# [1966] Supp. 1 S.C.R. 419

- **Citation:** [1966] Supp. 1 S.C.R. 419
- **Court:** Supreme Court of India
- **Decided:** 1966-05-06
- **Case number:** Civil Appeals Nos. 1133 and IP llJ4 of 1965
- **Bench:** K. N. Wanchoo, J.C. Shah Ands. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1966-supp-1-s-c-r-419-3870
- **Pages:** 17

## Headnote

Wealth Ta:c Act 1957, s. 4(1)(a)(iii)-whether the word "benefit"
meant '1immediate 01' deferred" benefit or only imm.ediate
bene-
~
.
Wealth TilJJ: (Amendment) Act 1964, s. 4-effect of-whether only
declaratory,
In August 1957 the appellant created two Trusts by two separate deeds one of which was a charitable trust and the other a family trust'. He then transferred certain shares to the family trust
the scheme of which was that during the minority of each of three
children of the appellant the property in Schedules A, B and C' to
the deed qua each beneficiary was to remain vested ir. the trustees
for the benefit of the charitable trust, and after the expiry of the
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period specified in each case, the corpus and income was to be herd
for the beneficial ownership of the three children.
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By C'Iause 9 df the family trust deed, it was provided that the
interests granted or created in the respective beneficiaries shall
vest in them immediately upon execution of the deed; Clause 21
conferred upon the trustees power either to use the income accruing
under the trust for the benefit of the charitable trust during the
period prescribed in each case upto the time that each of the three
children attained majority or to accumulate the income and deliver
it on the expiry of the periods specified to the trustees of the charitable trust. Clause 26 provided that notwithstanding anything contained in Clauses 21 to 25 the trustees could expend the income accru•
ing under the settlement to each of the beneficiaries therein for the
maintenance, education, health, marriage and1 advancement of
the
beneficiaries.
In computing the nett wealth of the assessee under the Wealth
Tax Act 1957, as on March 31, 1958 and March 31, 1959, the valuatioo
dates respectively for the assessment years 1958-59 and 195~60, the
Wealth Tax Officer and the Appellate Ass'stant Commissioner included the value of the shares held by the trustees undet the family trust, on the ground that these shares were held by them for the
benefit of the minor children within the meaning of Section 4(1)(a)
(iii) of the Act. On appeal the Appellate Tribunal reversed this decision but. upon a reference, the High Court decided the issue against
the assessee.
In the appeal to this court, it was contended on behalf of the
Revenue that the word "benefit" in the Section meant immediate or
deferred benefit and the amendment of Section 4(1) (a) (iii) by Act
46 of 1964 whereby the words "immediate or deferred" were introduced before the word "benefit" in the Section. was in effect only
declaratory; and that in any event it was clear from the recitals iii
the preamble and the other terms of the family trust deed that the
intention of the appellant was to make a settlement for the benefit of
his minor children within the meaning of the Section prior to its
amendment,
4:0
.<\'Plll'lME COVllT REPORT•
[1966] SUPP. 8.C.11.
HELD: (pe!' Wanchoo and Sikri, JJ.): Considering the terms of
A
the family trust deed as a whole, the shares transferred to the t~
tt:es were not held for the benefit of the three minor children as on
?v..~rch 31, 1958 and March 31, 1959 within the mean'ng of s. 4(l)(a)
(m) and could not therefore be included in the n<!tt wealth of the
assessce. [428El
By the terms of the deed, it was the charitable trust which
was entitled to the inrome of the shares in Schedules A, B and C
B
•
•
during the years before the minor children attained majority; upto
that time the children had no interest whatsoever in that income.
"'"'
It could not therefore be said that the settlement was for the immediate benefit of the minor children. r 426s-e1
/
Although the nm-obstante clause 26 purported to override the
provisions of Clauses 21 to 25, the inclusion of Clause 21 appeared
to be a typographical error. In any event even assuming that there
C
was a conflict between Clauses 21 and 26, the earlier disposition
under Clause 21 would prevail over the later directions contained
in Clause 26. Sahabzada Mo

## Text

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419
H. H. YESHWANT RAO GHORPADE
v .
THE COMMISSIONER OF WEALTH TAX, BANGALORE
May 6, 1966
[K. N. WANCHOO, J.C. SHAH ANDS. M. SIKRI, JJ.]
Wealth Ta:c Act 1957, s. 4(1)(a)(iii)-whether the word "benefit"
meant '1immediate 01' deferred" benefit or only imm.ediate
bene-
~
.
Wealth TilJJ: (Amendment) Act 1964, s. 4-effect of-whether only
declaratory,
In August 1957 the appellant created two Trusts by two separate deeds one of which was a charitable trust and the other a family trust'. He then transferred certain shares to the family trust
the scheme of which was that during the minority of each of three
children of the appellant the property in Schedules A, B and C' to
the deed qua each beneficiary was to remain vested ir. the trustees
for the benefit of the charitable trust, and after the expiry of the
D
period specified in each case, the corpus and income was to be herd
for the beneficial ownership of the three children.
