HARISHIKESM GANGULI (DEAD) vs COMMISSIONER OF INCOME TAX, CALCUTTA

The Supreme Court held that under Section 16(1)(c) of the Income-tax Act, 1922, a trust created by the settlor, which provides for the payment of a portion of the income to the settlor, does not render the entire income of the trust chargeable to tax in the settlor's hands, provided the conditions of the third proviso are met. The Court clarified that only the income retained by the settlor can be taxed, while the income accruing to other beneficiaries is not included in the settlor's total income. The judgment of the Calcutta High Court was set aside, affirming the Tribunal's decision that only the specified amount payable to the settlor is taxable.