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Issues:
1. Transfer of property for adequate consideration. 2. Application of section 64 of the Income-tax Act, 1961. 3. Existence and genuineness of pre-nuptial agreement. 4. Determination of adequate consideration. 5. Interpretation of "adequate consideration" as per legal precedents. Analysis: The case involved a reference under section 256(2) of the Income-tax Act, 1961, regarding the inclusion of income from a property in the total income of the assessee for the assessment year 1962-63. The primary question was whether the transfer of the property at No. 159, Chittaranjan Avenue, Calcutta, was made for adequate consideration, thereby impacting its taxability under section 64 of the Act. The property was nominally purchased in the name of the assessee's first wife, who later passed away, leading to a pre-nuptial agreement between the assessee and his second wife's mother, Smt. Lakshmi Devi, regarding the creation of a trust for the benefit of their children. The Tribunal accepted the existence of this pre-nuptial agreement and ruled that the transfer was not out of love or natural affection but in fulfillment of obligations, thus excluding the property's income from assessment for the previous year. In the subsequent assessment year 1962-63, the Income-tax Officer again included the property's income in the assessee's total income under section 64. However, the Tribunal, consistent with its earlier decision, upheld the assessee's contention, emphasizing the adequacy of consideration in the form of the pre-nuptial agreement. The critical aspect was whether the transfer was indeed made for adequate consideration, as required by section 64(iv) of the Act, which applies when assets are transferred to the wife without adequate consideration. The Tribunal's decision rested on the genuineness of the pre-nuptial agreement and the adequacy of consideration provided therein. The Court delved into the details of the pre-nuptial agreement, highlighting the assurances given by the assessee to create a trust for the benefit of his second wife's children and the substantial financial settlement agreed upon. Referring to legal precedents, including the Tulsidas Kilachand case, the Court emphasized that adequate consideration must be measurable in monetary terms and cannot solely rely on love and affection. The Court found the consideration provided by the assessee, including the financial settlement and trust creation, to be adequate, as it fulfilled the obligations undertaken before marriage, distinguishing it from transfers based on natural affection. In conclusion, the Court affirmed the Tribunal's decision, ruling in favor of the assessee based on the existence of a genuine pre-nuptial agreement and the provision of adequate consideration for the property transfer. The judgment highlighted the importance of assessing transfers for adequate consideration under tax laws, emphasizing the need for measurable and substantial consideration beyond natural affection. This comprehensive analysis of the judgment showcases the intricate legal considerations surrounding the transfer of property and the tax implications based on the adequacy of consideration, as interpreted by the Court in this particular case.
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