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By C'Iause 9 df the family trust deed, it was provided that the
interests granted or created in the respective beneficiaries shall
vest in them immediately upon execution of the deed; Clause 21
conferred upon the trustees power either to use the income accruing
under the trust for the benefit of the charitable trust during the
period prescribed in each case upto the time that each of the three
children attained majority or to accumulate the income and deliver
it on the expiry of the periods specified to the trustees of the charitable trust. Clause 26 provided that notwithstanding anything contained in Clauses 21 to 25 the trustees could expend the income accru•
ing under the settlement to each of the beneficiaries therein for the
maintenance, education, health, marriage and1 advancement of
the
beneficiaries.
In computing the nett wealth of the assessee under the Wealth
Tax Act 1957, as on March 31, 1958 and March 31, 1959, the valuatioo
dates respectively for the assessment years 1958-59 and 195~60, the
Wealth Tax Officer and the Appellate Ass'stant Commissioner included the value of the shares held by the trustees undet the family trust, on the ground that these shares were held by them for the
benefit of the minor children within the meaning of Section 4(1)(a)
(iii) of the Act. On appeal the Appellate Tribunal reversed this decision but. upon a reference, the High Court decided the issue against
the assessee.
In the appeal to this court, it was contended on behalf of the
Revenue that the word "benefit" in the Section meant immediate or
deferred benefit and the amendment of Section 4(1) (a) (iii) by Act
46 of 1964 whereby the words "immediate or deferred" were introduced before the word "benefit" in the Section. was in effect only
declaratory; and that in any event it was clear from the recitals iii
the preamble and the other terms of the family trust deed that the
intention of the appellant was to make a settlement for the benefit of
his minor children within the meaning of the Section prior to its
amendment,
4:0
.<\'Plll'lME COVllT REPORT•
[1966] SUPP. 8.C.11.
HELD: (pe!' Wanchoo and Sikri, JJ.): Considering the terms of
A
the family trust deed as a whole, the shares transferred to the t~
tt:es were not held for the benefit of the three minor children as on
?v..~rch 31, 1958 and March 31, 1959 within the mean'ng of s. 4(l)(a)
(m) and could not therefore be included in the n<!tt wealth of the
assessce. [428El
By the terms of the deed, it was the charitable trust which
was entitled to the inrome of the shares in Schedules A, B and C
B
•
•
during the years before the minor children attained majority; upto
that time the children had no interest whatsoever in that income.
"'"'
It could not therefore be said that the settlement was for the immediate benefit of the minor children. r 426s-e1
/
Although the nm-obstante clause 26 purported to override the
provisions of Clauses 21 to 25, the inclusion of Clause 21 appeared
to be a typographical error. In any event even assuming that there
C
was a conflict between Clauses 21 and 26, the earlier disposition
under Clause 21 would prevail over the later directions contained
in Clause 26. Sahabzada Mohammed Kamaar Shah v. Jaadish Chandra Deo Dhabal Dco (1960) 3 S.C.R. 604, 611. and Ramkishore Lal v.
Kamal Narain (1963) Supp. 2 S.C.R. 417, 425; referred to. f427B-C]
(per Shah J. dissenting): The primary intention of the appellant as disclosed in the preamble of the family trust deed was to
make provision for his children; from the terms of the trust deed
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and particularly from reading Clauses 9 & 26 together, it was clear
that there was a vested interest 'mmediately arising in favour of
the chiidren on the execution of the instrument. and that they were
the real beneficiaries.
The High Court had therefore rightly held that the shares transferred to the family Trust were for the immediate benefit of the settlor's minor children within the meaning of Section 4(1)(a)(iii) and
were liable to be included in the computation of wealth of the
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aj)pellant. [435C-El
(By the Court): The words "1mmed'ate 0r deferred" introduced
into Sect:on 4(l)(a)(iii) by Act 1946 of 1964 were not merely dedara.-
""'
tory. The amendment made a deliberate change. The word 'benefii·
must therefore be construed apart from the amendments and in the
context meant "for the immediate benefit of the individual or his
wife or minor child". [422C, Dl
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1133 and
IP
llJ4 of 1965.
'>
Appeal by special leave from the judgment and order dated
cNovember 18, 1964 of the Mysore High Court in T. R. C. No. 4
"'
of 1964.
R. Venkataram and R. Gopalakris/111a11, for the appellant.
S. V. Gupre, Solicicor-Generol,
R. Ganapathy Iyer,
R. H.
G
Dhcbar and R. N. Sachthey, for the respondent.
The Judgment of WAf'<CHOO anti SIKRI JJ. was delivered by
SlKRJ J. SHAH J. delivered a dissenting Opinion.
Sikri, J. These appeals by special leave are directed against
the judgment of the Mysore High Court in a reference under s.
