Calcutta High Court
Raja Baldeodas Birla Santatikosh vs Commissioner Of Income-Tax on 29 June, 1990
Equivalent citations: [1991]190ITR578(CAL)
JUDGMENT Ajit K. Sengupta, J.
1. By these references under the Income-tax Act, 1961 (in short referred to as "the Act"), at the instance of both the Commissioner of Income-tax and the assessee arising out of a common order of the Calcutta Bench of the Income-tax Appellate Tribunal for the assessment years 1971-72, 1972-73, 1973-74 and 1974-75, the following questions of law have been referred for the decision of this court:
(A) Income-tax Reference No. 313 of 1980--at the instance of the Commissioner of Income-tax under Section 256(1) of the Act:
"(1) Whether, on the facts and in the circumstances of the case and on a proper construction of the deed of settlement dated May 20, 1943, the transfer of the aforesaid shares by the trustees of Raja Baldeodas Birla Santatikosh is valid or void or voidable ?
(2) Whether, on the facts and in the circumstances of the case, even assuming that the transfer of the shares was void, the income from the said shares and accretions which were in fact not received by the assessee but by the Birla Jankalyan Trust was assessable in its hands ?"
(B) Income-tax Reference No. 313 of 1980--at the instance of the assessee--under Section 256(1) of the Act :
"(1) Whether, on the facts and in the circumstances of the case and on a proper construction of the deed of settlement dated May 20, 1943, the trustees of Raja Baldeodas Birla Santatikosh could make a donation of 3,75,000 ordinary shares in Jiyajeerao Cotton Mills Ltd. and other shares on March 30, 1964, to Birla Jankalyan Trust, a public charitable trust, for its objects ?
(2) Whether, on the facts and in the circumstances of the case and on a proper interpretation of the deed of settlement dated May 20, 1943, the Tribunal was right in holding that the consent of minor beneficiaries and/or competent civil court on their behalf was necessary for making a donation of the shares in Jiyajeerao Cotton Mills Ltd. and other shares to the trustees of Birla Jankalyan Trust ?
(3) Whether, on the facts and in the circumstances of the case and on a proper interpretation of the deed of trust dated May 20, 1943, and the provisions of the Indian Trusts Act, 1882, the Tribunal was right in holding that the trustees could not exercise their discretion to choose or exclude a particular beneficiary or class of beneficiaries and to dispose of the trust fund in accordance with the directions of the beneficiaries chosen ?"
(C) Income-tax Reference No. 37 of 1984--at the instance of the assessee--under Section 256(2) of the Act:
"Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that Ujjain General Trading Society Ltd. did not give the shares of Jiyajeerao Cotton Mills Ltd. to the trustees of Raja Baldeodas Birla Santatikosh for useful objects and that there was no trust within trust is vitiated in law having been arrived at without any material and/or evidence and/or by ignoring relevant materials ?"
2. In all these references, the assessee is a private discretionary trust constituted under a deed of settlement dated May 20, 1943, and named "Raja Baldeodas Birla Santatikosh" (hereinafter referred to as the "asses-see-trust").
3. Question No. 1 raised by the Commissioner of Income-tax and the questions raised by the assessee-trust substantially involve the same issue, that is to say, the validity of donation of certain shares made by the trustees of the assessee-trust on March 30, 1964, to Birla Jankalyan Trust (hereinafter referred to as the "donee-trust"). Question No. 2 raised by the Commissioner of Income-tax involves the issue of assessability of the income and accretions arising out of the said donated shares in the hands of the assessee-trust after the date of donation.
4. The facts relevant for the disposal of these references are shortly as under :
By a deed of settlement dated May 20, 1943, Seth Jugal Kishore Birla settled on trust Rs. 10,000 and certain shares to have and hold the same and income and accretions thereof for the following objects and purposes mentioned therein :
"(2) That the trustees shall stand seized and possessed of the trust estate upon trust to utilise and spend the net income arising therefrom as follows :
(i) Firstly, the trustees shall, out of the net income of the trust estate, earmark and set apart a sum of Rs. 2,500 per month or 50 per cent. of the net annual income, whichever is less, for the upkeep and maintenance of the properties such as Howlia-Noras, Kuas (wells), Bhawans, Banders and gardens belonging to and maintained by the male descendants of Raja Baldeodas Birla or some of them at Pilani and for meeting all the expenses of establishment and of boarding, lodging and entertaining of guests and visitors at the said place and of payment of the salaries, wages and other emoluments and perquisites payable to the staff for the time being maintained at Pilani or at other places in connection with the said properties provided, however, that if the fund earmarked or set apart as aforesaid or any portion thereof is not required at any time or times for the purpose aforesaid, the said fund shall be accumulated up to Rs. 2 lakhs to be spent for the purposes aforesaid as and when occasions arise.
(ii) Secondly, to utilise and/or accumulate the rest or residue of such income to provide for the education, support and maintenance of the male descendants in the male line of Raja Baldeodas Birla, their wives, widows and daughters (hereinafter referred to as the "beneficiaries") and also for meeting medical expenses or other necessary requirements of life including the expenses of marriage, sradh and also other special or religious rites and ceremonies customary amongst the Hindus."
5. The first object of the assessee-trust is to maintain certain properties at Pilani and provide for meeting expenses of establishment and of boarding, lodging and entertainment of guests and visitors at the said places.
6. The second object of the assessee-trust is to provide for the education, support and maintenance, medical, marriage and other religious expenses of the male descendants in the male line of Raja Baldeodas Birla, their wives, widows and daughters (referred to therein as "the beneficiaries"). It is relevant to point out that the trustees of the assessee-trust were all, at the material time, beneficiaries of the assessee-trust.
7. Under Clause 4 of the said deed of settlement, the trustees of the assessee-trust were given power and discretion to admit any person belonging to the class of beneficiaries who applies to the trustees to be admitted to the benefit of the trust.
8. Clause 5 of the said deed of settlement gave power to the trustees of the assessee-trust to select beneficiaries to receive benefits of the trust.
9. Clause 9(h) of the said deed of settlement empowered the trustees to accept donation, subscription or contribution, whether by gift or otherwise, for the objects and purposes of the trust.
10. Clause 9(i) of the said deed of settlement empowered the trustees to frame, alter, amend, vary schemes, rules and regulations for carrying out the objects and purposes of the trust and for managing the affairs thereof or matters incidental thereto.
11. Clause 12 of the said deed of settlement provided that, unless the trustees, by a majority of three-fourths agree, no part of the corpus of the trust estate or sale proceeds of immovable properties of the trust should be spent by the trustees.
