Clubbing of income - section 64 - spouses - Income Tax - 1390/CBDT

INSTRUCTION NO. 1390/CBDT Dated : December 18, 1975 Section(s) Referred: 64 , 4 of Wealth Tax Act Statute: Income - Tax Act, 1961 The attention of ITOs is invited to the Andhra Pradesh High Court's decision in the case of CWT vs. Khan Saheb Dost Mohd. Alladin and another (91 ITR 179) wherein the principles governing the Dower Debt under the Muslim Law have been clearly discussed. Dower which is payable on demand either in whole or in part at any time before or after consummation is called "prompt" dower, and the one payable on dissolution of marriage by death or divorce is known as "deferred" dower. The nature of the dower is governed by the agreement entered into by the parties at the time of marriage and in cases where there is no agreement, it must be regarded, according to Shia Law as "prompt" and in case of Sunnis, the rule is to regard part as "prompt" and the remaining as "deferred", the proportion being regulated by custom or status of the parties prompt dower is a debt though an unsecured one. It is an actionable claim and as such, any transfer of property made towards prompt dower has to be treated as one made for adequate consideration. There-fore, properties received by the wife in satisfaction of a dower debt which may be classified as "prompt" dower, will not attract the provisions of section 64 of the IT Act or section 4 of the W.T.Act nor could it be held to be a gift liable under the G.T.Act. One of the points to be noted here is that a transfer of immovable property in lieu of a dower debt without a registered document is ineffective and, therefore, income from such property continues to be includible in the transferor's income as held in the case of CIT, MP vs Agha Abdul Jabbar Khan(1968)(69 ITR 46). 2. Claims in regard to the liability discharged on "deferred" dower, however require to be examined in the light of the above aid decision of the AP High Court (91 ITR 179). The essential points to be noted in this connection are that- a) the spouses are not competent under their personal law to convert the deferred dower into a prompt one either by their conduct or by executing any document; b) the deferred dower would not become a 'debt owned' by the assessee during the subsistence of the marriage; and c) the right to claim mehr/dower would arise only in the case of prompt dower as it is payable immediately on marriage if demanded by the wife, whereas in the case of deferred dower, it is payable on dissolution of marriage or on the happening of some specified event but not otherwise. It therefore, follows that, under the Muslim Law, there is no liability on the husband to discharge dower debt during the subsistence of the marriage, much less, a liability to transfer property to his wife purporting to be in satisfaction of the dower debt, which may be classified as "deferred" debt. 3. Therefore according to the ratio-decidendi laid down by the A.P.High Court in the above said case, transfer of properties during the life-time of the spouse and before the dissolution of the marriage would amount to a gift without any consideration unless it be towards payment of prompt dower. The provisions contained in section 64 of the IT Act would accordingly come into play to enable the Department to club the income arising from the transferred assets with the income of the other spouse. In like manner, section 4 of the W.T.Act would also be applicable for purposes of aggregation except to the extent covered by the proviso. Further Gift-tax would also be leviable on the value of properties purporting to have been transferred towards the deferred dower, before, the dissolution of marriage by divorce etc. 4. It has been noticed that in spite of the above-said decision of the AP High Court 991 ITR 179) neither Gift-tax proceedings are being initiated in such cases nor aggregation of income made in IT/WT assessments of the husbands. The ITOs are therefore, requested to take immediate and suitable action in all cases where in satisfaction of a deferred dower, the wife of a Muslim claims to have received or the husband claims to have transferred, properties during subsistence of the marriage. Past cases should also be reviewed for suitable and prompt action wherever facts are in conformity with ratio-decidendi laid down by the AP High Court in the above said case (91 ITR 179).