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27(1) of the Wealth Tax Act (27 of 19571---hereinafter referred to as the Act--answering the question "whether the sums of
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YEBR'l'l'A>T 1'.\0 t•. t'OMMR. \V
TAX \81kri, ,J,)
421
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Rs. 4,30,684 and Rs. 4,13',353 being the value of the shares transferred by the assessee to the Sandur Ruler's Family (Second) Trust
could be included in the net wealth of the assessee for the assessment
years 1958-59 and 1959-60 under the provisions of Section 4(l)(a)
(iii) of the Wealth Tax Act" in favour of the Revenue.
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The question arose in the following circumstances: The ap·
pellant. His Highness Y eshwant Rao Ghorpade, hereinafter referred to as the assessee, held 12,750 shares in Sandur Manganese &
Iron Ores Ltd. on March 31, 1957. On August 24, 1957, he created
two Trusts; one may be called the Charitable Trust and the other
the Sandur Rulers Family (Second) TrustJ-may hereinafter be
referred to as the Second Trust. The assessee transferred some
shares to the Second Trust under conditions contained in the Trust
Deed. The Wealth Tax Officer and the Appellate Assistant Commissioner, in computing the net wealth of the assessee on March
31, 1958, and March 31, 1959, the valuation dates respectively for
the assessment years 1958-59 and 1959-60, included the value of
these shares held by the Trustees under the Second Trust. On
appeal, the Appellate Tribunal reversed the decisions of the authorities below and came to the conclusion that the value of the
shares could not be taken into consideration in computing the net
wealth of the assessee. The Tribunal, however, at the instance of
the Department referred the question of law already set out above
for the opinion of the High Court. The High Court, as mentioned
earlier, answered the question against the assessee. The assessee
having obtained special leave, the appeals are now before us.
The short question that arises is whether the shares in question
held by the Trustees under the Second Trust are held for the
benefit of the three minor children mentioned in the Second Trust
deed. The answer to this question depends, first, on the interpretation of the words "for the benefit of. ........ minor child" in s. 4(1)
(a)(iii) of the Act, and secondly, on whether on the true interpreta·
tion of the Second Trust, these assets are held for the benefit of
the minor children. Section 4(!)(a)(iii) reads as follows:
"4. ([) In computing the net wealth of an individual, there shall be included, as belonging to him ..... .
(a) the value of assets which on the valuation date are
held.
(iii) by a person or association of persons to whom
such assets have been transferred by the individual otherwise than for adequate consideration for the benefit of
the individual or his wife or minor child or".
The learned Solicitor-General, Mr. Gupte, on behalf of the
Revenue, contends that the word "benefit" in this section means
the immediate or deferred benefit. He says that the amendment of
the section made by the Wealth Tax (Amendment)
Act,
1964
(46 of 1964), which came into force on April J, 1965, is in
422
[\9~6j Rl"PP. 'C.R.
effect declaratory. Sectinn 4 of the Amending Act substituted a
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new clause for the clause set out above. The new clause is:
"(iii) by a person or association of persons to whom
such
asocts have been transferred by the individual
otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her
spouse or minor child !not being " married daughterl or
both. or".
We are unable to regard the new amendment as declaratory. The
amendment makes a deliberate change and the addition of the
words "the immediate or deferred ben~fll" before the words "of
the individual", apart fwm other changes, cannot be called a mere
declaratory legislation. and we must construe lhe word 'benefit'
apart from the amendments made by Act 46 of 1964.
It seems to us that the word 'benefit' in the context means for
the immediate benefit of the individual or his wife or minor child.
If a property is transferred to Trustees to hold in trust for the life
of A and then for B. we cannot hold that the property is held for
the benefit of B. during the life rime of A. As will appear later,
under the Second Trust. the Trustees hold the trust properly for
the benefit of the Charitable Trust for a number of years before
they start holding it for the benefit of the minor children. It is
difficull to say that while the property is being held for the benefit
of the Charitable Trust. it is also heini: held for the benefit of the
minor children.
Coming to the second point. namely, whether the trust pro·
perty is held for the benefit of the minor children within s. 4(!)(a)
liii), it is necessary to carefully consider the terms of the Second
Trust Deed, because the High Court has differed from the interpretation placed upon it by the Income Tax Appellate Tribunal.
It is common grouncl that the Trust Deed 111m1 be considered
as a whole. The preamble to the deed reads as follows:
"This Deed of Settlement and Trust is made this
24th day of August 1957 between His Highness Maharaj
Shri Yeshwant Rao Hindu Rao Ghorpade, Ruler of
Sandur. now residing at Sandur House, Palace Road.
Bangalore, hereinafter called the SETTLOR, of the one
part, and
His Highness Maharaj Shri Ye.shwant Rao
Hindu Rao Ghorpade. Ruler ,,f Sandur. and
C~otain
Sardar Dattaji Rao Chander Rao Ranavare. both of
whom are hereinafter collectively called the TRUSTEES. of the other part:
Whereas the SETTLOR is absolutely entitled to the
shares. set out and described in Schedules A.Band Chereto as sole and absolute owner thereof;
Whereas the SETTLOR had been and is desirous of
making a settlement on his two minor sons namely.