12. Clause 13 of the said deed of settlement authorised the trustees to set apart or accumulate out of the income or properties of the trust to constitute a separate fund and to utilise the same for any of the purposes of the trust.
13. Some time in 1943, one Ujjain General Trading Society Ltd. (hereinafter referred to as the "said company") donated 25,000 ordinary shares in Jiyajeerao Cotton Mills Ltd. to the assessee-trust, It is in dispute as to for what purpose the said donation was made by the said company. The case of the assessee-trust is that the said shares were donated "for utilising the said shares for useful objects". The question at the instance of the assessee in Income-tax Reference No. 37 of 1984 relates to this aspect. We will deal with it later in this judgment.
14. On March 13, 1964, Sri Jugal Kishore Birla established a public charitable trust named "Birla Jankalyan Trust (the donee-trust)". The trustees of the donee-trust were empowered to accept any gifts, donations or contributions in cash or in kind for all or some of the objects and purposes of the donee-trust.
15. On March 23, 1964, the secretary of the assessee-trust recorded that the question of utilisation of the said 25,000 shares received by the assessee-trust from the said company in 1943 and accretions thereto (hereinafter referred to as the "said shares") had been under consideration of the trustees of the assessee-trust and that the adult male members of the Birla family desired that the said shares be donated to a public charitable trust. Accordingly, on March 23, 1964, the trustees of the assessee-trust resolved that, with the approval of the said company, the settlor of the assessee-trust, the said shares as per list attached thereto should be donated to the Birla Jankalyan Trust for utilisation for the objects and purposes thereof.
16. By a letter dated March 25, 1964, the trustees of the assessee-trust requested Sri Jugal Kishore Birla, as founder of the assessee-trust, to give his confirmation and approval to the aforesaid proposal to donate the said shares for public charitable purposes. A similar letter was also written by the assessee-trust to the said company on March 25, 1964.
17. On March 26, 1964, the said company considered the aforesaid proposal of the assessee-trust regarding utilisation of the said shares for public charitable purposes and accepted the said proposal and recorded its confirmation and approval by a resolution and letter both dated March 26, 1964.
18. By a letter dated March 27, 1964, Sri Jugal Kishore Birla also gave his approval to the said proposal of the assessee-trust.
19. By a letter dated March 30, 1964, the assessee-trust communicated to the donee-trust its decision dated March 23, 1964, to transfer certain shares and assets for utilisation for the charitable objects of the donee-trust and also sent the said shares to the donee-trust in furtherance of its decision. The donee-trust accepted the said donation as is evidenced from a resolution dated March 31, 1964.
20. On March 31, 1964, the trustees of the assessee-trust, Sri Jugal Kishore Birla, settlor, the said company and the trustees of the donee-trust executed a deed of confirmation whereby, the trustees of the assessee-trust, with the consent and concurrence of its founder and the said company, declared and confirmed as under :
"The trustees, with the consent and concurrence of the founder and the company hereby declare that the shares described in the schedule appended hereto together with all additions and accretions thereto and investments and variations thereof and all accumulated income thereof and all other properties that may be acquired out of the same or otherwise hereinafter called 'the fund' shall be held and utilised for wholly public charitable purposes provided for in the said deed of trust dated March 13, 1964. The company confirms and, by way of further assurance assures upon the new trustees the fund to be held by them for the said public charitable purposes and on the terms as contained in the said deed of trust dated March 13, 1964."
21. The fact of the donation of the said shares was duly recorded in the books of both the assessee-trust and the donee-trust. The said shares thereafter were transferred in the names of the trustees of the donee-trust.
22. In view of the facts stated above, the donation of the said shares by the assessee-trust to the donee-trust was complete in all respects. The assessee-trust lost all right, title and interest whatsoever on the said shares and the dividend thereon and the donee-trust became absolute owners of such shares to the exclusion of all others.
23. From 1943 till the end of March, 1964, the assessee-trust held the said shares and the dividend received thereon, A major part of the dividend on the said shares was received in kind, i.e., in the form of shares and those shares were also held by the assessee-trust.
24. The said shares, thereafter, were not assessed in the wealth-tax assessment of the assessee-trust for the assessment years 1964-65 to 1969-70, The income from the said shares was also not assessed in the hands of the assessee-trust for the assessment years 1965-66 to 1969-70 but was assessed in the hands of the donee-trust.
25. The income-tax assessments of the assessee-trust up to the assessment year 1969-70 were completed accepting the validity of the donation of the said shares and accretions thereto to the donee-trust and dividend received on the said shares by the donee-trust and was accepted as lawfully belonging to the donee-trust.
26. For the first time in the assessment year 1970-71, the Income-tax Officer assessed the dividends received on the said shares in the hands of the assessee-trust on the ground that the donation of the said shares to the donee-trust was void and the assessee-trust continued to remain the owner of the said shares. On appeal, the Appellate Assistant Commissioner of Income-tax, Jaipur, held that the income from the said shares could not be assessed in the hands of the assessee-trust. On further appeal by the Income-tax Officer, the Jaipur Bench of the Tribunal upheld the order of the Income-tax Officer and held that the dividends were correctly assessed in the hands of the assessee-trust as the donation of the said shares to the donee-trust was void.
27. A reference against the said order of the Jaipur Bench of the Tribunal is pending before the Rajasthan High Court. Both the assessee and the Revenue agreed to the hearing and disposal of these references by this court during the pendency of the reference in the Rajasthan High Court involving similar questions of law.
28. In the assessments of the assessee-trust for the assessment years 1971-72, 1972-73, 1973-74 and 1974-75, following the assessment order for the assessment year 1970-71, the income from the said shares was included in the hands of the assessee-trust. In view of the decision of the Jaipur Bench of the Tribunal, the Appellate Assistant Commissioner of Income-tax, dismissed the appeals of the assessee-trust.
29. The appeals preferred before the Tribunal by the assessee-trust came up for hearing before the Calcutta Bench of the Tribunal as, in the meantime, all income-tax files of the assessee-trust had been transferred to Calcutta.
30. The Calcutta Bench of the Tribunal held, inter alia, as follows :
(i) There was no evidence to show that Ujjain General Trading Society Limited gave the said shares to the assessee-trust for a useful object or that there was any trust within a trust. The said shares were shown as part of the assets of the assessee-trust and income received from the said trust was taxed in the hands of the assessee-trust; there was no trust within a trust as contended by the assessee.
