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6. To appreciate the above contentions it is necessary to note the relevant facts. The late Nizam, Mir Sir Osman Ali Khan Bahadur executed a trust deed on August 12, 1957, by transferring the shares of the face value of Rs. 85,01,650 for the benefit of the dependants and khanazads. This is known as (H.E.H. The Nizam's) Dependants and Khanazads Trust. Subsequently, the solicitors opined that the trust deed dated August 12, 1957, was null and void as it was formed with the corpus which was already the property of the khanazads and also with the amounts that were already gifted to the dependants by the Nizam. Therefore, the trustees by a resolution dated March 14, 1959, decided to close the trust account with the Central Bank of India and place it at the disposal of the Financial Adviser of the Nizam. Accordingly, the original account with the bank was closed and a new account, "account of Nizam's Khanazads" was opened. As the Nizam created the trust, the ITO initiated gift-tax proceedings against the settlor. The settlor contended that there was no gift on the date when the trust deed was executed as the gifts of these amounts had already been made to the dependants and khanazads prior to the execution of the deed. The GTO rejected this claim which was upheld in appeal. The settlor approached the Central Board of Direct Taxes. Some time in October, 1966, the settlor accepted that there was no valid and proper gift prior to the execution of the trust deed dated August 12, 1957, and, therefore, accepted the correctness of the gift. The late Nizam then wrote a letter to the Central Bank of India stating that the accounts that were maintained by the Financial Adviser on behalf of the members of the family of khanazads and dependants be closed and the balance be transferred to a new account in the name of Khan Bahadur C.B. Taraporevala, who in addition to being the Financial Adviser was also the secretary of the Trust. The settlor had an intention of creating another trust for the benefit of some of the khanazads that were left out at the time of creation of the earlier trust dated August 12, 1957. This trust was to be formed by June 12, 1961. The resolution passed by the trustees on March 14, 1959, also mentions about the intention of late Nizam with regard to creating this trust. Shares of the face value of Rs. 23.5 lakhs were transferred by June, 1961, and that amount formed part and parcel of the trust created on August 12, 1957.
1. 6,000 Preference shares of Andhra Oil and Cake Products Rs. 6,00,000
2. 8,750 Ordinary shares of Kaveri Engineers Rs. 8,75,000
3. 4,750 Ordinary shares of Sri Desai Bros. Ltd.
Rs. 4,75,000
4. 4,000 Ordinary shares of International Instruments Rs. 4,00,000
8. By March, 31, 1961, the settlor had only 2,250 shares in Kaveri Engineers and the paid up value of these shares as on that date was only Rs. 75 each. The settlor had acquired 4,000 shares during 1961-62, and even as on March 31, 1962, the face value of his shares in Kaveri Engineers was Rs. 6,25,000 as against shares worth Rs. 8,75,000 said to have been transferred in June, 1961 itself. The settlor might have had an intention of creating the trust, but it had not been made very clear. A few beneficiaries' names had been written, but he was paying them out of his own pocket and the settlor's intentions were not clear from the material on record. The accounts of this trust were made at a stretch only after the death of the settlor. The beneficiaries of this trust had to be paid annually Rs. 2,14,000 from the accounting year 1962-63 onwards. But they received only some meagre amounts. It was also pointed out that the beneficiaries had to be paid Rs. 2,14,000 per year under this trust, but the annual income of the trust was less than a lakh of rupees and in such circumstances if the parol trust (trust created in June, 1961), and the trust created on August 12, 1957, are to be treated as one and the payments on account of the parol trust had to be made to the detriment of the interest of the beneficiaries of the original trust dated August 12, 1957. The ITO, accordingly, held that the corpus of Rs. 23.5 lakhs and the income therefrom should be excluded from the wealth-tax and income-tax assessments of the trust for the assessment year 1965-66, and shall be considered in the personal assessment of the owner, i.e., the Nizam. The ITO followed the said order for the subsequent years 1966-67 to 1971-72. The AAC held that the parol trust is not a valid one and agreed with the findings of the ITO. On the assessee's appeals, the Appellate Tribunal passed one common order on March 31, 1975. It held that the order dated August 23, 1974, passed in Wealth-tax Appeals Nos. 64, 65 and 66 of 1972/73, etc., holding that a valid trust was created by the late Nizam to the extent of Rs. 23,50,000 and this trust formed part of the original trust dated August 12, 1957, would hold good in this appeal also. The Appellate Tribunal observed that the Nizam wanted to treat the amount pertaining to the two trusts as forming part of a single trust so that all the beneficiaries will be getting the amounts mentioned in the lists without any detriment to the parties. Thus, the Appellate Tribunal held that there was a valid trust created by the Nizam in respect of Rs. 23,50,000 and that trust formed part of the original trust dated August 12, 1957, and that while assessing the trustees the entire income be taken into account and the assessments should be made accordingly.

31. It is further stated thus :

"On the other hand, if a trust has been once declared and the interest of the settlor in the trust property vested in the trustee (or, in technical language, if the trust is completely constituted) courts of equity will enforce it, whether the party applying for relief gave valuable consideration or not even although the trustee should disclaim the trust and thereby revest the property in the settlor."

32. The learned counsel for the assessee referred to as quoted in the same volume at pages 54 and 55, which are as under : Jefferys v. Jefferys [1841] Cr & Ph. 138 and Re Wale; Wale v. Harris [1956] 1 WLR 1346 ; [1956] 3 All ER 280 as quoted in the same volume at pages 54 and 55, which are as under:

"Thus, in Jefferys v. Jefferys a father voluntarily conveyed freeholds to trustees upon certain trusts in favour of his daughters, and also covenanted to surrender copyholds to the use of the trustees, to be held by them upon the trusts of the settlement. The settlor afterwards died without surrendering the copyholds, having devised certain portions of both freeholds and copyholds to his wife. In a suit by the daughters to have the settlement enforced, it was held that the court would carry out the settlement of the freeholds, for so far as they were concerned the trust was completely constituted, the title of the daughters complete, and the property actually transferred to the trustees. On the other hand, the court refused to enforce specific performance of the covenant to surrender the copyholds ; for in their case the trust was incompletely constituted, the settlor having neither declared himself a trustee, nor transferred them to the trustees. He had merely entered into a voluntary contract to transfer copyholds which a court of equity could not enforce.