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Issues Involved:
1. Inclusion of profits settled on wife and daughters in assessee's total income. 2. Application of Section 16(1)(c) of the Indian Income-tax Act. 3. Interpretation of "transfer of assets" and "disposition of income". 4. Applicability of Section 16(3) regarding income of wife and minor child. Issue-Wise Detailed Analysis: 1. Inclusion of Profits Settled on Wife and Daughters in Assessee's Total Income: The primary question was whether the profits settled by the assessee on his wife and two daughters should be included in his total income. The assessee executed three deeds of settlement, transferring a one-fourth share of his profits from a partnership firm to his wife and daughters. The Income-tax Officer included these profits in the assessee's total income, a decision upheld by the Appellate Assistant Commissioner and the Tribunal. 2. Application of Section 16(1)(c) of the Indian Income-tax Act: The assessee contended that the settlements fell within Section 16(1)(c) and satisfied the requirements of the third proviso, arguing that the income should not be treated as his. Section 16(1)(c) deems all income arising from a revocable transfer of assets or disposition of income as the income of the settlor. The third proviso exempts dispositions that are irrevocable for a period exceeding six years or during the lifetime of the person, provided the settlor derives no benefit. 3. Interpretation of "Transfer of Assets" and "Disposition of Income": The court examined whether the settlements involved a transfer of assets or merely a disposition of income. The deeds did not transfer the assessee's interest in the partnership assets but only his right to receive profits. The court held that there was no transfer of assets under the deeds, as the assessee continued to own the business with the same interest. 4. Applicability of Section 16(3) Regarding Income of Wife and Minor Child: Section 16(3) includes in an individual's total income any income arising to the wife or minor child from assets transferred by the individual. The court held that even if there was a transfer of an asset, Section 16(3) would apply, justifying the aggregation of the income of the wife and unmarried daughter with the assessee's income. Section 16(3) prevails over the exemption granted by Section 16(1)(c) read with the third proviso. Conclusion: The court concluded that the settlements did not involve a transfer of assets but a disposition of income. The income disposed of under the deeds was deemed to be the income of the assessee. The question referred to the court was answered in the affirmative, against the assessee, and the assessee was directed to pay the costs.
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