(ii) The donation of the said shares by the assessee-trust to the donee-trust was not authorised under the provisions of the deed of settlement dated May 20, 1943. It further held that the donation of the said shares could be made only with the consent of the beneficiaries and since there were minor beneficiaries also, it was necessary to obtain the consent of the civil court,
(iii) The Tribunal, however, held that the donation of the said shares was not void but only voidable. It was for the beneficiaries who might have been affected by the action of the trustees who could challenge the transfer and so long as the said donation was not set aside by a competent court of law, the income received on the said shares could not be assessed in the hands of the assessee-trust.
(iv) The Tribunal held that the income of the donated shares could not be included in the hands of the assessee-trust as there was no real income in the hands of the assessee-trust in respect of the said shares.
31. The Calcutta Bench of the Tribunal differed from the Jaipur Bench mainly on two issues, namely, (a) transfer of the said shares was not void but voidable, and (b) the income from the said shares after the date of donation was not the real income of the assessee-trust. Both these aspects are covered by the questions referred at the instance of the Revenue.
32. Mr. A. C. Moitra, learned counsel appearing on behalf of the Revenue, contended that the Calcutta Bench of the Tribunal was not justified in finding, in the absence of any evidence, that there was consent by the major beneficiaries of the assessee-trust to the transfer of the said shares to the donee-trust. There is no direction or power given to the trustees of the assessee-trust to donate or transfer any of the trust properties. Under Section 11 of the Indian Trusts Act, the purpose of the trust could be modified only by the consent of all the beneficiaries being competent to contract and, where the beneficiary is incompetent to contract, his consent-could for the purposes of that provision, be given by a competent civil court. Admittedly, there were minor beneficiaries and the consent of a competent civil court was not obtained. The Jaipur Bench of the Tribunal found that there was no consent to the said transfer by the major beneficiaries of the assessee-trust, Hence, the requirements of Section 11 of the Indian Trusts Act were not fulfilled and, therefore, the trustees of the assessee-trust had no power to donate the said shares and the said donation was invalid and void.
33. It was further contended on behalf of the Revenue that the resolution dated March 23, 1964, and the deed of confirmation dated March 31, 1964, were signed by the trustees of the assessee-trust and there is nothing to show that they signed as major beneficiaries. There is no evidence to show who were the major/minor beneficiaries and whether all the major beneficiaries had given their consent to the said donation.
34. We are not impressed with the contention of the Revenue. The Calcutta Bench of the Tribunal considered the order of the Jaipur Bench and all other relevant materials. After considering all the materials, the Calcutta Bench of the Tribunal has given a categorical finding that the question of the consent of the major beneficiaries was never in dispute. There is ample evidence on record that the consent of the major beneficiaries was available. The Tribunal noted that, all along, the case of the assessee-trust was that the adult beneficiaries agreed to the donation which was not disputed by the Income-tax Officer. The relevant portion of the order of the Calcutta Bench of the Tribunal is reproduced as under :
"In our opinion, the earlier Bench of the Tribunal overlooked the factual position, viz., that there was no dispute raised by the Income-tax Officer regarding the consent of the majors. When there is no dispute raised, it must be accepted that what the assessee stated is correct. Moreover, there is ample evidence on record that the consent of the majors is clearly available. The settlor who is also the beneficiary, as also the beneficiaries of Santatikosh who are all majors, have agreed to the transfer of shares by Santatikosh in favour of Birla Jankalyan Trust. This is evidenced not only by the resolution of the Santatikosh dated March 23, 1964, but also clearly shows that the majors have consented to the disposition of the properties. We may add here that though the recital as regards the 'useful objects' is not accepted, the documents as such are genuine and they are quite relevant for the purpose of showing the consent of the majors. At any rate, we have shown from the assessment order that, so far as the question of consent- of the majors is concerned, it was beyond the pale of any controversy and, therefore, the earlier Bench, with great respect, wrongly decided the matter. We may also mention here that the assessee offered to examine the male members to prove that they have consented to the gifting away of shares in favour of Birla Jankalyan Trust and the Income-tax Officer did not choose to examine them."
35. These are findings of fact arrived at on the basis of materials on record. The Revenue has not raised any question in these references disputing the aforesaid findings as perverse or without material or contrary to evidence on record.
36. Mr. R.N. Bajoria, learned counsel appearing on behalf of the assessee-trust, rightly contends that, in the absence of a question challenging the finding of facts, it is not open to the Revenue to contend that there was no consent of the major beneficiaries and this court has to proceed on the basis of the findings of fact arrived at by the Tribunal. This principle is well settled and needs no elaboration. Therefore, in deciding this reference, we have to proceed on the basis that the major beneficiaries consented to the said donation to the donee-trust.
37. It was next contended on behalf of the Revenue that the trustees of the assessee-trust having not been authorised by the deed of settlement dated May 20, 1943, to donate the said shares for any public charitable purposes, as in this case, and the requirements of Section 11 of the Indian Trusts Act not having been fulfilled, it is open to the Income-tax Officer to treat and hold the said donation to be void. In this connection, reliance was placed on the Full Bench decision of the Punjab and Haryana High Court in the case of CGT v. Tej Nath .
38. We do not see how the said decision is applicable in the facts of the instant case. In that case, the Full Bench of the Punjab and Haryana High Court was concerned with the question of the validity of gift of immovable property made by the karta of a Hindu undivided family and the court took the view that a gift by the karta of a Hindu undivided family of any portion of the family property, whether to other coparceners or to strangers, is void per se. In the instant case, we are not concerned with the question of the authority of a karta of a Hindu undivided family to make a gift of the family property. The Punjab and Haryana High Court, at page 107 of the said decision, however took the view that, where other members of the Hindu joint family assented to the gift made by the karta of the family, it would be valid. The decision of the Punjab and Haryana High Court did not consider or decide the question whether a transfer by the trustees of a private trust is void or voidable. The said decision does not advance the case of the Revenue.
39. It was next contended on behalf of the Revenue that the beneficial interest in the said shares transferred by the assessee-trust to the donee-trust would accrue and arise to the assessee-trust who is the real owner of the shares in question and the dividend income received by the donee-trust would still be assessable in the hands of the assessee-trust In this connection, reliance was placed on the decision of the Supreme Court in the case of Kishanchand Lunidasing Bajaj v. CIT . We fail to see how the said decision of the Supreme Court helps the Revenue. The facts of the case before the Supreme Court were that certain shares were acquired out of the joint family funds and were standing in the name of the karta of the family. On those facts, the question for decision was whether the dividend income on the said shares was assessable in the hands of the Hindu undivided family. The Supreme Court at page 503 held as follows :
"A company for its purposes does not recognise any trust or equitable ownership in shares : it merely recognises the registered shareholder as the owner and pays the dividend to that shareholder. But the shares may, because of a trust or other fiduciary relationship, belong to a person other than the registered shareholder, and the dividend distributed by the company would for the purpose of tax be deemed to accrue or arise to the real owner of the shares."
