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TMI Blog1995 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the total income of any individual, there shall be included all such income as arises directly or indirectly--. (iv) subject to the provisions of clause (i) of section 27, to a minor child, not being a married daughter of such individual, from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration. " Reference to clause (i) of section 27 is not necessary since it has no relevance to the facts of this case. The respondent-assessee is an individual. She was carrying on the business of mica mining and was also having income from property and money-lending. During the financial year 1956-57, the respondent made a cash gift of rupees ninety thousand to her minor son, Suryanarayana Reddy. This amount was immediately utilised for purchasing a house property at Gudur. The said house property was being utilised for the purpose of the assessee's business. Eight years after the purchase of the house, i.e., on July 5, 1665, the said house property was sold to Tirupati Devasthanam for a consideration of Rs. 1,48,000. On the date of this sale also, Suryanarayana Reddy was a minor. The Income-tax Officer included the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to her minor son was the cash of rupees ninety thousand but it cannot be forgotten that that money was utilised for purchasing the said house property. It was only a case of substitution of one form of property by another form of property. When the said house property was sold, a capital gain of rupees fifty-eight thousand was made. Capital gain is undoubtedly a type of income. The definition of " income " in section 2(24) includes " capital gains ". It was, therefore, liable to be included in the income of the assessee. In Sevantilal Manehlal Sheth's case [1968] 68 ITR 503 (SC), the facts were the following : In the year 1951, the assessee, Maneklal, gifted 1,184 ordinary and l55 preference shares of a particular sugar mills to his wife, Bai Laxmibai. On the date of transfer, their total value was Rs. 69,730. Subsequent to the said gift, the sugar mills converted the preference shares into ordinary shares giving eight ordinary shares for each preference share, with the result that on December 31, 1954, Bai Laxmibai held a total of 2,424 ordinary shares of the said sugar mills. Out of those 2,424 ordinary shares, Bai Laxmibai sold 2,400 shares on August 1, 1956, for a Sum of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the question arose whether the income accruing to the minors by virtue of their admission to the benefits of partnership could be included in the total income of the assessee under section 16(3)(a)(iv). The said provision read thus at the relevant time : " In computing the total income of any individual for the purpose of assessment, there shall be included--(a) so much of the income of a wife or minor child of such individual as arises directly or indirectly ... (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration." The question that required to be answered by this court was : " whether it can be said that the income with which we are concerned in this case arises directly or indirectly from the assets transferred by the assessee to those minors ". The court answered it in the negative, in the following words : The connection between the gifts mentioned earlier and the income in question is a remote one. The income of the minors arose as a result of their admission to the benefits of the partnership. It is true that they were admitted to the benefits of the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Smt. Mohini Thapar [1972] 83 ITR 208 (SC) were both delivered by K. S. Hegde J.) We may note the facts in Smt,. Mohini Thapar [1972] 83 ITR 208 (SC). The assessee made certain cash gifts to his wife. From out of those cash gifts, she purchased shares and invested the balance amount in deposits. The question was whether the income derived by the assessee's wife from the deposits and shares is liable to be included in the income of the assessee husband under section 16(3) of the Indian Income-tax Act, 1922. Hegde J. observed. " The assets transferred in this case is the gift of the cash amounts made by the assessee to his wife. The transfers in question are direct transfers. But those assets, as mentioned earlier, were invested either in shares or otherwise. Hence it was urged on behalf of the Revenue that the income realised either as dividends from shares or as interest from deposits are income indirectly received in respect of the transfer of cash directly made. This contention of the Revenue appears to be sound. That position clearly emerges from the-plain language of the section ". When learned counsel for the assessee relied upon the decision in Prem Bhai Parekh's case [197 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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