Judgement Appeal (No. 33 of 1944), by special leave, from a judgment and order of the High Court (September 15, 1941) on a reference by the Commissioner of Income-tax, Madras, on the requisition of the appellant, under s. 66, sub-s. 2, of the Indian Income-tax Act, 1922, of the following question of law, Law. Rep. 72 Ind. App. 141 ( 1944- 1945) Maharajah of Pithapuram v. Commnr. of Income-Tax, Madras 32 namely — "Whether the income of the year 1938-39 derived from the assets comprised in the revocable instruments of trust and settlement executed by the petitioner in favour of his four daughters on April 5, 1933, i.e., before the commencement of the Indian Income-tax (Amendment) Act, VII. of 1939, can be deemed to be income of the petitioner under revocable transfers of assets as contemplated by cl. (c) of sub-s.1 of s. 16 of the Indian Income-tax Act, XI of 1922, as amended by the Indian Income-tax (Amendment) Act, VII of 1939." The High Court (Leach C.J., Wadsworth and Patanjali Sastri JJ.) answered the question referred in the affirmative. The following facts are taken from the judgment of the Judicial Committee For the year 1939- 1940 the appellant was assessed to income-tax on a total income of Rs.2,19,640, which included a sum of Rs. The following facts are taken from the judgment of the Judicial Committee For the year 1939- 1940 the appellant was assessed to income-tax on a total income of Rs.2,19,640, which included a sum of Rs. 1,77,374, representing the total of the income arising from assets settled on his four daughters by the appellant by four deeds, all dated April 5, 1933, and all of which, subject to the necessary variation in the name of the particular beneficiary, were subject to the same conditions, namely—(i.) The properties were to be held in trust for each of his daughters by the appellant during his lifetime as trustee, and after his death by his eldest son, the Yuvarajah of Pithapuram, as trustee; (ii.) the properties were to be held in trust for each of the daughters for life and on their death, for their issue, male and female, and, in the event of any of the said daughters dying without issue, the properties were to revert to the holder for the time being of the Pithapuram estate; (iii.) the appellant reserved to himself the full power to revoke the settlement or make any fresh disposition he liked; (iv.) the trustee for the time being had the right to convert (into money) the properties described in the schedules and invest the same in any of the recognised securities under the Indian Trust Act; and (v.) so long as the appellant was the trustee he had the absolute and uncontrolled discretion to invest the money in any kind of securities as he liked and without reference to the provisions of the Trust Act. In each year of assessment up to, and including, the year 1938- 1939 the income arising from the properties settled on each of the daughters was assessed separately in the name of each, though the assessment was made on the appellant as their trustee. In the assessment year 1939- 1940, the Income-tax Officer sought to apply an alteration in the law enacted by s. 18 of the Indian Income-tax (Amendment) Act, 1939 (Act VII. of 1939), which came into force on April I, 1939, by virtue of a government notification in terms of s. 1, sub-s.2, of the Act, and to treat the income of the daughters as the income of the appellant. The appellants objections to that course had so far been without success and were the subject of this appeal. of 1939), which came into force on April I, 1939, by virtue of a government notification in terms of s. 1, sub-s.2, of the Act, and to treat the income of the daughters as the income of the appellant. The appellants objections to that course had so far been without success and were the subject of this appeal. The material part of s. 18 of the Act of 1939 was as follows— "18. In s. 16 of the said Act,— "(a) for sub-ss. (1) and (2) the following sub-sections shall be substituted, namely— "(1.) In computing the total income of an assessee— "(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 disponer 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 settlement, disposition or transfer shall be deemed to Law. Rep. 72 Ind. App. 141 ( 1944- 1945) Maharajah of Pithapuram v. Commnr. of Income-Tax, Madras 33 be revocable if it contains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor, or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or assets "Provided further that the expression settlement or disposition shall for the purposes of this clause include any disposition, trust, covenant, agreement, or arrangement, and the expression settlor or disponer in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made "Provided further that this clause shall not apply to any income arising to any person by virtue of a settlement or disposition which is not revocable for a period exceeding six years or during the life-time of the person and from which income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be assessed on the said income as and when the power to revoke arises to him." 1945. Jan. 24, 25. Casswell K.C. and Mustoe for the appellant. Jan. 24, 25. Casswell K.C. and Mustoe for the appellant. The question is whether