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4. "Whether on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in not appreciating the action of the AO in holding that the assessee trust is not a revocable trust since contributors have practically no control over the income arising out of the activities of the fund and the contribution can be revoked only with the consent of the contributors holding 75% of the units and thus the assessee will not be eligible for the benefit of section 61 to 63 of the Income Tax Act, 1961 not being a revocable trust. The Ld. CIT(A) has also erred in not appreciating the action of the AO in regard that the section 61 to 63 of the Income Tax Act, 1961 are anti-avoidance provisions to plug any leakage or diversion of legitimate income?" 

(B)    Holding the trust as a non-revocable trust:

(i)    As observed by the A.O, the assessee trust was not in the nature of a

revocable trust for two fold reasons viz. (i) that, the contributions could be revoked only with the consent of the contributors holding 75% of the units; and (ii) that, contributors had practically no control over the income arising out of the activities of the fund. In the backdrop of his aforesaid conviction, the A.O was of the view that the assessee trust being an irrevocable trust was thus not eligible for the benefit of Sec.61 and Sec.63 of the Act. Rebutting the aforesaid view of the A.O, the CIT(A) had observed as under:

As mentioned earlier, the Trust Deed and the Deed of Assignment contain clauses which indicate that the power of revocation has been granted. Incidentally, we find that these principles on revocable transfer have been followed by the Coordinate Bench of Mumbai Tribunal in the case of M/s. Milestone Army Navy Trust, ITA No. 4067/Mum/2014, dated 23/12/2015.

7. 6. 5 I n vi ew of t he di scussi on ab ove a n d res p ect f ull y f oll owi ng t he principles laid down in the above referred decision of the Bangalore Bench of the Tribunal in the case of India Advantage Fund-VII (supra) and the Mumbai Bench of ITAT in Milestone Army Navy Trust (supra) we hold that the assessee Trust is a revocable Trust and contribution by beneficiaries is a revocable transfer. Having held thus, it follows that the income shall be taxed in the hands of the beneficiaries. i.e. the Mutual Funds who purchase the PTCs from the assessee trust.

9.6 Considering the fact as highlighted above and respectfully following the decision of superior authorities, it is held that the appellant trust is a revocable trust and the provisions of section 61 to 63 of the I.T. Act will be applicable to it. Hence, contribution by beneficiaries is a revocable transfer implying that the income will be taxed in the hands of the beneficiaries and not the appellant trust."

We have given a thoughtful consideration to the observations of the lower authorities, and concur with the view taken by the CIT(A) that the assessee trust is a revocable trust, and thus, the provisions of Sec. 61 to 63 of the Act would be applicable to it. On a perusal of Sec. 61 of the Act, we find that the same therein provides that an income arising to a 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. However, if the transfer is irrevocable for a specified period, then as per Sec. 62 of the Act, the provisions of Sec. 61 would be rendered unworkable. As for the definition of the terms "transfer" and "revocable transfer", the same is provided in Sec. 63 of the Act. Sec. 63 provides, that (a) a transfer shall be deemed to be revocable if, viz. (i) it contains any ITO, 21(3)(2) Vs. Scheme A1 of ARCIL CPS 002 XI Trust 18 provisions 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 reassume 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. On a literal interpretation of the aforesaid statutory provision, we find that it is nowhere stated that if the transfer is explicitly revocable, the provisions of Sec. 61 and 63 would not apply. As observed by the CIT(A), we find that Clause 5 of the trust deed makes it clear beyond any scope of doubt that the contribution made by the SR holders is „revocable‟. Accordingly, we have no hesitation in observing that the income therein arising has to be brought to tax in the hands of the SR holders, i.e as per the provision of Sec. 61 to 63 of the Act. Insofar, the view taken by the A.O, that as the revocation of the contributions is conditional upon the consent of the contributors holding 75% of the units, we are afraid that the same would not render the contributions as irrevocable. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of Behramji Sorabji Lalkaka Vs. CIT (1948) (16 ITR 301) (Bom). In the aforesaid case, it was observed by the Hon‟ble High Court that the words "revocable transfer" are well understood in law and a transfer does not cease to be revocable because the power of revocation cannot be exercised by the settlor without the consent of the named individuals or any of them. As observed by the Hon‟ble High Court, a transfer is nonetheless revocable even if it can be revoked only with the consent of any named person or persons. As such, on the basis of our aforesaid observations we are persuaded to subscribe to the view taken by the CIT(A), who had rightly concluded that the assessee trust is a revocable trust, and thus, the provisions of Sec. 61 to 63 of the Act would be applicable to it.