy the statutory requirement that the benefit of any such income is available to the child. Such indirect advantage, which may or may not always result in a higher income, cannot be accepted as equivalent to a benefit enjoyed by the child in that income. This argument was advanced before the Tribunal but was countered with a reference to the provisions contained in clause 3D of the respective trust. That each of the daughters has been given under the trust deed a right to demand a part of the corpus freed of the trust after attaining her majority would not seem to me to make a material difference in the proper approach to the question.

Finally , I would hold that the benefit, if any, receivable by the child must be certain and vested. It cannot be the mere possibility of a benefit or a benefit available on the fulfilment of a contingency. In Manilal Dhanji's decision as given by a Division Bench of this court reported in [1959] 35 ITR 467 (Bom), it has been observed that where there is a stipulation in the trust similar to the stipulation contained in the three trusts with which we are concerned, the interest must be regarded as contingent. It was further observed that the view taken by the Tribunal in that case that the interest or benefit must be regarded as vested was erroneous. It is impossible to hold that this conclusion of the Division Bench was given per incuriam. On the other hand, such a conclusion appears to be in accord with illustration (ii) to section 120 of the Indian Succession Act, 1925, and the provisions contained in section 21 of the Transfer of property Act. It is true that in Chandulal Shivlal v. Commissioner of Wealth-tax [1965] 55 ITR 441 (Guj), a Division Bench of the Gujarat High Court has observed that the word "benefit" is a word of the widest import and would seem, in its opinion, to include a contingent benefit. With respect, however, and bearing in mind what the Gujarat High Court was called upon in that case to decide, this observation must be regarded as a stray observation, a casual use of a word or phrase and not even a well-considered obiter.

In the result, I agree with the observations of my learned brother and in the final order.

BY THE COURT.-Question is answered in the negative, in favour of the assessee and the department will pay the costs of the reference to the assessee.

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