1967 (3) TMI 42 - HC - Income Tax

Madras Agricultural Income Tax Act - Lands purchased in name of wife and minor children and consideration was provided by assessee - U/S 9(1)income from land was could be assessed in the hand of the assessee

Summary

Issues: Interpretation of section 9(1) of the Madras Agricultural Income-tax Act, 1955 regarding taxation of agricultural income derived from lands settled or purchased by the assessee for his wife and children.

The judgment by the High Court of Madras involved the interpretation of section 9(1) of the Madras Agricultural Income-tax Act, 1955, concerning the taxation of agricultural income derived from lands settled or purchased by the assessee for his wife and children. The petitioner, a father of two minor sons, was taxed on the total agricultural income for the years 1958 to 1962 from various lands. The petitioner owned some lands, settled some on his wife and children, and purchased additional lands in the names of his minor children and wife. The revenue and the Tribunal rejected the argument that the lands settled or purchased did not involve a transfer of assets from which agricultural income was derived by the petitioner. The Tribunal's conclusion was deemed unassailable by the High Court. The settlement in favor of the wife and children fell within the ambit of section 9(1) as it involved lands belonging to the assessee. The consideration provided by the assessee for the purchases led to the lands being considered assets remaining as his property, even though they were in the names of his wife and children. The Tribunal correctly held that the income derived from the settled and purchased lands should be included in the total agricultural income of the assessee.

The crux of the issue was whether the lands settled or purchased by the assessee for his wife and children could be considered assets remaining as his property within the scope of section 9(1) of the Act. The Court emphasized that the intention of the subsection was to tax income derived from property transferred by the settlor or transferor, even if the property remained indirectly under their control. The Court rejected the argument that the lands purchased in the names of the wife and children, with consideration provided by the assessee, did not constitute assets remaining as his property. The Court clarified that the form of consideration, in this case, land, did not alter the fact that the lands were still the assets of the transferor. The Court drew a parallel between directly purchasing lands in one's name and later transferring them, and purchasing lands directly in the names of family members, emphasizing that the source of consideration determined the ownership of the assets for tax purposes.

Ultimately, the High Court dismissed the petitions, upholding the Tribunal's decision, and ordered the petitioner to bear the costs. The Court affirmed that the income derived from the settled and purchased lands rightfully formed part of the total agricultural income of the assessee, as the lands were considered assets remaining as his property despite being settled or purchased in the names of his wife and children.