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TMI Blog1963 (3) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... D. N. Mukherjee and B. N. Ghosh For the Respondent: K. N. Rajagopala Sastri and R.. N. Sachthey JUDGMENT The judgment of the Court was delivered by S.K. DAS J.-These are four appeals on certificates granted by the High Court of Calcutta under s. 66-A (2) of the Indian Income-tax Act, 1922. The appeals are from the decision of the Hight Court dated February 28, 1961 in Income tax Reference No. 49 of 1956. We may first state the relevant facts. One P. J. P. Thomas is the appellant before us. He was the assessee before the taxing authorities. He held 750 'A' shares in J. Thomas Co., Ltd., of 8 Mission Row, Calcutta. The assessee entered into an engagement to marry one Mrs. Judith Knight, stated to be a divorcee, and the engagement was announced in certain newspapers on September 3, 1947. On December 10, 1947 the assessee and Mrs. Knight presented to the Company an application to transfer the said 750 'A' shares to Mrs.Judith Knight. A transfer deed of that date stated : "I, Philip John Plasket Thomas of 8, Mission Row, Calcutta, in consideration of my forthcoming marriage with Judith Knight of 35, Ridgeway, Kingsbury, London (hereinafter called the said transferee) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act applied in these cases. Against the order of the Appellate Assistant Commissioner the assesse preferred four appeals to the Appellate Tribunal and contended (1) that he transferred the shares to Mrs. Judith Knight when she was not his wife, (2) that the transfer of shares was absolute at the time when it was made and no condition was attached to the transfer, and (3) that the transfer was for adequate consideration. On these grounds the assessee contended that the provisions of s. 16 (3) of the Act were not attracted to the cases in question. The Appellate Tribunal by a consolidated order dated April 4, 1956 disagreed with the view of the Income tax Officer and the Appellate Assistant Commissioner that the provisions of s. 16 (3) (b) applied, but it held that the cases fell within s. 16 (3) (a) (iii) of the Act, because the transfer became effective only after the marriage. It further held that the transfer could also be construed as a revocable transfer within the meaning of s. 16 (1) (c) of the Act. Therefore the Appellate Tribunal dismissed the four appeals. The assessee then made four applications for referring two questions of law arising out of the Tribunal's order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r child of such individual as arises directly or indirectly- (i) from the membership of the wife in a firm of which her husband is a partner; (ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner; (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart; or (iv)from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual (otherwise than for adequate consideration); (b) xx xx xx xx xx". Sub-s. (3) of s. 16 of the Act was introduced in 1937. For the purpose of its application it is immaterial whether the partnership was formed before or after 1937 and whether the transfer was effected before or after that date. However, the sub-section deals only with income arising after its introduction. It clearly aims at foiling an individual's attempt to avoid or reduce the incidence of tax by transfering his assets to his wife or minor child, or admitting his wife as a partner or admitting his minor child to the benefits of partnership, in a firm in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htly different view. He said that the material consideration under s. 16 (3) (a) (iii) was whether the transferee was actually the wife of the assesse during the relevant accounting period when the income from the assets transferred to her accrued. In effect both the learned judges held that for the application of cl. (a) (iii) it was not necessary that the relationship of husband and wife must subsist at the time when the transfer of the assets is made; according to Mukharji J. the crucial date to determine the relationship is the date when the taxing authorities are computing the total income of the husband and according to Bose J. the crucial time is the time when the income accrues to the wife. It must also be stated in fairness to Mukharji J. that he did not accept the view that the words 'husband' and "wife' in cl. (a) (iii) included prospective husband and prospective wife. He accepted the view that the words 'husband' and 'wife' must mean legal husband and legal wife. Even so he expressed the view that on a true construction of s. 16 (3) (a) (iii) the time when the relationship has to be construed is the time when the computation of the total income of the husband is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he woman referred to in cl. (a), and the word 'husband' has reference merely to the individual whose total income is to be computed for the purpose of assessment. In support of this argument he has relied on the expression "such individual" occurring in subs. (3) (a). We are unable to accept these arguments as correct. It is indeed true that all the four sub-clauses of cl. (a) must be harmoniously read as this court observed in Commissioner of Income-tax v. Sodra Devi [1957] 32 I.T.R.615,623. ; but we see no disharmony between sub-cl. (i) and sub-cl. (iii) on the interpretation which we are putting. Sub-cl. (i) talks only of the membership of the wife in a firm of which her husband is a partner ; it has no reference to assets at all. Subcl. (iii) however talks of assests and qualifies the word "assets" by the adjectival clause "transferred directly or indirectly to the wife by the husband". We fail to see how any disharmony results from giving full effect to the adjectival clause in sub-cl.(iii). Nor do we see why the words 'husband' and 'wife' should be taken in the archaic sense contended for by the learned counsel for the respondent. In re Smalley, Smalley v. Scotton [1929] 2 Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of s. 16 clearly aims at foiling an individual's attempt to avoid or reduce the incidence of tax by transferring his assets to the wife or minor child or admitting his wife as a partner or admitting his minor child to the benefits of partnership, in a firm in which such individual is a partner. This object does not require that the word "wife' or the word 'husband' should be interpreted in an archaic or secondary sense. Learned counsel for the respondent has drawn our attention to certain English decisions, particularly the decision of the House of Lords in Lord Vestey's Executors and Vestey v. Commissioners (1949) 31 T. C. 1 of Inland Revenue (1). One of the questions which was considered in that decision was whether for the purpose of either s. 18 of the Finance Act, 1936 (in England) or s. 38 of the Finance Act, 1938 (in England) "wife" included a "widow." Their Lordships had to consider the earlier decision of the Court of Appeal in Commissioners of Inland Revenue v. Gaunt (1941) 24 T.C. 69. which held that the one word included the other. Their Lordships ultimately held, overruling the decision in Gaunt's case, that the word "wife" did not include a "widow." The English d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orthcoming marriage and the gift was subject to a condition subsequent, namely, that of marriage which if not performed would put an end to the gift. This does not however advance the case of the respondent in any way. A gift may be made subject to conditions, either precedent or subsequent. A condition precedent is one to be performed before the gift takes effect; a condition subsequent is one to be performed after the gift had taken effect, and if the condition is unfulfilled that will put an end to the gift. But if the gift had already taken effect on December 10, 1947 and the condition subsequent has been later fulfilled, then the gift is effective as from December 10, 1947 when the assessee and Mrs. Knight were not husband and wife. That being the position, sub-cl. (iii) of s. 16 (3) (a) will not be attracted to the case as the transfer of the shares was not made by the husband to his wife. We were also addressed on the question as to the circumstances in which a gift to an intended wife or husband may be recovered when the marriage does not take place through the fault of either of the two parties. We do not think that that question falls for decision in the present case. F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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