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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.

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.

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.

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.