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YE81IWANT RAO v. COMMR. W, TAX (Sikri, J.)
423
Rajkumar
Shri
Shivarao Yeshwantrao Ghorpade,
aged 16 years and Rajkumar Shri Venkatrao Yeshwantrao
Ghorpade, aged 6 years hereinafter referred to as the
First and the Second Beneficiary and on his minor
daughter Rajkumari Shri Vijayadevi Yeshwantrao Ghorpade, aged I 0 years, hereinafter referred to as the Third
Beneficiary, out of natural love and affection towards
them of the shares set out in Schedules A, B and C hereto respectively, and with a view to make provision for
them;
Whereas the SETTLOR intends and desires to give
to his aforesaid minor sons and minor daughter, from
time to time, further shares or other assets, with the intention that such further shares or other assets be given,
should be held in
Trust for the said minor sons and
minor daughter in the manner in which they have respectively taken the shares set out and described in Schedules A, B and C hereto, as if the further shares or other
assets had formed part of the said Schedules."
It is not necessary to set out the last para in the preamble. The
learned Solicitor-General attaches importance to the recitals in
the preamble, but, in our view, the recitals do not assist us in·
any manner. There is no doubt that the intention of the settlor
was to make a settlement on his minor children, but the whole
question which arises in this case is whether the settlement made
by him is for the benefit of the minor children within s. 4(1)(a)(iii).
The word "settlement' is neutral, and the question is what has been
settled on the minor children. But there is no doubt that the
assessee out of natural love and affection for his minor children
created the Trust in question, and that the minor children are the
beneficiaries under the Trust.
Clauses I, 2 and 3 of the Trust Deed grant, transfer and convey the shares mentioned in the Schedules A, B and C to the
Trustees. Clause I deals with the shares settled for the ultimate
benefit of the first beneficiary; clause 2 deals with the shares
settled for the ultimate benefit of the second beneficiary, and clause
3 deals with the shares settled for the ultimate benefit of the third
beneficiary. These clauses are couched in the same language and
it is only necessary to set out clause 1, which is in the following
terms:
"The Settlor doth hereby grant, transfer and convey
upto the Trustees the shares set out and described in
Schedule A hereto, to have and to hold the same in Trust,
both as to the corpus and income therefrom, for a period
of two years from the date of this Indenture for the beneH
fit of Shri Yeshwantrao Maharaj Charitable Trust and on
the expiry of the said period of two years. to have and
to hold the shares set out and described in Schedule A
424
SUPREmi: COURT REPORTS
(1966) SUPP. 8.C,R.
nereto in Trust both as to the corpus and income received
after the expiry or the aforesaid period of two years from
the date of this Indenture, for the benefit of Rajkumar
Shri Shivarao Yeshwantrao Ghorpade, the First Beneficiary herein, as the full absolute and beneficial owner
thereof, but subject to the tenns and conditions hereinafter set forth.
Oause I thus purports to vest the shares in the Trustees and
directs, first, that they shall hold the same in trust. both as to
corpus and income therefrom, for a period of two years from
August 24, 1957, for the benefit of the Charitable Trust, and
secondly, that on the expiry of the said period of two years to
A
B
hold the shares in trust, both as to corpus and income received. C
after the expiry of the aforesaid period of two years from August
24, 1957 for the benefit of the first beneficiary. It seems to us clear
from reading this clause in isolation from the other clauses, which
will be referred to later, that for the first two years the beneficiary
is the Charitable Trust and not the Rajkumar, the first beneficiary.
For the first two years there is an express direction that the corpus
and the income should be held for the benefit of the Charitable
Trust. There was some discussion as to why both the corpus and
income are mentioned. The word "income" has been defined in
clause 31 of the Deed as follows :
"Jn these presents. the expression 'income' with
reference to any Beneficiary shall mean the income
derived from the shares set out and described in the Schedule appropriate to such beneficiary and any income that
may be derived from the investment of such income including any income that may be derived from any further
shares or other assets that may be transferred either by
the Settlor or by any other persons for the benefit of any
such beneficiary, including bonus shares, if any."
It appears to us that in view of this definition it was perhaps necessary to mention the word "income" in Clause I because the idea
of the settlor was that income accruing in the first year should be
invested and further returns secured from it. But it
is manifest
that the Rajkumar, the first beneficiary, had no interest whatsoever
in the income accruing during the first two years from the trust
properties. It is true that clause I does not direct that the income
during the first two years should be handed over to the charitable
Trust, but this is made clear in clause 21. which we shall presently
consider.
The next relevant clause is clause 9 which reads as under:
"This Settlement and Trust is herebv declared to be
irrevocable and shall take effect immediately and all trusts.