40. The Supreme Court negatived the contention of the appellant that because the dividend income in respect of the shares cannot be grossed up and credit for tax paid cannot be obtained by the appellant, the appellant was not liable to be taxed in respect of the dividend received by him. In that case, admittedly, the shares belonged to the joint family and the karta of the family was holding the shares for and on behalf of the family and dividend was received by the family. Therefore, the dividend income was held to be assessable in the hands of the joint family. It was not a case of donation by the trustees of a private trust to a public charitable trust. In our opinion, the decision of the Supreme Court in the aforesaid case is not applicable to the issues involved in these references.
41. Mr. Bajoria contended that the assessee-trust is a private discretionary trust for the benefit of certain individuals including the trustees. Under the law of trusts in India, the trustee is the legal owner of the trust property with an obligation in the nature of trust attached thereto. If the trustees act in breach of trust or contrary to the requirements of Section 11 of the Indian Trusts Act, the consequence at best could be that, as provided in Section 23 of the Indian Trusts Act, the trustee could be held liable to make good the loss which the trust property or the beneficiary has sustained, unless the beneficiary, being competent to contract, has himself concurred or acquiesced therein. Therefore, the transfer of trust property by the trustee in breach of trust is not void or a nullity but is only voidable at the instance of the beneficiary. If the beneficiary concurs or acquiesces in the said transfer by the trustee, the transfer will be good and binding upon the beneficiary, A voidable act is not void ab initio but is good until avoided by the person competent to avoid it. A voidable act becomes valid when the person affected thereby acquiesces in it or concurs with it. With the consent of or on behalf of the beneficiaries, the trustees could act beyond the terms of the trust deed. Where a trustee acts without the consent of the beneficiary, such action could only be voidable at the instance of a person whose consent was required to be taken. The consent may be prior or later. So far as a void transaction is concerned, the absence or presence of a consent or later ratification or acquiescence is absolutely of no consequence. This principle is imbedded in the provisions of Section 23 of the Indian Trusts Act. The right to follow trust property in the hands of a third person is given to the beneficiary alone and not to a third party under Section 63 of the Indian Trusts Act. Therefore, it is the beneficiary alone who could avoid a transfer of the property by the trustee in breach of trust and follow the trust property in the hands of a third person but, in a case where the beneficiary concurs in the transfer or later on acquiesces in it, he cannot follow the property. Therefore, on a harmonious reading of the provisions of Sections 11, 23 and 63 of the Trusts Act, it is apparent that the trustees, being legal owners of the trust property, are authorised and are competent to transfer the same. The trustees being legal owners could confer a good title to the transferee. If the transfer is in breach of trust, the beneficiary alone affected by the transfer could sue for breach of trust and follow the trust property in the hands of a third person. If the beneficiary so affected does not choose to take action for the alleged breach of trust or follow the trust property in the hands of a third person, the transfer would not be void ab initio. The beneficiary affected by the alleged transfer may concur with it or acquiesce in it. If he does so, he cannot later on question the transfer. Therefore, the transfer of trust property by a trustee is not void ab initio.
42. We are of the view that the contention of Mr. Bajoria has substance. There is a basic difference between a void act or a nullity and a voidable act. So far as a void act or nullity is concerned, it has no existence in the eye of law since its very inception. Nullity or a void act cannot be cured by any subsequent ratification or consent. On the other hand, a voidable act exists so long as the person entitled to avoid it does not do so. The voidable act becomes valid when the person affected thereby ratifies or acquiesces in it. Where the act complained of affects the rights of private individuals, such act would be voidable only at the option of the affected person, Section 11 of the Trusts Act authorises the trustees to act beyond the terms of the trust deed in case all the beneficiaries competent to contract give their consent and, in the case of minor beneficiaries, the civil court gives such consent. Any action taken by the trustees without such consent would be only voidable at the instance of those whose consent was required to be taken. The person who could give his consent to the doing of an act can also later ratify or acquiesce in it if it is done without his prior consent. So far as a void transaction is concerned, the absence or presence of consent or later ratification or acquiescence is absolutely of no consequence.
43. Even assuming that the action of the trustees of the assessee-trust in making a donation of the said shares to the donee-trust was unauthorised, it would not amount to a breach of trust as defined in Section 3 of the Indian Trusts Act. Section 23 of the Indian Trusts Act provides for the consequences of a breach of trust. The relevant provisions of the said section are set out below :
"Where the trustee commits a breach of trust, he is liable to make good the loss which the trust property or the beneficiary has thereby sustained, unless the beneficiary has by fraud induced the trustee to commit the breach, or the beneficiary, being competent to contract, has himself, without coercion or undue influence having been brought to bear on him, concurred in the breach, or subsequently acquiesced therein, with full knowledge of the facts of the case and of his rights as against the trustee." (emphasis* supplied)
44. A plain reading of the aforesaid provisions would make it manifest that a trustee is made liable to make good the loss which the beneficiary or trust property has sustained. The provisions for making good the loss is by way of indemnity for the damages suffered on account of breach of trust. The very fact that compensation is provided for such breach of trust would clearly show that the action is not and cannot be treated as void. Furthermore, the above section also provides that, if the beneficiary, by fraud, induces the trustee to commit the breach of trust or if he concurs in the breach or subsequently acquiesces therein, then no action against the trustee shall lie. The action for the breach of trust in the case of a private trust can be only at the instance of the individual beneficiary. If the beneficiaries are not themselves aggrieved by any action of the trustees, then such action of the trustees cannot be ignored on the assumption that it was void. The trustees are the legal owners. They are competent to deal with the property as the legal owners and, in case the beneficiaries feel aggrieved by any action of the trustees, then they alone can institute such action as they may deem fit. In such an action also, the relief cannot be obtained if the beneficiaries have condoned the act. The matter can be looked at from another angle. If all the major beneficiaries and those beneficiaries who were minors in March, 1964, when the shares in dispute were donated and who have attained majority by now, affirm and ratify the donation of the said shares by the trustees to the public trust, can it still be contended that the said donation was not valid ?
