Judgment

GROVER, J.: This is an appeal by special leave from a judgment of the Calcutta High Court answering the following question of law referred to it against the assessee and in favour of the Revenue:

"Whether on the facts and in the circumstances of the case, the entire or any part of the income from the house properties concerned could be included in the total income of the assessee by virtue of the provisions of S. 16 (1) (c) of the Income-tax Act, 1922 read with the first proviso thereto?"

2. The assessee was assessed in the status of an individual. He derived income from house properties and from the business of a registered partnership firm H. Ganguly& Co. He had six houses one of which was 24, Mohanlal Street, Calcutta and the other at Jangambari in the city of Banaras. On March 19, 1953 the assessee created a trust in respect of these two houses. It was provided in the trust deed that the trustees shall pay a sum of Rs. 200/- per month to the settlor, for life for his own absolute use and benefit out of the income of the trust estate remaining after payment of taxes; rents etc. In other words he himself was one of the beneficiaries.

3. The Income-tax Officer held that the income from the aforesaid two properties was assessable in the hands of the assessee inasmuch as he had retained a portion of the income from the trust properties for himself. The trust had, therefore, become revocable under the provisions of S. 16 (1) (c) of the Income-tax Act 1922, hereinafter called the Act . The appellate Assistant Commissioner on appeal affirmed the view taken by the Income-tax Officer; When the matter came before the Appellate Tribunal it found that the assessee had irrevocably parted with the aforesaid two properties and the same had got vested in the trust. It was held that S. 16 (1). (c) would become applicable only if the settlor reserved to himself the entire income arising from the settled properties; if only a portion had been reserved by the settlor it would not make the settlement revocable it is not disputed that the total annual income from these properties came to over Rs. 19,000. Out of this the assessee, who was the settlor, was entitled to Rs. 2,400/- annually. According to the Tribunal only the amount of Rs. 2,400/- which had actually been received by the assessee under the terms of the trust deed could be included in his income.

4. The view of the High Court was that in order to be revocable under the first proviso to S. 16 (1) (c) it is sufficient if the settlement, disposition or transfer contains a provision for retransfer of a part of the income to the settlor, dispenser or transferor. It is not necessary that there must be a provision for the retransfer of the entire income. The word "income" includes any part of the income unless there is anything repugnant in the context. The High Court considered that the third proviso to S. 16 (1) (c) did not explain the first proviso but was a kind of rider of exception to it. Bearing in mind the object behind the enactment of S. 16 and on a consideration of the terms of the section the true meaning and scope of the first proviso seemed to be that the settlement in the present case was revocable in its entirety thus attracting the substantive clause of S. 16 (1) (c).

5. Clause (c) was introduced in S. 16 (1) in the year 1939. At the material time s. 16 (1) stood thus:

"S. 16 (1) In computing the total income of an assessee

(a) . . . . . . . . . . . . .

(b) . . . . . . . . . . . . .

(c) all income arising to any person by virtue of a settlement or disposition whether revocable or not, and whether effected before or after the commencement of the Indian Income tax (Amendment) Act 1939 from assets remaining the property of the settlor or dispenser, shall be deemed to be income of the settlor or disponer and all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income of the transferor:

Provided that for the purposes of this clause a