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settlements and interests granted or created by these
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presents shall vest in the respective Beneficiaries imme·
diately."
YESilWA!;T RAO ?). COMMR. W. TAX (Sikri, J.)
425
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, Mr. Gupte relied on this clause to show that the interest of
..
the n1inor children was a vested interest and not a contingent in~
terest. Assuming that it is so, it still does not assist us in answering
the question which we have posed above. Assuming the interest
to be vested we stiU have to consider whether the Trustees hold
the shares for the benefit of the minor children as on the valuation
B
dates, i.e., March 31, 1958 and March 31, 1959.
Clause 21 to which reference was made a short while ago,
and the provisos thereto, are as follows. We may mention that
the High Court thought that the provisos were irrelevant but in
our view they throw a great deal of light on the question before
us.
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"21. The Trustees may, in their absolute discretion,
accumulate the income accruing under this settlement to
the benefit of Shri Yeshwantrao Maharaj Charitable Trust
for a period of two years from the date of this Indenture
as respects the shares set out and described in Schedule
A hereto and for a period of twelve years from the date
of this Indenture as respects the shares set out and desD
crihed in Schedule B hereto and for a period of eight
years from the date of this Indenture as respects the
shares set out and described in Schedule C hereto.
Provided that:
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(a) The Trustees may, at any time and from time to
time, during the aforesaid period of two years from the
date of this Indenture, pay to the 'Trustees of Sliri
Yeshwantrao Maharaj Charitable Trust the whole or any
part of the income accruing under this settlement in respect of shares set out and described in Schedule A hereto,
during the said period of two years as the Trustees may,
from time to time, deem fit and on the expiry of the said
period of two years, the Trustees shall pay over to the
Trustees of the said Shri Yeshwantrao Maharaj Charitable Trust the whole or the balance of the said income as
the case may be, and thereupon the Trustees shalli stand
discharged of all their obligations to the aforesaid Charitable Trust and thereafter the said Charitable Trust shall
have no right or claim whatsoever either to the income or
the corpus of the said shares set out and described in
Schedule A hereto."
Provisos (b) and (c) are in similar terms and deal with the
shares set out in Schedule B and Schedule C, respectively, the
only difference being about the period during which the income
accruing could be paid to the Charitable Trust and the period
after which the Trustees were under an obligation to pay to the
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Charitable Trust the whole or the balance of the said income.
It seems to us quite clear from clause 21 that the intention of
the settlor was that the income from the shares mentioned in
426
SUl'llltHE OOURT REPORTS
(1966) SUPP. B.C.R.
Schedule A s~ould be either paid over to the Charitable Trust A
durmg the penod of two years, or if it is not paid over during the
two years, it should be paid over to the Charitable Trust on the
expiry of the said two years.
Now reading clause I and clause 21 with proviso (al it seems
to us that it is the charitable trust which is entitled to the income
of the shares in Schedule A during the first two years. Reading
clause 2 and clause 21 with proviso (bl it is equally clear that it is
the charitable trust which is entitled to the income from the shares
set out in Schedule B for a period of 12 years. Further it is manifest that reading clause 3 and clause 21 with proviso (c) it is the
charitable trust which is entitled to the income from the shares set
out in Schedule C during the first eight years. During these periods
the first, second and third beneficiary had no interest whatsoever
in that income.
The learned Solicitor-General says that this may be so if we
only consider clauses upto 21, but if we consider clauses 22, 23, 24,
25 and 26, they override the intention manifested uptil now.
Clauses 22, 23 and 24 enabl'e the Trustees to accumulate the income
accruing under the settlement to the first, second and the third
beneficiary respectively till July 31. 1975. We may only set out
clause 22 which deals with the first beneficiary. Clause 22 reads as
follows:
"The Trustees may in their absorute discretidn accumulate the income accruing under this Settlement and
Trust to the First Beneficiary herein until the 31st July
1975 and on the aforesaid date shall make over to him all
the Trust funds in the possession of the Trustees as may
belong to the said Beneficiary."
In our view, clause 22 enables the Trustees to accumulate only
the income accruing to the first beneficiary; does not say what income accrues to the first beneficiary. For that we have to look to
the other clauses. It is only under the latter part of clause I of the
Trust Deed that income accrues to the first beneficiary. Clause 25
deals with the eventuality of the first, second or the third beneficiary dying before July 31, 1975. It does not r~al~y throw much
light on the question. The next clause, clause 26, 1s important, and
Mr. Gupte strongly relies on this clause. This clause reads as
foUCIWs:
"Notwithstanding anything contained in clause 21 to
25 supra, the Trustees shall have full power during the
currency of this Settlement and Trust to expend from out
of the income accruing under this Settlement to each of
the Beneficiaries herein such amount as the Trustees may
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in their discretion deem fit for the maintenance, education,
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health, marriage and advancement of each of the Beneficiaries herein."
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Yl<SIIWAN1' RAO ·11. COMMR. W. TAX (Sikri, J.)