45. Our attention has been drawn by Mr. Bajoria to Section 63 of the Indian Trusts Act which we consider very relevant in the context of this case. Section 63 provides as follows ;
"Following trust property into the hands of third persons.--Where trust property comes into the hands of a third person inconsistently with the trust, the beneficiary may require him to admit formally, or may institute a suit for a declaration, that the property is comprised in the trust ..."
46. In the instant case, if the said shares donated by the trustees of the assessee to the public trust can be said to have come into the hands of the public trust inconsistently with the trust of May 20, 1943, it is for the beneficiary to require the public trust to make the stated admission or to initiate proceedings for bringing the property back into the trust. The law merely gives a right to the beneficiary and the right is given to the beneficiary alone and not to a third party, to bring the transferred property into the trust again. This clearly establishes that the transfer is not void ab initio.
47. The aforesaid provisions of the Indian Trusts Act make it clear that if the trustees of the assessee-trust have acted contrary to the terms of the deed of settlement in making the donation of the said shares to the donee-trust, the donation is not void ab initio but, at the most, it can be challenged by an aggrieved beneficiary, and so long as it is not so challenged and so long as the said shares donated are not brought back into the assessee-trust, the transfer is fully effective and operative in law for all intents and purposes.
48. It is relevant to refer to the definition of the expression "beneficial interest" in Section 3 of the Indian Trusts Act. According to this definition, the interest of the beneficiary is his right against the trustee as owner of the trust property. It is well-settled that, in Indian law, beneficial ownership is unknown and there is but one owner, namely, the legal owner. The beneficiary has no right of ownership in the trust estate but merely has a right against the trustee as owner of the trust property.
49. The Privy Council, in the case of Chhatra Kumari Devi v. Mohan Bikram Shah , stated : "The Indian law does not recognise legal and equitable estates ; ... By that law, therefore, there can be but one 'owner', and where the property is vested in a trustee, the 'owner' must, their Lordships think, be the trustee". This court, in the case of CIT v. Ganga Properties Ltd. , accepted the above statement of law and held that, in Indian law, beneficial ownership is unknown.
50. The Supreme Court, in the case of W.O. Holdsworth v. State of Uttar Pradesh , held as under with reference to the position of a trustee (p. 480) :
"These definitions emphasize that the trustee is the owner of the trust property and the beneficiary only has a right against the trustee as owner of the trust property. The trustee is thus the legal owner of the trust property and the property vests in him as such. He no doubt holds the trust property for the benefit of the beneficiaries but he does not hold it on their behalf. The expression 'for the benefit of" and 'on behalf of are not synonymous with each other, They convey different meanings. The former connotes a benefit which is enjoyed by another thus bringing in a relationship as between a trustee and a beneficiary or cestui que trust, the latter connotes an agency which brings about a relationship as between principal and agent between the parties, one of whom is acting on behalf of another."
51. There is a clear distinction between the case of a person having no inherent capacity to transfer a property and that of a person who has the inherent capacity to transfer the property but who has to exercise his powers for the benefit of or with the consent or approval of another person. In the first case, the transfer may be void but, in the second case, it is effective in law but may be voidable at the instance of the beneficiary or the person affected. In other words, the distinction is between the transfer made by a person who has no capacity at all to make the transfer, for example a minor or a lunatic, and the transfer made by a person who has the capacity to transfer but subject to the fulfilment of certain conditions imposed for the benefit of some individuals. The donation made by the trustees of the assessee falls within the second category and not the first.
52. The matter may be viewed from yet another angle. Suppose, in the present case, the trustees, in their capacity as trustees, were to file a suit against the public trust for recovering the shares, although the beneficiaries do not object to such donation, would the trustees succeed ? The answer is clearly in the negative. The trustees having finally and effectively transferred the shares to the public trust, they have no right to claim the same back from the trust. The trustees are not entitled to question the validity or legality of their own act.
53. Again, the correctness of the contention of the Department that since there was no consent on behalf of the minor beneficiaries, the donation is void ab initio may be tested by taking an illustration. Suppose there were only definite specified minor beneficiaries, and they, on attaining majority, expressly approve the donation, the acceptance of the Department's contention would lead to the absurd result that even though the donation is expressly approved by the minor beneficiaries on attaining majority, still the donated property would continue to be trust property right from the beginning. In other words, this contention would deprive the minor beneficiaries of their right to approve and consent to the donation.
54. It is an established principle of trust laws that the beneficiaries alone can avoid an act of the trustees which is contrary to the provisions of the trust deed and/or the provisions of the Trusts Act. A stranger can have no say in the matter. Further, a beneficiary under the trust can waive or disclaim or even acquiesce in the action of a trustee even though it is against his interest. The following passages from Lewin on Trusts and Snelt's Principles of Equity are apt to quote :
Lewin on Trusts (16th Edn. p. 685) :
"If a beneficiary, not being subject to any legal incapacity such as infancy concurs in a breach of trust he is for ever estopped from proceeding against the trustee for the consequences of the act, whether or not he derived benefit by the breach ; and a fortiori, a beneficiary who is also a trustee cannot hold his cotrustee responsible for any act in which they both joined.".
Lewin on Trusts (16th Edn. page 686) :
"A beneficiary, though he did not concur at the time, may debar himself from relief by subsequent acquiescence in the breach of trust."
Snell's Principles of Equity (27th Edn.) at page 281 ;
"No beneficiary can proceed against a trustee for the breach if the beneficiary was sui juris and with full knowledge of all the facts (and if may be their legal consequences) concurred or acquiesced in the breach."
55. Any act in violation of the provisions of a statute which is a legislation for the benefit of private persons will not make such act void or a nullity. It would, at the most, be voidable. The person to whom protection is sought to be given by the legislation can waive such protection. In this connection, the decision of the Supreme Court in the case of Dhirendra Nath v. Sudhir Chandra Ghosh, , is relied upon (p. 1304) :
"(7) Even then, the question arises whether an act done in breach of the mandatory provision is per force a nullity. In Ashutosh Sikdar v. Behari Lal Kirtania [1908] ILR 35 Cal 61, 72, Mookerjee J., after referring to Macnamara on 'Nullity and Irregularities', observed :
'. . .no hard and fast line can be drawn between a nullity and an irregularity ; but this much is clear, that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it, or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated.' Whether a provision falls under one category or the other is not easy of discernment but in the ultimate analysis it depends upon the nature, scope and object of a particular provision. A workable test has been laid down by Justice Coleridge in Holmes v. Russell [1841] 9 Dowl 487 which reads :
'It is difficult sometimes to distinguish between an irregularity and a nullity ; but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection ; if he can waive it, it amounts to an irregularity ; if he cannot, it is a nullity'." (emphasis* supplied).