or not the High Court, in answering the question referred in the affirmative, interpreted correctly the terms of s. 16, sub-s.1 (c), of the Income-tax Act of 1922 as amended by the Act of 1939. It is not proposed to argue that these were not revocable settlements. They did not come within the purview of s. 16, being actual transfers of assets made before the passing of the Income-tax (Amendment) Act, and that Act has no application to them. Clause (c) of sub-s.1 of s. 16 is divisible into two parts, and in the first part the legislature has dealt with one type of settlement only—where the assets are not transferred. The appellant comes under the second part—" all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income of the transferor "—and not under the first part. Had the legislature desired to do so, they could have inserted in the second part the words that are in the first part—" whether effected before or after the com-" mencement of the Indian Income-tax (Amendment) Act, 1939 "—but they did not do so. The second point is that the words of the section are not retrospective; they are words of the future "shall be deemed." [Reference was made to Behari Lal Mullick v. Commissioner of Income-tax, Bengal (( 1927) 2 Ind. T. C. 328, 332.).] The effect of s. 3 of the Income-tax Act, 1922, is to charge the appellant to tax in 1939-40 in respect of only that income which formed his total income in 1938-39. Section 18 of the Income-tax (Amendment) Act, 1939, had no effect in determining what was the appellants total income for 1938-39, and, therefore, his total income for that year ought to be ascertained by reference to the relevant legislation as it stood before it was amended by that section. For income-tax purposes the income arising to the appellants daughters under the settle ments was in 1938-39 a part of the total income of the daughters and not a part of the total income of the appellant. Mustoe followed. Full weight should be given to the difference between the first and second parts of the section regarding retrospective effect in the first part only. Mustoe followed. Full weight should be given to the difference between the first and second parts of the section regarding retrospective effect in the first part only. Section 16, sub-s.1, cannot operate on income which arose before April 1, 1939. The effect of the legislation contended for by the respondent will be to impose tax on A. in respect of income which has been received by B. [Reference was made to Perry (H.M. Inspector of Taxes) v. Astor (( 1935) 19 Tax Cas. 255, 290.).] Tucker K.C. and Handoo for the respondent. In India it has been consistently held that it is the law as it exists for the year of assessment that governs the assessment for that year even though the income being assessed is that of the previous year; there appears to be no decision to the contrary Indian Finance Act, 1939, s. 6, sub-s.3; Income-tax Com- missioner v. Tehri-Garhwal State (( 1933) L. R. 61 I.A. 1). The respondent is not asking the Board to read this section with any greater retrospective effect than has to be given to the whole Act. It has to be shown that this income is caught by sub-s.1 (c). The High Court dealt with it on the footing that it came under the second part Law. Rep. 72 Ind. App. 141 ( 1944- 1945) Maharajah of Pithapuram v. Commnr. of Income-Tax, Madras 34 of the clause as a transfer of assets. The second part is wider than the first; it is sufficient that there has been a transfer of assets, namely, the beneficial interest in the property, to the beneficiaries, by virtue of which they would become entitled to the income. By virtue of the transfer income has arisen to the daughters, and the case comes exactly within the words of the second part of the section. The "instruments of trust and settlement" made by the appellant constituted revocable transfers of assets within the meaning of s.16, sub-s.1 (c), and income arose to the appellants daughters from the assets comprised in such transfers in the year ended March 31, 1939 (the previous year). The "instruments of trust and settlement" made by the appellant constituted revocable transfers of assets within the meaning of s.16, sub-s.1 (c), and income arose to the appellants daughters from the assets comprised in such transfers in the year ended March 31, 1939 (the previous year). The Indian Finance Act, 1939, and the Income-tax Act of 1922 required that the appellant should be assessed for the year 1939-40 on his total income of the year ended March 31, 1939 (the previous year), and any provisions of the Finance Act, 1939, and the 1922 Act, as amended by the Amendment Act of 1939, must be construed as a reference to the computation of the total income of the previous year. Accordingly, s. 16, sub-s. 1, must be construed as providing for the computation of the total income (for the previous year) of the appellant, and cl. (c) thereof as providing that all income arising in the previous year to the appellants daughters by virtue of the transfer of assets should be deemed to be the income of the appellant for the previous year. The omission of the words " whether " effected before or after the commencement of the Indian " Income-tax (Amendment) Act, 1939 " from the