JAGADISAN J.

This is a reference under section 66(1) of the Indian Income-tax Act, and the point in issue between the department and the assessee is as regards the scope and applicability of section 16(1)(c) of the Act to the facts and circumstances of the case. The question that stands referred is

"Whether the sums of Rs. 2, 52, 350 and Rs. 2, 78, 222 representing the gross amounts of dividend on the shares transferred by the assessee to the Thiagarajar Educational Trust were correctly included in the computation of income for the assessment for the years 1957-58 and 1958-59, having regard to the third proviso to clause (c) of sub-section (1) of section 16 of the Income-tax Act ?" *

The assessee is an individual deriving income from salary, property, business and dividends as a shareholder in various limited companies. A public charitable trust called the Thiagarajar Educational Trust was constituted on April 29, 1956, by the assessee along with his brother, Sundaram Chettiar, and his father, Karumuthu Thiagaraja Chettiar. These founders of the trust were themselves to be trustees of the institution. At the inception they transferred the shares held by each of them in S