56. Maxwell, in his book "On the Interpretation of Statutes", 11th Edition, at page 375, states the law as under :
"Another maxim which sanctions the non-observance of a statutory provision is that cuilibet licet renuntiare juri pro se introducto. Everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy."
57. Mr. Bajoria, therefore, rightly contended that, in the instant case, the trustees of the assessee-trust were the legal owners of the shares in question. The transfer of the said shares by the assessee-trust to the donee-trust was consented to, as found by the Tribunal, by the major beneficiaries of the assessee-trust. It is apparent that the major beneficiaries of the assessee-trust agreed with the trustees to donate the said shares to the donee-trust. It is an undisputed fact that, although the consent on behalf of minor beneficiaries of the assessee-trust at the relevant time in March, 1964, was not taken, the said minor beneficiaries later on even after all of them became major, never disputed the said donation and, therefore, have acquiesced therein. The donation of the said shares by the trustees of the assessee-trust was not invalid and not having been disputed by the beneficiaries concerned, but on the contrary the beneficiaries have concurred in or acquiesced in the said donation as valid, it cannot be avoided either by the trustees or the beneficiaries of the assessee-trust.
58. Mr. Bajoria next contended that the trustees of the assessee-trust having made the said donation, the trustees being some of the beneficiaries thereof and in view of the fact that the major beneficiaries of the assessee-trust concurred in the said donation and the fact that the minor beneficiaries never disputed the said donation, the Income-tax Department, being a stranger to the transaction and having no legal right to dispute the transaction has no locus standi or any legal right to hold or treat the donation as void ab initio.
59. This contention of Mr. Bajoria, in our opinion, is well-founded. It was sought to be argued on behalf of the Department that the Department was not a stranger and could hold the donation as void. We are unable to agree with this said contention made on behalf of the Department. In this connection, we can usefully refer to the following observations of Justice P, B, Mukharji in the case of Jatindra Nath Set v. Jadavpur University, , as follows :
"The first reason is that the applicant cannot enforce this breach, even, if any, of this trust. The second reason is that the State Legislature can alter or affect private trusts. Taking the first reason, I am of the opinion that the applicant cannot correct a breach of trust, even, if any, because he is neither a trustee nor a beneficiary under such trust deed and he will have no locus standi to correct private breaches of trust unless such breaches are unconstitutional or ultra vires. Neither the representatives of the trustees nor the heirs of late Brojendra Kishore Roy Choudhury are at all opposing such transfer."
60. On the principles of the aforesaid decision, we do not see how the Income-tax Department could have any authority in law to hold the said donation as void.
61. Mr. Bajoria, distinguishing the decision of the Full Bench of the Punjab and Haryana High Court in the case of CGT v. Tej Nath , contended that the principle laid down therein has not been accepted by other High Courts, Mr. Bajoria, in this regard, relied on the decision of the Rajasthan High Court in the case of CIT v. Braham Dutt Bhargava , wherein the court observed as follows (at pages 396, 399) :
"The crucial question raised before us is whether the trust or the gift made by the manager of the assessee-Hindu undivided family with the consent of the only other adult member, of the family by which a provision was made for the education of the sons of the two brothers is unlawful or void ab initio. For, if it is ab initio void, then there may be something for the view that the property still continues to form part of the assets of the assessee-Hindu undivided family. But, if at the worst it is voidable, then it clearly seems to us that the transaction must hold good, until, on impeachment by any other member of the family, it is held to be bad. The question which arises for determination in these circumstances is, whether a gift made by the karta of a joint Hindu family of the kind we have before us is altogether void."
"The first is that a gift by the manager of a joint Hindu family pf the family property at any rate to a member or members thereof is voidable and not void ab initio. The second is that such a gift can be attacked only by the members of the family whose interests are affected thereby and not by strangers."
62. The above principle laid down by the Rajasthan High Court has been followed by the Allahabad High Court in the case of L. Hirday Narayan v. CIT , and the Rajasthan High Court in the case of CIT v. Motilal Ramswaroop , and again by the Allahabad High Court in the case of Jugal Kishore Jai Prakash v. CIT .
63. In this connection, the observations of Pollock on Contracts (12th edition, page 6) referred to in the decision of the Rajasthan High Court in CIT v. Motilal Ramswaroop are relevant for our present purpose which are as follows (at page 46 of 76 ITR) :
"The distinction between void and voidable transactions is a fundamental one, though it is often obscured by carelessness of language. An agreement or other act which is void has from the beginning no legal effect at all, save in so far as any party to it incurs penal consequences, as may happen where a special prohibitive law both makes the act void and imposes a penalty. Otherwise no person's rights, whether he be a party or a stranger, are affected. A voidable act, on the contrary, takes its full and proper legal effect unless and until it is disputed and set aside by some person entitled so to do."
64. As noted by the Rajasthan High Court in CIT v. Motilal Ramswaroop , the above principle is also recognised by the Privy Council in Hanuman Kamat v. Hanuman Mandur [1891] ILR 19 Cal 123 and also in the decision of the Lahore High Court in Imperial Bank of India v. Maya Devi, AIR 1935 Lahore 867, 868. The Patna High Court in CIT v. Ram Gopal Rajgarhia , and the Gauhati High Court in CIT v. Gangadhar Sikaria Family Trust have also taken the same view. The Supreme Court, in Raghubanchmani Prasad Narain Singh v. Ambica Prasad Singh, , held that an alienation by the manager of the joint Hindu family even without legal necessity is voidable and not void. In view of the aforesaid decisions, we are of the view that the decision in CGT v. Tej Nath does not lay down the law correctly and conclusively.
65. The position of a karta cannot be equated with that of a trustee nor can the coparcener of a joint family be equated with the beneficiary under a trust. A coparcener has a legal right by birth in the Hindu undivided family properties and he has the right to demand partition. The beneficiary under a private discretional trust has no ownership in the trust estate but has only a right against the trustee to claim the benefits under the trust. Further, the position of a manager or karta of a Hindu undivided family cannot be compared to that of a trustee under a trust. The karta is not the legal owner of the property unlike the trustee. The karta is only a manager having no legal title to the Hindu undivided family property. He represents the Hindu undivided family as manager. In any event, even in the case of a karta of the Hindu undivided family the gifts made by him in all cases are per se void. The members of the Hindu undivided family affected by such gift may initiate proceedings for setting aside the transfers.
66. The decision of the Supreme Court in CAT v. Central India Industries Ltd. is also relevant. The Supreme Court has held that even if a company illegally distributes any dividend, it is assessable in the hands of a shareholder and, for the illegality, the company may incur liability for penalty.
