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Issues Involved:
1. Validity of the deed due to lack of registration. 2. Repugnance of the third proviso to section 16(1)(c) to the main clause. 3. Nature of the payment of dividend income to the assessee's wife. Issue-wise Detailed Analysis: 1. Validity of the Deed Due to Lack of Registration: The Tribunal held that the deed was void for lack of registration under section 25 of the Contract Act. However, the Court disagreed, stating that the deed was a unilateral document and did not constitute a contract. The deed was similar to the one in Gopal Saran Narain Singh v. Sita Devi, where the Judicial Committee held that such a deed did not require registration. The deed was a gift and did not need registration to be valid. The Court also considered whether the deed was void for attempting to gift future property, which is not allowed under section 122 of the Transfer of Property Act. However, the Court limited its analysis to the question of registration and concluded that the deed did not require registration, thus answering the first question in favor of the assessee. 2. Repugnance of the Third Proviso to Section 16(1)(c) to the Main Clause: The Department did not support the contention that the third proviso to section 16(1)(c) was repugnant to the main clause. The Court noted that while the proviso might seem odd, it did not contradict the main clause. The main clause and the proviso could coexist, with the proviso applying to settlements or dispositions that are irrevocable for a certain period. Therefore, the Court answered the second question against the Department. 3. Nature of the Payment of Dividend Income to the Assessee's Wife: The Court found that the Tribunal did not address this crucial question. The Department argued that the transfer was merely an application of the assessee's income, while the assessee contended that the third proviso to section 16(1)(c) applied, making the income the wife's. The Court analyzed section 16(1)(c), stating it applies to income that has ceased to be the settlor's and has become the beneficiary's. If the income first arises to the settlor and is then paid to the beneficiary, section 16(1)(c) does not apply. The Court concluded that the dividend income remained the settlor's income initially and was only transferred to the beneficiary after being received by the settlor. Therefore, the income was assessable in the settlor's hands, answering the third question in favor of the Department. Judgment Summary: - Question No. 1: "No." - Question No. 2: "No." - Question No. 3: "Yes." The Court made no order as to costs, considering the Department's untenable contentions before the Tribunal.
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