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1. In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court :

" Whether, on the facts and in the circumstances of the case, and on the proper interpretation of the trust deed the Tribunal was justified in holding that the said trust is a revocable trust ? "

2. The assessment year involved is 1970-71. The assessee is one Mrs. Leela Nath, who had executed a deed of trust on 25th September, 1958. As the question involved in this case mainly depends on the construction of the trust deed, it would be relevant to refer to the said deed in a little detail. In the recital of the said deed, the names of the trustees were mentioned as the assessee herself, her husband and one Sri Wazir Chand for their lives. In the recital the settlor recited as follows:

7. The assessee being aggrieved by the aforesaid decision of the AAC appealed to the Tribunal. It was submitted before the Tribunal on behalf of the assessee that the revenue authorities were wrong in holding that the trust was a revocable one. It was argued that it was only the power reserved in the trust deed for the settlor to reassume the trust property or any income therefrom that could make the trust revocable and not merely the fact of the settlor getting any benefit of the trust property or the income therefrom. In support of this contention, reliance was placed on certain decisions, which we shall presently notice. It appears that the attention of the Tribunal was drawn to Clause 13 of the trust deed. It was also urged that the assessee did not derive the benefit of the income form the trust property by withdrawing the said amount free of interest and the income of the trust was not affected by such withdrawal and even if the assessee had derived any benefit then that by itself would not render the trust a revocable one. On behalf of the revenue reliance was placed on the reasonings given by the ITO and the AAC. It was argued that the various clauses gave power to the settlor to reassume the property or income of the trust, to get directly or indirectly, benefit from the income or assets of the trust. It was further argued that it was not material that the power was to be exercised by the settlor alone or with the consent of the beneficiaries or other trustees. The Appellate Tribunal, after considering the provisions of Sections 61, 62 and 63 of the Act, observed as follows :