427
Mr. Gupte says that this clause shows that all the previous clauses
are a smoke-screen to enable the Trustees to spend the money for
the benefit of the beneficiaries even during the aforementioned
periods of 2, 12 and 8 years, and he says that the non-obstanle
clause overrides everything contained in clauses 21 to 25. There is
no doubt that clause 21 is mentioned in the non-obstante clause,
but we agree with Mr. Venkataraman, the learned counsel for the
assessee, that the mention of clause 21 seems to be a typographical
mistake, for the meaning of the clause is quite clear that the
Trustees cannot under this clause expend from out of the income
accruing under the settlement to the charitable trust for their power
to spend is limited to the income accruing under the settlement to
each of the beneficiaries, and as we have mentioned before while
dealing with clause 21, the only income that accrues to the three
beneficiaries under the settlement is after it ceases to be accumulated for or given to the Charitable Trust. If we were to acoept Mr.
Gupte's argument we would have to omit the word8 "to each of the
Beneficiaries herein" occurring in the clause. Mr. Gupte contends
that the word 'beneficiary' would include the Charitable Trust.
We are unable to agree because the latter portion of the clause
deals with education, marriage, etc., and these can have reference
only to the first, second and the third beneficiary, i.e .. his minor
chi.,dren. Mr. Gupte urges that it would be natural on the part of
the settlor to provide for the maintenance, education, health,
marriage and advancement of each of the beneficiaries during
their minority, and it would be unnatural to attribute intention to
him to leave them without any means of sustenance during their
minority. There is no force in this contention. The settlor may well
have through! that he would look after the minor children during
their minority, and what he wanted to provide was for their expenses after they had attained the age of about 18. It would be
recalled that the effect of the earlier provisions is that income
starts accruing under the settlement to each of the minor children
when they reached the age of about 18. We are accordingly of the
opinion that clause 26 does not cut down the interest which had
been settled on the Charitable Trust.
We may mention that in this connection Mr. Venkataraman
drew our attention to the rule of construction laid down by this
Court in Sahabzada Mohammed Kamgar Shah v. Jagdish Chandra
Deo Dhabal Deo (') and Ramkishore Lal v. Kamal Narain. (') In
the latter case Das Gupta, J., speaking for the Court, observed as
follows:
"Sometimes it happens in the case of documents as
regards disposition of properties, whether they are testamentary or non-testamentary instruments, that there is a
clear conflict between what is said in one part of the document and in another. A familiar instance of this is where
in an earlier part of the document some property is given
(') [1960] 3 S.C.R. 601, 611.
I') [1963,J Supp. 2 S.C.R. 417, 426.
·12l
SUPREME COURT REPORTS
[1966] SUPP. S.C.R.
absolutely to one person but later on other directions about
the same property are given which conflict with and take
away from the absolute title given in the earlier portion.
What is to be done where this happens? It is well settled
that in case of such a conflict the earlier disposition of
absolute title should prevail and the later directions of
disposition should be disregarded as unsuccessful attempts
to restrict the title already given. (See Sahabzada Mohd.
Kamgar Shah v. Jagdish Chandra Dea Dhabal Dea(')
It is clear, however, that an attempt should always be made
to read the two parts of the document harmoniously, if
possible. It is only when this is not possible, e.g .. where
an absolute title is given is in clear and unambiguous
terms and the later provisions trench on the same, that
the later provisions have to be held lo be void."
In our opinion these observations would apply to the facts of
this case if it is held that there is contlict between clauses I and 21
on the one hand and clause 26 on the other. But, m our view, all
these clauses can be read harmoniously by holding that the mention
of clause 21 in clause 26 is a typographical mistake, and clause 26
deals only with the income which accrues to the first, second and
third beneficiary after the interest of the Charitable Trust has
ceased.
In conclusion we hold that considering the document as a
whole the shares were not held for the benefit of the three minor
children as on March 31. 1958 and March 31, 1959. Accordingly
A
B
D
the answer to the question referred by the Appellate Tribunal and
E
set out above must be against the Revenue.
The appeals are accordingly allowed, judgment of the High
Court set aside and the question referred to the High Court answered in the negative. The assesscc will be entitled to costs here and in
the High Court. One hearing fee.
Shah, J. The High Court of Mysore answered the following
F
question referred under" 27(1) of the Wealth Tax Act 27 of 1957 ·
in the affirmative:
"Whether the sums of Rs. 4,30,684 and Rs. 4, 13,353
being the value of the shares transferred by the assessee
to the Sandur Ruler's Family (Second) Trust could be included in the net wealth of the assessee for the assessment
years 1958-59 and 1959-60 under the provisions of s.
G
4(1)(a)(iii) of the Wealth Tax Act?"