67. In view of the aforesaid well-known distinction between a void and a voidable transaction, we are of the view that the donation of the said shares by the assessee-trust to the donee-trust was not void ab initio. The trustees of the assessee-trust may not have been authorised to make the said donation by its trust deed but, admittedly, the said trustees were also beneficiaries thereof and were major and competent to contract and have legal title to the said shares and, as found by the Tribunal and noted in the letter dated March 23, 1964, all the other adult members of the Birla family had concurred in the said donation and the fact that the minor beneficiaries never disputed the said donation, in our opinion, renders the said donation so made by the trustees of the assessee-trust valid and at best voidable, at the instance of the beneficiaries affected thereby. The said beneficiaries having acquiesced in the said donation and not disputed the same at any time, the said donation could not be treated as a nullity or void ab initio, The Income-tax Department, being a stranger to the transaction, has no authority in law to treat the said transaction as void ab initio.
68. We, however, do not agree with the contention of Mr. Bajoria that the said donation was authorised by the deed of settlement dated May 20, 1943. There is no provision in the said deed which authorised the trustees to donate any of the properties or fund of the trust to any other body for public charitable purposes. Clauses 2, 9(h), 9(i) and 13 of the said deed of settlement authorised the trustees to utilise or set apart or accumulate the income or properties of the trust for any of the purposes of the trust as set out in Clause 2 thereof. Mr. Bajoria referred to Clauses 9(a) and 12 of the deed of settlement and wanted us to read therein an implied power of donation. We do not agree. Clause 9(a) is a usual power of investment of trust properties. Power to ". . . . dispose of ... or otherwise deal" therein has to be construed ejusdem generis. Power to spend, given to the trustees in Clause 12 also, in our opinion, means spending for any of the objects and purposes of the trust. It is really a restrictive clause intended to protect the corpus of the trust and cannot be read as an authority to the trustees to donate the trust property outside the scope of the trust.
69. Under Section 11 of the Indian Trusts Act, the trustees are required to utilise the trust property as directed in the trust deed. Section 11 of the Trusts Act authorises the trustees to modify the purposes of the trust with the consent of the beneficiaries and a competent civil court on behalf of the minor beneficiaries. In that sense, in our opinion, the Tribunal was right in holding that the consent of a competent civil court on behalf of the minor beneficiaries was necessary. But, as held before, absence of such consent of the civil court could not render the donation void ab initio. The minor beneficiaries on whose behalf the civil court could have given consent, themselves later, on attaining the age of majority, did not dispute the donation and have acquiesced therein. Whether they have so acquiesced or not is a question of fact which is not in dispute. In that view of the matter, it is reasonable to hold that the trust stood modified so far as the said donation was concerned.
70. There is no evidence in support of the contention of Mr. Bajoria that the trustees of the assessee-trust should be deemed to have selected some of the beneficiaries to the exclusion of the others in relation to the donation of the said shares, Although the power to select beneficiaries is there, such selection or exclusion could not be implied. There is no evidence on record that the trustees of the assessee-trust exercised their power of selection or exclusion under Clause 4 of the deed of settlement. It is not known whom they selected and whom they excluded. The Tribunal, while dealing with this contention of the assessee-trust, has held as follows :
"This was accepted by all major parties concerned. Beyond this nothing happened. We cannot read into this transaction anything more, viz., that the trustees have first of all excluded the minor beneficiaries in their absolute discretion and they have chosen the major beneficiaries ..."
71. This, in our opinion, is a finding of fact which is not challenged as perverse. We see no reason to hold to the contrary. The trustees of the assessee-trust no doubt had the power of selection and exclusion in Clauses 4 and 5 of the deed of settlement. The question is whether the trustees in fact exercised such power. Exercise of such power one way or the other could not be assumed. There must be real and a conscious exercise of power to select one beneficiary and exclude the other. Merely because the major beneficiaries consented to the donation, it could not be inferred that they did so because the trustees selected them as beneficiaries and the trustees excluded all minor beneficiaries. There is no basis for such an inference.
72. Before taking up question No. 2 referred at the instance of the Department, we would like to dispose of the additional question raised by the assessee in Income-tax Reference No. 37 of 1984.
73. It is contended on behalf of the assessee that, way back in 1943, the said company gave the said shares to the trustees of the assessee-trust to be held by them for utilising the said shares for useful objects. It is, there fore, contended that the said shares did not, at any time, form part of the fund of the assessee-trust under the deed of settlement dated May 20, 1943, but constituted a separate trust for utilising the said shares for use ful objects. It is contended that the "useful objects" really meant public charitable purposes and, therefore, the donation in March, 1964, was in consonance with the original gift of the said shares by the said company to the trustees of the assessee-trust. This contention has not found favour with the Tribunal. All the time, the trustees of the assessee-trust treated the shares as part of the corpus of the trust and never kept it separately.
No separate accounts were made. The dispositions made by the trustees of the assessee-trust are from a common fund which not only included the original corpus of the trust but also the income arising from the shares transferred. Assessments were also made on the assessee-trust in respect of the entire income both under the Income-tax Act and in respect of wealth under the Wealth-tax Act.
74. As regards the resolution of the assessee-trust and the said company, the Tribunal noted that the resolution noted "It was recalled". The Tribunal observed that it was not possible to think as to how it could be recalled especially when there was no documentary evidence regarding the transfer of shares after 21 years. The Tribunal noted that there is not even an affidavit filed by any of the parties to the transfer stating that the shares were given with a specific direction. In that view of the matter, the Tribunal did not accept the recording made by the secretary of the assessee-trust in March, 1964. The Tribunal, therefore, negatived the assessee's contention that there was a trust within a trust.
75. The above findings of the Tribunal are based on the materials on record. On a reading of the said documents of March, 1964, it could not be said that the findings of the Tribunal are such which could not be reasonably arrived at. Mr. Bajoria for the assessee-trust wants us to come to a different finding on a reading of the same documents. We do not see any justification for interfering with the finding of the Tribunal. There is no reason to hold that the finding of the Tribunal is perverse or without evidence.
76. In this connection, we may usefully refer to the observations of the Supreme Court in Sardar Bahadur S. Indra Singh Trust v. CIT "The existence of a trust is a fact and not a fiction. We fail to see how the learned judges were able to come to the conclusion that Ajaib Singh while gifting the shares created one more trust without any writing and without any objective and appointed the trustees of the assessee-trust to be the trustees of the new trust as well. These assumptions have no basis either in fact or in law."
