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TMI Blog1965 (3) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The contention was that the assessee had only advanced funds for the purpose of construction and that could not be construed as a transfer of an asset. This argument prevailed with the Appellate Assistant Commissioner, who directed the deletion of any part of the income from the house from the total income of the assessee. The department took the matter in appeal to the Tribunal. The Tribunal found as a question of fact that the assessee did transfer a sum of ₹ 75,000 to the wife without any adequate consideration and that this sum was utilised for the construction of the house. The Tribunal took the view that even if it was only money that was transferred, it could still be brought within the scope of section 16(3) of the Act. The further contention advanced was that there was no receipt of any real income from the property, for the owner, the wife of the assessee, was actually residing therein, and it was urged that it is real income as opposed to notional income that could be brought within the scope of section 16(3) of the Act. This contention was also negatived by the Tribunal. Lastly, it was urged that section 9 of the Act places an upper limit in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, then if any income is derived by the wife from the asset so transferred, it has under law to be included in the total income of the assessee. In disputing the applicability of section 16(3) of the Act, Mr. Seshadri urges that no income is in fact derived by the assessee's wife from the property. According to the learned counsel, it is only income which is actually derived--the expression used in the section is arises --that can be brought within the scope of section 16(3). It is claimed that the owner of the property, that is, the wife of the assessee, lives in the house and that being so, she does not derive any income. If at all, it is only notional income that can be said to be received by the wife when she personally occupies the house in question. Mr. Seshadri's contention is that only a real income and not a deemed or notional income that can be the subject-matter of section 16(3). It is true that in Commissioner of Income-tax v. Sir Homi Mehta's Executors [1955] 28 I.T.R. 928, a Bench of the Bombay High Court laid down that income should be a real income before it can be brought to tax. In that case, the assessee and his sons formed a private limited compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of house property. The contention that we are to examine is whether section 16(3) requires that the income arising from the property should be an income in the shape of money. It is true that because the wife resides in the house, she is not in actual receipt of any income represented by rents or the like. But would it be true to say that no income at all arises to her from the property in question? We are unable to say that the expression income, as arises directly or indirectly cannot include the benefits arising from the enjoyment of the property. The use of the expression indirectly is broad enough to take in an income which is not received in specie but represents such advantages as the enjoyment of the property might secure, the value of which advantages could be translated in terms of money. On the section as it is worded, we are unable to agree with Mr. Seshadri that where the wife resides in the house property and does not receive any rents from the property, it is only notional income that can be said to arise and that such notional income is not within the scope of section 16(3). Mr. Seshadri elaborates his point further by reference to section 9 of the Act. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(2) of the Act. We do not agree with the learned counsel that it is not a real income that is contemplated by section 9(2). Reference has been made by the learned counsel to Tennant v. Smith [1892] 3 Tax Cas. 158. That was a case where the question arose whether the value of a residence provided by the employer is not an emolument of office in respect of which the employee is chargeable to income-tax. Further details of that case are not necessary except to observe that the question went upon a consideration of the various Schedules to the English Act under one or other item of which any item of receipt of income is taxable. Learned counsel refers to the following passage at page 171: No doubt, if the appellant had to find lodgings for himself, he might have to pay for them. His income goes further because he is relieved from that expense. But a person is chargeable for income tax under Schedule D as well as under Schedule E, not on what saves his pocket but on what goes into his pocket, and the benefit which the appellant derives from having a rent-free house provided for him by the bank brings in nothing which can be reckoned up as a receipt, or properly described as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brings to tax the annual value of the property, deems a certain sum to be the income from the property, so that it is not a real income that is dealt with under section 9. It is thus his contention that what is only a deemed income under section 9 cannot be brought within the scope of section 16(3) which, according to him, deals only with a real income of the transferee, which is assessed in the hands of the transferor, the assessee. Firstly, we may point out that it is not a deemed income at all that is dealt with under section 16(3), that is to say, the law does not say that the income of the wife shall be deemed to be the income of the assessee. What in effect it provides for is that an income received by the wife in certain circumstances shall be taxed in the hands of the assessee. Section 16(3) sets out the mode of computation of the income of a person who has transferred certain assets to his wife, and in certain specified circumstances the income arising from the transferred asset is taxed in the hands of the husband himself. It may be said in a manner of speaking that the income of the wife is deemed to be that of the husband, but the section itself does not say so. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for the purposes of his own residence. In that case, the annual value is first determined as in a case where a property is let out to a tenant and that amount is reduced by one-half or by ₹ 1,800, whichever is less, and the reduced sum is taken to be the annual value of the property liable to tax under section 9(1) of the Act. There is the further limitation imposed, that is, if the sum so arrived at exceeds 10% of the total income of the owner, the annual value of the property shall be deemed to be 10% of such total income. According to Mr. Seshadri, it is this income, that is to say, the sum as reduced, or 10% of the owner's income, whichever is less, that can be taken in for assessment under section 16(3) of the Act, for, according to the learned counsel, the sum so reduced, or 10% of the total income of the owner, is, by virtue of the provisions contained in section 9, regarded as the annual value of the property, that is to say, the income that can be brought to tax. It seems to us that this contention has to be accepted. Under section 6 of the Act, among the various heads of income chargeable to tax is income from property. That is dealt with in section 9 and this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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