Judgement

R. S. PATHAK, J. :- These appeals have been preferred by the Revenue against the common judgment of the High Court of Andhra Pradesh answering the following questions in favour of the assessee :

" (1) Whether, on the facts and in the circumstances of the case, the incomes arising from the Reserve Fund and the Expenses Account of the Nizams Family Trust Deed dated 10-5-1950 can be aggregated in a single assessment for each of the assessment years 1960-61 to 1965-66?

(2) If the answer to the above question is in the affirmative, whether the assessments made under S. 148 of the Act for the assessment years 1960-61 and 1961-62 were legal and valid?"

2. By a Deed of Trust dated May 10, 1950 the Nizam of Hyderabad created a Family Trust. A corpus of nine crores in Government securities was transferred to the trustees under that Deed. The corpus was notionally divided into 175 equal units. Five units were to constitute a fund called the Reserve Fund, and 31/2 units were to constitute the "Family Trust Expenses Account". The remaining 1661/2 units were allotted to the relatives mentioned in the Schedule in the manner provided therein, the number of units allocated to each individual relative being specified there.

3. Two clauses of the Trust Deed hold the center of the stage in these appeals. Clause 6 creates a Reserve Fund comprising five equal units of the corpus of the Trust Fund. The trustees hold the Reserve Fund upon trust to apply the income or corpus thereof for any special, unusual, unforeseen or emergency expenses for the benefit of the members of the Settlors family specified in the Schedule. Additionally, if the income of the Family Trust Expenses Account is insufficient to meet the charges of collection of the income of the Trust Fund and the remuneration of the trustees and of the Committee of Management and the other costs, charges, expenses and outgoings relating to the Trust, the trustees are enjoined to make good such deficit out of the income or corpus of the Reserve Fund, and for that purpose they may transfer to the Family Trust Expenses Account such sums as may be required. It is further provided that on the death of any of the Settlors relatives specified in the Schedule the trustees must set apart out of the Reserve Fund a certain portion calculated in accordance with the directions contained in the clause and to add such portion to the units of the corpus of the Trust Fund allocated to the member specified in the Schedule and to amalgamate the same, and to hold it upon the same trusts as those hereinafter declared and contained of and concerning the unit or units of the corpus of the Trust Fund allocated to such relative of the settlor as aforesaid.

4. Clause 7 directs the trustees to hold 31/2 equal units of the corpus of the Trust Fund allocated to the Family Trust Expenses Account, and to apply the net income of that Fund to the charges for the collection of the income of the Trust Fund and the remuneration of the trustees and of the members of the Committee of Management and to other costs, charges, expenses and outgoings relating to the Trust. There is a further provision. After all the other Trusts constituted under the Deed have been fully administered and carried out and the corpuses of all such units have been handed over and transferred to the ultimate respective beneficiaries the trustees are enjoined to transfer and hand over the 31/2 units comprising the Family Trust Expenses Account to the Settlors successor who may be described as the Nizam or by any other title or rank or designation, and failing such person, to the eldest male descendant in the direct male line of succession of the Settlor according to the rule of primogeniture.

5. For the assessment year 1959-60 and the assessment years prior thereto the incomes accruing to the Reserve Fund and the Family Trust Expenses Account were aggregated in a single assessment made on the trustees of the Nizams Family Trust. But thereafter the asses