New Delhi: JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1856-61 of 1974 etc.

From the Judgment and order dated 16.1.1974 of the Andhra Pradesh High Court in Case Referred No 2 of 1977 V.S. Desai, Ms. A. Subhashini and B.B. Ahuja for the Appellant.

Y.Ratnakar and D.N. Misra for the Respondent.

The Judgment of the Court was delivered by 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 Nizam's Family Trust Deed dated s 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 section 148 of the Act for the assessment years 1960-61 and 1961-62 were legal and valid " 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 3 1/2 units were to constitute the 'Family Trust Expenses Account". The remaining 166 1/2 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.

Two clauses of the Trust Deed hold the centre of the stage in 976 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 Settlor's family specified in the Schedule.

Additionally, if the income of the Family Trust Expenses Account is insufficiently 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, charged, 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...

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