18. In this connection, it is necessary to bear in mind the entire scheme of Sections 60 to 63. Section 61 makes all income arising to any person by virtue of a revocable transfer of assets chargeable to income as the income of the transferor. Section 62 stipulates that the provision of Section 61, that is to say, addition of income by virtue of a revocable transfer of assets to the income of the transferor should not apply to income arising to any person by virtue of a transfer by way of, inter alia, a transfer which is not revocable during the lifetime of the beneficiary or made before the 1 st April, 1961, which is not revocable for a period exceeding six years. But Sub-section (1) of Section 62 is hedged by a proviso, which is applicable provided that the transferor does not derive any direct or indirect benefit from such income in either case. If the transferor does derive, in fact, direct or indirect benefit from a transfer and even if the conditions of Sub-clause (i) or (ii) of Sub-section (1) of Section 62 are fulfilled, it would be treated as a revocable trust. In this case; it is again necessary to emphasise that in view of the question that is posed before us and1 in view of the arguments that the Tribunal had occasion to consider, it is not necessary for us to examine whether the transferor actually derived any direct or indirect benefit from the income arising out of the transfer because we are only concerned with whether the transfer, that is to say, the deed of transfer, was a revocable one by fulfilling either of the conditions stipulated in Clause (a) and Clause (b) of Section 63 of the Act. Indeed, an argument might have been possible that having used an interest-free loan out of the transferred asset the assessee had, in fact, in the background of the case, derived direct or indirect benefit. Whether such an argument would have been sound or not, it is not necessary for us to decide or discuss because that is not within the ambit of the question posed before us. As we have mentioned before, in order to be a revocable transfer under Section 63 of the Act, the transfer deed must contain a provision for retransfer directly or indirectly of the whole or any part of the income which must go to the transferor or the right to reassume power directly or indirectly over the whole or any part of the income or assets. This aspect, in our opinion, in view of the clauses mentioned in the deed, on principle, cannot be said to be a revocable trust under Section 63 of the Act (sic). We have set out the relevant clauses. If, as we have indicated, Clause 8 of the deed of transfer is construed to mean that the power for the discretion to invest the money of the trust did not include the power to give an interest-free loan, the trustees acted in breach of the terms of the deed, for a benefit derived by the settlor, where the trustees acting in derogation or in breach of the deed of transfer, it cannot be said that the deed of transfer was revocable because it contained a term permitting either retransfer directly or indirectly over the whole or any part which must go to the transferor or the right to reassume power directly or indirectly over the whole or any part of the income or assets. Even if we proceed on the basis that the power to invest absolutely includes the power to grant an interest-free loan even then, in our opinion, no provision under Clause 9 entitles the transferor or the settlor to transfer directly or indirectly the whole or part of the income or the assets to the transferor. It may be that it gave a right to the transferor or the settlor or one who was the owner to be a borrower of certain money. But that cannot be construed to mean that it conferred a right to retransfer, that is to say, hand over the assets or the income in the same capacity that the transferor held before the deed of transfer, nor can it be construed to permit the transferor to reassume, that is to say, to take the sum in the same capacity or in the same capacity which he had before the transfer, directly or indirectly, or either whole or part of the income or assets. Learned advocate for the revenue emphasised that Clause 8 permitted or entitled the trustees to invest the property in such manner in their absolute and uncontrolled discretion and it also excluded the operation of the restriction prescribed by the Trusts Act or any other law pertaining thereto. It might be that it gave an uncontrolled right to the trustees to reinvest but it did not permit or give any power either to transfer or to hand over the property in the same capacity, that is to say, as owner of either the income or the asset or the property in the same capacity as that of the transferor. If Clause 8 is read in conjunction with -cl. 9 then, in our opinion, it cannot be construed that there was any right which the settlor reserved in the deed of transfer by virtue of which it could be said that he had reserved the rights contemplated under sub-els. (i) and (ii) of Clause (a) of Section 63 of the Act. This construction, in our opinion, is well settled by judicial decisions. The first decision to which we must refer is the decision of the Division Bench of this court in the case of CIT v. Sir S.M. Bose [1952] 21 ITR 135. There, the court was concerned with the first proviso to Section 16(1)(c) of the Indian I.T. Act, which we have set out hereinbefore, and which corresponds to Section 63(a), Clauses (i) and (ii). But what was one in proviso to Clause (c) of Sub-section (1) of Section 16 of the Indian I.T. Act, 1922, has now been placed in two sub-clauses being Sub-clauses (i) and (ii) of Clause (a) of Section 63 of the Act of 1961. The Division Bench of this court held that the first proviso to Section 16(1)(c) of the Indian I.T. Act, 1922, only contemplated cases where the settlor could lawfully reassume power over the income or the assets. There, what happened was that the assessee had settled certain property on himself as a trustee to hold it in trust for his daughter. The deed, which was in the ordinary form, an out and out trust on the English model, provided that the trustee was to take possession and after paying the outgoings the income of the trust estate was to be paid to his daughter during the term of her natural life for her sole and separate use. The deed also made provisions as to how the income was to be dealt with on the death of the daughter. But the settlor retained no right whatsoever over the corpus or the income, and he had no power of revocation. Clause 3 of the deed provided that " as long as the present trustee, viz., the settlor or the persons, named as trustees in addition or substitution, shall act as trustees, they shall not be accountable to any of the beneficiaries under these presents relating to his or their dealings as to the income of the trust estate ". The question was whether the income from the trust properties was taxable in the hands of the assessee as his income by virtue of the provisions of s. I6(1)(c) of the Indian I.T. Act, 1922. It was held that the settlor by the trust deed put the income for ever out of his control and that being so the income from the trust properties could not be assessed as part of the income of the assessee under Section 16(1)(c). Clause 3, which we have set out hereinbefore, did not, according to the Division Bench, give the settlor a control over the income. It was merely a provision limiting the rights of the beneficiary to question certain acts of the trustee. Provisions made in the deed to prevent frivolous litigation and to prevent questioning the bona fides of the trustees did not have the effect of giving the settlor a right to reassume power directly or indirectly over the income or assets. Similarly, in our opinion, in the instant case before us, the discretion give to the trustees " to invest the property of the trust in such manner as they, in their absolute and uncontrolled discretion, may consider proper" or that this power shall not be subject to any restriction as prescribed in the Trusts Act of 1882 or any other law pertaining te the trustees in relation to the powers of the trustees of investment or otherwise, cannot be construed to mean that the settlor had the right to reassume power directly or indirectly over the income or the assets as an owner. This principle was again enunciated by the Supreme Court in the case of CIT v. S. Raghbir Singh .

40. However, we are not concerned in this case with the question whether the very fact that the trustees could put an end to the trust with the concurrence of the major beneficiaries made the power revocable or not, in view of the nature of the power given in the present trust deed. For the reasons aforesaid we must, therefore, say that on both aspects we are not able to accept the contention of the revenue that the trust deed contained such provision which would make it a revocable trust in terms of Sub-clause (i) or Sub-clause (ii) of Clause (a) of Section 63 of the I.T. Act, 1961.