The Wealth Tax Bill was moved before the Parliament on
May 15, 1957, and was enacted as law after receiving the assent of
the President on September 12, 1957. The two trust deeds which
fall to be construed in these appeals were executed on August 24,
1957. The object of the settlor of the two deeds of trust was to
- -·------- -----------------
(') [1900] 3 S.C.R. 6C'4, 611.
II
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E
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YESH\VANT RAO v. CO>U!R. W. TAX (Shah, J.)
429
evade the charge of wealth tax on the properties covered thereby.
It was so found by the High Court, and that was not denied' before
us. But it is open to a taxpayer to so order his affairs that incidence of tax may lawfully be avaided. Attempts at evading incidence of taxation though not commendable are not illegal. In each
case the Court must take the taxing statute as it stands, subject to
all its imperfections: If a transaction does not fairly fall within the
letter of the law, the Court will not seek to put a strained construction to bring it within the law. The Court will not also stretch a
point in favour of the taxpayer to enable him to get by his astuteness the benefit which other taxpayers do not obtain.
The two trust deeds were executed on August 24, 1957. One is
a trust deed styed "Shri Yeshwant Rao Maharaj Charitable Trust"
-hereinafter called 'the Charitable Trust'-and the other is styled
"The Sandur Ruler's Family (Second) Trust"-hereinafter called
'the Family Trust'. Of both these Trusts, Yeshwant Rao Ghorpade,
Ruler of Sandur, is the settler and the trustees are the settlor and
Captain Sardar Dattaji Rao Chender Rao Ranavare. Under the
Charitable Trust the income and all the assets of the Trust funds
are liable to be utilised for advancement of knowledge, education.
health, safety or any other object of general public utility or beneficial to mankind. The settlor is to be the Chairman of the Board
of Trustees during his lifetime and he has power to fill up the
vacancy in the office of a trustee. In case of his death, the Ruler
of Sandur for the time being, is entitled to fill the vacancy of the
office of trustee. Under this deed no property is settled for the Trust.
By cl. 3 the assets and the funds of the Trust are to be such sums
as the Founder Trustees may contribute or in any manner provide
to the Trust. such sums or assets as may be contributed, gifted or
donated by any person or company to the Trust, all interest or income arising out of the said sums and assets, all assets that may be
purchased or acquired from out of the said funds or otherwise acquired for the Trust, all investments and realisations therefrom out
of the said funds, and assets, and all sums and assets which have by
any means become the property of the Trust. By cl. 4 the trustees
are authorised to accept any donation or other sums of money or
other assets from any person or campany subject to any special conditions as may be agreed upon, but not so as to be inconsistent with
the intent and purposes of the Trust.
Simultaneously with the Charitable Trust, the Family Trust was
executed. Initially the settlement was to operate in respect of 30
ordinary shares of the Sandur Manganese and Iron Ores (Private)
Ltd., ten shares described in Sch. A to be held in trust for the benefit of Rajkumar Shivarao, the First Beneficiary, ten shares described
in Sch. B to be held in trust for the benefit of Rajkumar Venkatrao.
the Second Beneficiary and the remaining ten shares described in
Sch. C to be held in trust for the benefit of Rajkumari Vijayadevi,
the Third Beneficiary. By paragraph-2 of the preamble it is declared that the settlor was desirous of making a settlement "on his
SUl'RBliE COURT REPORTS
(1966] SUPP. s.c.I\.
two minor sons, namely Rajkumar Shri Shivarao Ycshwantrao
A
Ghorpade, aged
16 years, and Rajkumar Shri Venkatrao
Yeshwantrao Ghorpade, aged 6 years ..................... and on his
minor daughter Rajkumari Shri Vijayadevi Yeshwantrao Ghorpade,
aged 10 years, ..................... out of natural love and affection
towards them ........................... and with a view to make provision for them", and by the third paragraph of the preamble it
B
was declared that the settlor intended and desired to give to bis
minor sons and daughter from time to time further shares or other
assets, with the intention that such further shares or other assets
should be held in trust for the minor sons and daughter to be taken
by them as set out and described in Schedules A, B & C, as if such
shares or other assets had formed part of the said Schedules. The
primary intention disclosed by the preamble of the deed of trust c
was that the settlor settled properties described in Schedules A, B
& C and declared his intention to settle other properties in future
with the object of making provision for his three named children.
The quantum of the estate settled must undoubtedly be determined
by the habendum clause, but the preamble may in case of ambiguity be resorted to for ascertaining the object of the deed and the
intention of the executant. By the first clause the settlor conveyed
D
to the trustees the shares described in Sch. A, and to hold the same
in trust "both as to the corpus and income therefrom for a period
of two years from the date of this Indenture for the benefit of" the
Charitable Trust "and on the expiry of the said period of two
years, to have and to hold the shares set out and described in Schedule A ............... in Trust both as to the corpus and income received after the expiry of the ............ period of two years . .. .. . .. .
E
for the benefit of" the First Beneficiary "as the full, absolute and
beneficial owner thereof, but subject to the terms and conditions
hereinafter setforth". Similarly the shares described in Sch. B were
conveyed for twelve years for the benefit of the Charitable Trust
and thereafter for the benefit of the Second Beneficiary, and by cl.