77. In view of the aforesaid decision, question No, 2 referred at the instance of the Department does not really call for an answer. The donation of the said shares by the assessee-trust in March, 1964, being valid and binding on all parties, the income therefrom after the date of donation could not be assessed in the hands of the assessee-trust. The assessee-trust was not entitled to the said income. It, in fact, did not receive it. The said income was earned and received by the donee-trust. Therefore, it could not be assessed in the hands of the assessee-trust. The Supreme Court, in Sardar Bahadur S. Indra Singh Trust v. CIT , observed at page 565 as follows :
"If the gift in question was a valid one then the trust became the owner of the shares gifted. That being so it also became the owner of the dividends received. Hence, those dividends will have to be considered as the income of the trust."
78. The contention of the Revenue proceeds on an assumption that the transfer was void and income was in fact not received by the donee-trust. On that assumption of the transfer being void could the income from the said shares be not includible in the assessment of the assessee-trust on the principle of "real income", This is a hypothetical contention. Arguments were, however, advanced by both parties, although it is not necessary we deal with the same.
79. The Tribunal found that the donee-trust was registered as owners of the said shares in the registers of various companies. It is the donee-trust which has been receiving the dividends. The assessee-trust has not been receiving any income from the said shares which have been transferred since 1964. Assessments have been made, accordingly, both under the Income-tax Act as well as under the Wealth-tax Act. On these facts, it cannot be held that the assessee-trust is assessable on the said dividends which have never been earned or received by it merely on an assumption that the donation may be void. That assumption is without any basis on facts and in law. The Revenue cannot seek to assess the income in the hands of the assessee-trust on a mere assumption.
80. As observed by Pollock on Contracts (at p. 6, 12th Edition) "A voidable act takes its full and proper effect unless and until it is disputed and set aside by some person entitled so to do."
81. Therefore, the said donation must take its full legal effect. The trustees or beneficiaries of the assessee-trust have not disputed the donation at any time. The donation is not void ab initio. Until lawfully avoided or set aside the donee-trust has a perfect legal title to the said shares and dividends, if any, thereon. We agree with the view of the Rajasthan High Court in CIT v. Motilal Ramswaroop as follows :
"The Income-tax Act taxes the person whose income it is and not the person who may per chance have title to the property through which the income has been earned."
82. In the instant case, the assessee-trust had totally divested itself of the right, title and interest in the said shares. The assessee-trust has not retained any power over, or interest in, the said shares or its income. Therefore, it could not be held that the income on the said shares after the date of donation accrued to the assessee-trust at any time.
83. Learned counsel for the Department relied on the decision of the Supreme Court in State Bank of Travancore v. CIT on the concept of real income. We do not see how the said decision in the facts of this case is helpful to the Department. It is not a case where income was given up by an assessee after it accrued to it. The provisions of Sections 60 and 61 of the Income-tax Act are not applicable in the facts and circumstances of the case.
84. On the contrary, in our opinion, the following principles summarised by Justice Sabyasachi Mukharji (as his Lordship then was) at page 155 of the said decision are applicable in the instant case ;
"(1) It is the income which has really accrued or arisen to the assessee that is taxable. Whether the income, has really accrued or arisen to the assessee must be judged in the light of the reality of the situation.
(2) The concept of real income would apply where there has been a surrender of income which in theory may have accrued but in the reality of the situation no income had resulted because the income did not really accrue ...
(5) If there is any diversion of income at source under any statute or by overriding title, then there is no income to the assessee.
(6) The conduct of the parties in treating the income in a particular manner is material evidence of the fact whether income has accrued or not. .."
85. In the instant case, judged in the light of the reality of the situation and the conduct of the parties, the income from the said shares after the date of the donation did not, at any time, really accrue to nor was it earned or received by the assessee-trust. If the said donation is assumed to be void which we have already held is not so, the dividend thereon, even when received by the said Birla Jankalyan Trust, would be assessable to income-tax in the hands of the assessee unless, on the principles of real income such dividend on the said shares having been lawfully earned and received by the donee-trust and not by the assessee-trust is held not to be includible in the hands of the assessee-trust.
86. The Revenue also contended that they are entitled to question the validity of the said donation. It is contended that the Revenue is not a stranger. The Income-tax Department is a sleeping partner or a beneficiary and there has been avoidance or evasion of the tax, These submissions are not acceptable. It is a strange and ignoble thought and contrary to law that the Income-tax Department is a sleeping partner or a beneficiary of a trust. There is no question of avoidance or evasion of tax in the instant case. It is not in dispute that the dividends derived on those shares had been utilised all along year by year having the said trust for public charitable purposes and the aforesaid shares continue to appear in the balance-sheet of the said public charitable trust as part of its assets. The Income-tax Officer, because he exercises a quasi-judicial function, does not become a party to the trust or the transaction. It is well-settled in several decisions that the Income-tax Officer cannot dictate to an assessee as to how he has to carry on his business or manage his affairs. These well-settled principles totally belie the contention of the Revenue that they are in the nature of a sleeping partner or beneficiary under the trust and are entitled to question the validity of the donation of the said shares.
87. For the reasons aforesaid, we answer the questions referred to herein-above as follows :
Question No. 1 referred at the instance of the Commissioner of Income-tax is answered by holding that the transfer of the said shares by the assessee-trust was not void but voidable. The said question, therefore, is answered in favour of the assessee.
Question No. 2 referred at the instance of the Commissioner of Income-tax is answered in the negative and in favour of the assessee.
Question No. 1 referred at the instance of the assessee is answered in the negative and against the assessee inasmuch as the assessee-trust has no implied power of donation of any of its assets.
Question No. 2 referred at the instance of the assessee is answered in the affirmative, subject to the observation that absence of the consent of a civil court on behalf of the minor beneficiaries did not render the donation of the said shares void ab initio and in view of the finding of the Tribunal that none of the minor beneficiaries, at any time, later disputed the said donation but acquiesced in the said donation, the absence of consent of a civil court is immaterial so far as the validity of the said donation is concerned.
Question No. 3, at the instance of the assessee, is answered by holding that although the trustees of the assessee-trust had the power and discretion to choose or exclude a particular beneficiary or a class of beneficiaries, there is no evidence on record that, in fact, they have done so. The question is, therefore, answered against the assessee.
88. The question referred at the instance of the assessee in Income-tax Reference No. 37 of 1984 is answered in the negative and against the assessee.
89. On the facts and circumstances of the case, there would be no order as to costs.
K.M. Yusuf, J.
90. I agree.