latter part of cl. (c) does not render that part inapplicable to revocable transfers of assets effected before April 1, 1939. Casswell K.C. in reply, referred to Inland Revenue Commissioners v. Clarkson-Wrebb ( 1933] 1 K. B. 507.), and to. s. 38 of the Finance Act, 1938, of this country, on the question of retrospective effect. Section 16 cannot possibly mean income which has already arisen in a previous year; shall be deemed must mean shall be deemed to have been." Feb. 26. The judgment of their Lordships was delivered by LORD THANKERTON, who stated the facts set out above and continued Before dealing with the particular grounds of appeal, their Lordships consider it desirable to make some general observations as to Indian income-tax law, which may-clear away a certain confusion of thought which would appear to affect certain of the contentions in the present case. In the first place, it is clear to their Lordships that under the express terms of s. 3 of the Indian Income-tax Act, the subject of charge is not the income of the year of assessment, but the income of the previous year. In the first place, it is clear to their Lordships that under the express terms of s. 3 of the Indian Income-tax Act, the subject of charge is not the income of the year of assessment, but the income of the previous year. This is in direct contrast to the English Income-tax Acts, under which the subject of assess ment is the income of the year of assessment, though the amount is measured by a yardstick based on previous years. The difference is well illustrated by the distinction that in England the source of income must still be extant in the year of assessment but that that is not of relevance in India. Their Lordships may refer to the able judgment of Rankin C.J. in Behari Lal Mullick v. Commissioner of Income-tax, Bengal (( 1927) 2 Ind. T. C. 329.), with which they agree. In the second place, it should be remembered that the Indian Income-tax Act, 1922, as amended from time to time, forms a code, which has no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year by a Finance Act. This may be illustrated by pointing out that there was no charge on the 1938- 1939 income either of the appellant or his daughters, nor assessment of such income, until the passing of the Indian Finance Act of 1939, which imposed the tax for 1939- 1940 on the 1938- 1939 income and authorized the present assessment. By sub-s.1 of s. 6 of the Indian Finance Act, 1939, income-tax for the year beginning on April 1, 1939, is directed to be charged at the rates specified in Part I. of Schedule II, and rates of super-tax are also provided for, and by sub-s. 3 it is provided that " for the purpose of this section " and of Schedule II., the expression total income means " total income as determined for the purposes of income-tax " or super-tax, as the case may be, in accordance with the " provisions of the Indian Income-tax Act, 1922." This can only refer to the Indian Income-tax Act, 1922, as it stood amended at the date of the Indian Finance Act, 1939, and necessarily includes the alterations made by the Amending Act, which had already come into force on April 1, 1939. Law. Rep. 72 Ind. App. Law. Rep. 72 Ind. App. 141 ( 1944- 1945) Maharajah of Pithapuram v. Commnr. of Income-Tax, Madras 35 In this view, the only question is whether the income arising from the properties settled by the four deeds under consideration falls within the terms of s. 16, sub-s.1 (c), of the Income-tax Act. The first question would naturally be whether under these four deeds the assets from which the income arose remained the property of the appellant, or whether they involved a transfer of assets, though clearly a revocable transfer. From the way in which the present case has been presented throughout, including the hearing before the Board, their Lordships find it unnecessary to consider this question or to express any view on the matter. In the question referred these deeds are regarded as involving revocable transfers of assets; in their judgment the High Court state " It is admitted, " as it must be, that the deeds executed by the assessee operate 14 to transfer the assets " (I. L. R. [ 1942] M. 93.), and, at the hearing before the Board, both parties accepted the same view. The only argument left to the appellant was to found on the express insertion of the words " whether effected before or after the " commencement " of the 1939 Amendment Act in the first category of settlements, and their absence in the latter case of revocable transfers of assets, and to seek to derive therefrom an implied exclusion in the latter case of transfers effected prior to the commencement of the Amending Act, namely, April 1, 1939. Their Lordships can find no reason to justify such an alteration of the plain words of the section, which would involve the insertion after the words " a revocable "transfer of assets" of the limiting words, "effected after the commencement of the Indian Income-tax (Amendment) Act, 1939." Accordingly, their Lordships are of opinion that the decision of the High Court was right and should be affirmed, and they will humbly advise His Majesty that the appeal should be dismissed. The appellant will pay the respondents costs of the appeal.