3 the scttlor conveyed the shares described in Sch. C for a period
of eight years for the benefit of the Charitable Trust and thereafter
F
to the Third Beneficiary. By cl. 4 it is declared that other shares or
assets given to all or any of the beneficiaries and transferred to the
trustees will be held in trust for all or any of the beneficiaries as
may in accordance with the settlement and trust be specified, and
subject to the same limitatioos, interests and conditions as relate to
the shares specified in Schedules A. B & C, as if those other shares
or assets so transferred had formed part of the Schedule A, B & C
G
as may be specified by the settlor or such other person. Clause 31
ot the deed of trust defines the expression "income" with reference
to any beneficiary ~s meaning income deri~ed from the shares. set
oot and described in the Schedule appropnate to such beneficiary
and any income that ~ay be derived from t~e investment of such
income including any mcome that may be derived from any further
B
shares or other assets that may be transferred for the benefit of any
such beneficiary.
•
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YESliWANT RAO v. COM!.IR. W. TAX (Shah, J.)
431
The scheme of els. 1, 2, 3 & 4 of the Family Trust may first
be examined. The shares initially settled and any other shares or
assets subsequently settled for the benefit of the beneficiaries or any
of them are by cl. 4 to be dealt with as if they formed part of the
three Schedules. The Charitable Trust is to obtain the benefit of
the property in Schs. A, B & C both as to the corpus and income<,
approximately for the periods during which the three beneficiaries
do not attain their respective ages of eighteen years, and income
therefrom is to be held for the benefit of the Charitable Trust and
on the expiry of the periods mentioned, the shares and the assets
are to be held in trust both as to the corpus and income therefrom
for the benefit of the First, Second or the Third Beneficiary. The
scheme devised by the seHlor is that during the minority of each
beneficiary the property in Schedules A, B & C qua each beneficiary is to remain vested in the trustees for the benefit o~ the Charitable Trust, and after expiry of the peridd specified the corpus and
income is to be held for the full, absolute and beneficial ownership
of the respective beneficiaries. By els. 6, 7 & 8 provision is made
for appointment of trustees. It may suffice to mention that the settlor
during his lifetime is to be the trustee and has in case of vacancy
power to appoint new trustee by writing or by will, and by cl. 10
the custody of the Trust assets and every portion thereof is to
remain with the settlor and the trustees have full power to alter the
investments in their absolute discretion. Clause 9 reads as follows:
"This Settlement and Trust is hereby declared to be
irrevocable and shall take effect immediately and all
trusts, settlements and interests granted or created by these
presents shall vest in the respective beneficiaries immediately."
It is not clear whether in cl. 9 the charity is intended td be designated as a beneficiary. From the Schedules and els. 1, 2 & 3 it appears
that the beneficiaries were to be the three children of the settlor.
F
Even granting that charity was intended to be a beneficiary within
the meaning of cl. 9, the instrument vests the interests granted or
created in the respective beneficiaries immediately on execution,
and therefore the interest which enures to the three children of the
settlor under the instrument vests in them immediately. By cl. 21
it is directed that the trustees may, in their absolute discretion,
accumulate the income accruing under the settlement for the benefit
G
of the Charitable Trust for a period of two years from the date of
the indenture as respects the shares set out and described. in Sch.
A, for a period of twelve years as respects the shares set out and
described in Sch. B and for a period of eight years as respects the
shares set out and described in Sch. C. The direction is not
obligatory, but permissive. By the first proviso the trustees are
H
authorised to pay at any time, and from time to time, during the
period of two years, to the trustees of the charity the whole or any
part of the income accruing under the settlement in respect of shares
432
8t:PREME COURT UEPORTS
(1966) SUPP. S.C.R.
set out in Sch. A, and on the expiry of the said period the trustees
are enjoined to pay Gvcr to the trustees of the charity the whole or
the balance of the income as the case may be, and thereupon the
trustees stand discharged of all their obligations to the charity.
Similar provision is made by provisos (b) & (c) with regard to payment of income from the shares during the period CJf twelve years
in respect of shares set <lUt in Sch. B and during the period of eight
years in respect of shares described in Sch. C. Prima facie this may
indicate that the income to be received from the shares is to be
applied for the benefit of charity in respect of the shares set out in
Schedules A, B & C during the specified periods and that the children of the settlor are not to have any interest in that income. By
els. 22. 23 and 24 an ab.,olute discretion is conferred upon the trustees to accumulate the income until July 31. 1975 in respect of the
shares mentioned in each of the Schedules and on the expiry of that
period to make over to the Trust funds as may belong to the beneficiaries. This is clearlv intended to maintain the control of the
settlor over the proper.tics settled in trust till July 31. 1975. By cl.
25 it is directed that the trustees shall have control over the trust
funds and the income.