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16.5 The aforesaid provisions take effect retrospectively from 1st April, 1980 and will, accordingly, apply in relation to the assessment year 1980-81 and subsequent years. [Section 10(c) of the Finance Act]"

8. A study of this legislative background shows that Parliament was aware of the inequity of disallowing the expenditure allowed in respect of an irrevocable trust and provided that even the balance of the amount unspent will be treated as belonging to the company which created the irrevocable trust. In other words, the effect of these three sections is to statutorily revoke the irrevocable trust created by the company. This intention is manifest by the provisions of sub-section (11) which provides that the company can take back not only the amount unutilised but also claim any assets held by the trust and have it transferred to itself. It may be kept in mind that under sub-section (9) the amount bona fide laid out or expended in any expenditure wholly and exclusively for the welfare of the employees is treated as the expenditure of the company and under section 11 the amount which has not been so laid out or expended shall be repaid to the company. Thus the expenditure and the unutilised amount form two sides of the coin and cover the entire assets held in trust under the irrevocable trust. In this situation if we apply the tests of ownership given in Salmond, it will be seen that every one of those tests are satisfied with reference to the company and in the case of the trust the tests fail even w.e.f. 1-4-1980. The conclusion that is irresistible is that the trust ceased to be the owner of the fund from 1-4-1980 and that the irrevocable trust was in effect revoked by statute.

4. He had also taken into consideration the CBDT Circular No. 387 dated 6-7-1984, which is a Memorandum explaining, inter alia, the insertion of section 40A(11). The extract of the Circular was already quoted in the learned Judicial Member's Order at pages 8, 9 and 10. I feel it is not necessary to once again reproduce the same. However, I may state that I have kept them in mind for due consideration while deciding this issue.

After having thus surveyed the provisions of section 40A(11), the CBDT Circular, as well as the principles enunciated by the Supreme Court regarding the retrospectivity of the legislative provisions, he held that the "Parliament" was aware of the inequity of disallowing the expenditure in respect of an irrevocable trust and provided that even the balance of the amount unspent will be treated as 'belonging' to the donor company. In other words he held that the effect of these three sections is to statutorily revoke the irrevocable trust created by the company. This intention is manifest by the provisions of sub-section (11) which provides that the donor company can take back not only the amount unutilised but also claim any assets held by the trust which were acquired with the contribution made by the donor and have them transferred to itself.

"4. Net wealth to include certain assets ....

(5) The value of any assets transferred under an irrevocable transfer shall be liable to be included in computing the net wealth of the transferor as and when the power to revoke arises to him."

14. The Trust Deed was executed on 20-2-1980 and it is described as an irrevocable trust, a photo-copy of which is already on record. Under the provisions of section 40A(11), which is already extracted verbatim in this order, the word 'assessee' signifies the donor company or the company which contributed the funds to the irrevocable trust. It is clearly stated in the said sub-section that any sum is paid before 1st day of March, 1984, inter alia, to any trust, referred to in sub-section (9), then, notwithstanding anything contained in any other law or any instrument, he shall be entitled to claim so much of the amount paid by him as has not been laid out or expended by such fund (such amount being hereinafter referred to as the unutilised amount) be repaid to him. Therefore, the meaning of the sub- section is very clear and by virtue of the provision, the Parliament conferred a right to the donor who had contributed, the funds to the irrevocable trust before 1-3-1984, a right to demand repayment of the unutilised portion out of the said amount. The remaining words occurring in sub-section (11)(i) "and where any claim is so made, the unutilised amount shall be repaid, as soon as may be, to him". The above words forming part of sub-section 40A(11)(i) casts an obligation on the donee-trust (assessee-trust) to whom the contribution is made to repay the unutilised amount out of the total amount contributed to them to the donor. This was already considered by the Madras Tribunal in a SMC Bench in the case of ITO v. Tube Investments of India Ltd. [1990] 32 ITD 172. In that case, the assessment year involved is 1982-83. The assessee trust was set up by the settlor company for the welfare of its employees. It is an irrevocable trust. After the introduction of section 40A(9), (10) and (11) with retrospective effect from 1-4-1980, the assessee company in that case had claimed refund not only the unutilised portion of the trust contribution but also the accrued interest as well as dividends, if any. The question was whether the claim of the assessee-company in that case is allowable under the law. Upholding the claim of the assessee-company the following is held by the Madras Bench of the Tribunal as per the head note obtaining at page 173 of the decision :

18. After having considered the arguments on both the sides advanced before me, I find it easy to accept the arguments advanced on behalf of the assessee and consequently I hold that the learned J.M.'s ultimate conclusion that the unutilised amount in the hands of the assessee-trust from out of the contributions made by the donor becomes debt in the hands of the assessee-trust from 1-4-1980 itself under the provisions of section 40A(11), which are specifically held to be retrospective from 1-4-1980 is correct. The only point of difference as set out in the referred question is whether the retrospective operation to section 40A(11) with effect from 1-4-1980 affects the liability of the assessee-trust to wealth-tax. In my opinion, it does affect the wealth-tax liability of the assessee trust in the following manner. I have already extracted the sub-section (11) of section 40A in the above paras. Sub-section (11) clearly states about the right as well as liability. Firstly, I make it very clear that the word in the said sub-section "assessee" contextually means only the donor-company which had contributed the funds to the assessee-trust. When so under-stood, the sub-section reads that if the assessee (donor) has before 1st March, 1984 paid any sum to any trust, then notwithstanding anything contained in law or any instrument, he shall be entitled to claim the unutilised amount on each of the three valuation dates relevant to the three assessment years under consideration. Sub-section (11) contained an non obstante clause-"notwithstanding anything contained in any other law or in any instrument". Therefore, this abrogates any recital in the instrument. The Trust Deed dated 20-2-1980, is an instrument and no doubt in the recitals it is described as an irrevocable trust. Even though it is irrevocable, by virtue of the operation of the non obstante clause used in sub-section (11) it should be held to have become revocable from 1-4-1980 by virtue of retrospective operation of this sub-section. It means that whatever might have been written in the revocable trust deed, the donor company is entitled to recover the unutilised amount. Therefore, it is clear that at least as far as realisation of the unutilised amount is concerned, the trust deed becomes revocable trust and does not remain irrevocable.