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18. OTHER GENERAL ARGUMENTS:

18.1 The Assessee contended before CIT(A) that the Assessee was set up as a revocable trust and the scheme of the Act clearly indicates that income of the fund has to be assessed in the hands of the beneficiaries being the contributors/transferors. Reference in this regard was made to Section 61 of the Act which provides that "All income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income-

tax as the income of the transferor and shall be included in his total income". Sec.62 of the Act provides that if a transfer is irrevocable for a specified period than Sec.61 will not apply. Section 63 defines as to what is "transfer" and "revocable transfer" for the purpose of Sec.61 & 62 of the Act. It provides that:-(a) a transfer shall be deemed to be revocable if-(i) it contains any provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor, or (ii) it, in any way, gives the transferor a right to re-assume power directly or indirectly over the whole or any part of the income or assets; (b) "transfer" includes any settlement, trust, covenant, agreement or arrangement. It was argued that under clause 13.3.1 of the trust deed the trustees may at any time before the expiry of the term terminate the trust subject to satisfying certain procedures/conditions. It was pointed out that the Hon'ble Supreme Court in the case of CIT Vs. Rahbir Singh AIR (1966) 18 (SC) has held that a settlement of disposition was deemed to be statutorily revocable if there was a provision therein for the retransfer of the income or assets or which conferred a right to reassume power over the income or assets. It was contended that it was not the requirement of the Act that the trust deed should state specifically that the Trust is revocable in nature and a clause which provides for re-assumption/retransfer of the assets is sufficient to treat the trust as revocable trust. Consequently, it was argued that the income of the Assessee was chargeable to tax only in the hands of the beneficiaries/contributors in accordance with the provisions of Sec.61 of the Act.

DECISION OF THE CIT(A):

20. The CIT(A) in the impugned order has narrated the whole of the written submission of the Assessee, the remand report of the AO and rejoinder of the Assessee to the remand report and finally gave his conclusion as follows:

"24. In view of the above discussion, after careful consideration of the facts and circumstances of the case, I am convinced that the appellant trust is a revocable trust. It need not be subjected to tax as the tax obligations have been fully discharged by the beneficiaries of the appellant trust. Therefore the AO is directed to treat the income of the appellant trust as NIL as against Rs.3,54,10,591 determined by the AO. As the income of the appellant trust is determined as NIL the issue of disallowance of expenditure made by the AO is not considered and the appeal is allowed."

21. Aggrieved by the order of the CIT(A), the revenue has preferred the present appeal before the Tribunal. The grounds of appeal raised by the revenue read thus:

"1. The Order of the CIT (A) is opposed to facts of the case.

2. The CIT (A) should have appreciated the fact that the assessee, an Asset Management entity came into existence by virtue of a Trust deed.

3. The CIT(A) has erred in holding that the assessee trust , is a revocable trust and it need not be subjected to tax, as the tax obligation have been fully discharged by the beneficiaries of the assessee trust.

24. With the aforesaid prelude, he made submission on the grounds raised by the Revenue before the Tribunal in the grounds of appeal. On ground No.3 raised by the Revenue in which the revenue has attacked the findings of the CIT(A) that the Assessee trust is a revocable trust and it need not be subjected tax as the tax obligation have been fully discharged by the beneficiaries of the Assessee trust, the learned counsel for the Assessee drew our attention to Sec.61 and 63 of the Act. Section 61 of the Act provides that "All income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income-tax as the income of the transferor and shall be included in his total income". Section 63 defines as to what is "transfer" and "revocable transfer" for the purpose of Sec.61 of the Act. It provides that:-