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3. In the assessment the Income-tax Officer added the sum of Rs. 9,738, being the interest accruing to the trust, to the income of the assessee on the ground that the said sums of money had not been handed over in cash to the trustees and that mere entries in the books of a concern which did not have the cash balance cm the date of transfer in favour of the trust did not constitute a gift.

4. The Income-tax Officer also considered Clauses 4, 9, 21, 39(vi), 40 and 42 of the deed and held that the cumulative effect of the said clauses was that the trust was wholly illusory and the settlor could not be held to have divested himself of control over the trust funds. He concluded that, therefore, the trust-fund remained the property of the settlor.

8. From the order of the Tribunal the following question has been referred :

" Whether, on the facts and in the circumstances of the case and on a proper interpretation of annexure ' A ', there was a valid trust su as not to justify the inclusion of Rs. 9,738 in the assessment of the assessee, the settlor ? "

9. No one appeared on behalf of the assessee at the hearing. The only contention of Mr. Suhas Sen, learned counsel for the revenue, before us was that this trust should be deemed to bo revocable within the meaning of Section 16 of the Indian Income-tax Act, 1922, inasmuch as the settlement contained a provision which gave the settlor a right to reassume power directly over the assets of the trust and, therefore, in computing the total income of the settlor the income arising by virtue of this settlement should bo deemed to be the income of the settlor. Mr. Sen based his argument on Clause 9 of the deed which is set out hereinbelow :

15. It was contended before the Supreme Court that under this deed, the settlor retained absolute power over the income and corpus of the trust estate and that the first proviso to Section 16(1)(c) should be applied as the deed gave the settlor the right to reassume power directly or indirectly over the income and assets of the trust. The Supreme Court considered what was meant by reassumption of power and, in his judgment, Sikri J. observed as follows (at page 10) :

" What then is the fair meaning of Section 16(1)(c), proviso (i) ? It seems to us that the words ' reassume power ' give indication to the correct meaning of the proviso. The latter part of the proviso contemplates that the settlor should be able, by virtue of something contained in the trust deed, to take back the power he had over the assets or income previous to the execution of the trust deed. A provision enabling the settlor to give directions to trustees to employ the assets or funds of the trust in a particular manner or for a particular charitable object contemplated by the trust cannot be said to confer a right to reassume power within the first proviso. Otherwise a settlor could never name himself a sole trustee. It seems to us that the latter part of the proviso contemplates a provision which would enable the settlor to take the income or assets outside the provisions of the trust deed......
Coming to the various clauses of the trust deed......what he (settlor) can direct under Clause 4 is the application of income to a particular charitable purpose. Similarly under Clause 6 he can nominate the charitable object and the fund or investment which should be utilised for that object, This is in no sense a power to reassume control. Clause 8 enables the settlor to delegate the carrying out of a particular charitable object. For instance he could direct some contributions to be made to a hospital or a school without obliging the trustees to see that the hospital or the school docs not misapply the funds. Clauses 10 and 11 which enable the settlor to give directions regarding the investment must be read subject to the provisions of the Bombay Public Trusts Act and the general principles of law relating to trusts. We have already said that he could not legally direct a loan to be made to himself. Further, it is difficult to subscribe to the proposition that a loan to a company in which the settlor is interested would give power to the settlor over the assets within the meaning of the first proviso. Clause 21 only shows the wide powers which the settlor has reserved to himself. None of these clauses come within the purview of proviso (i)." .