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TMI Blog1966 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... and accomplished daughter of Ruling Chief of Alas State in Kathiawar, famous for its industry and business instinct. In consideration of the royalty and lessee's covenant hereafter reserved and contained the lessor hereby transfers to the lessee the quarries of stone, ballasts, kankar morum and sand, etc., described in the schedule A hereto and hereby gives to the lessee the liberties, powers and privileges hereafter mentioned with the said quarries subject to the restrictions and conditions as to the exercise and enjoyment of the said liabilities, powers and privileges which are specified hereafter." In clause 8 of the covenant is mentioned royalty which the lessee was to pay to the assessee. This reads : "8. During the term of this demise, the lessee shall pay a royalty at the rate of Rs. 4,000, four thousand only, annually in two equal instalments, the first instalment to be due on the 1st June, and the second instalment on the 1st December, every year whether the lessee quarries or carries on any operations or not." Paragraph 9 of the covenant provides : "9. The lessee will not be entitled to any remission in the royalty hereby reserved or revision of the term of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the proposition that the case of the assessee would fall under section 16(1)(c) and not under section 16(3)(a)(iii) of the Act ; that the lease deed itself did not amount to the transfer of any asset within the meaning of section 16(3)(a)(iii) of the Act, and, lastly, that there was adequate consideration for the transfer of the quarries which, according to the assessee, was proved by the production of the aforesaid letters, and constituted an ante-nuptial contract. The Income-tax Officer held that section 16(3)(a)(iii) of the Act applied, that the lease constituted a transfer of assets and that consideration of the paltry sum of Rs. 4,000 annually as royalty under the lease deed, against the yearly income in the relevant year of account for those quarries of Rs. 20,360 and in the succeeding year of Rs. 58,436 was wholly inadequate. He further expressed the view that the transfer was not in consideration of any marriage to the lessee but to safeguard the quarries from lapsing to the U. P. Government under the U. P. Zamindari Abolition and Land Reforms Act. On appeal, the Appellate Assistant Commissioner took the view that the lease was an irrevocable settlement upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not canvassed by the learned counsel for the assessee. Therefore, what has to be considered is whether the transaction of the lease in the instant case fell within the mischief of section 16(3)(a)(iii) of the Act. The relevant part of section 16(3)(a)(iii) of the Act runs : "(3) 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 - (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." The requirements of this sub-section, therefore, are (1) assets must have been transferred directly or indirectly by the husband to his wife ; and (2) such transfer must be for adequate consideration. That a lease in perpetuity is a transfer within the meaning of section 105, Transfer of Property Act, is not doubted but what is contended for the assessee is that under the Income-tax Act such a transfer will not do and only an out and out sale will avail the revenue. There is no force in this contention. There is no warrant fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was any other consideration which the Tribunal was bound to consider but had failed to do so. In this connection, firstly, it will have to be determined whether there was any pre-nuptial agreement, and, if so, whether such an agreement could have been taken into consideration when no mention of it was made in the registered lease deed in determining the adequacy of the consideration. The paucity of material on the record for determining these questions is a great handicap. The only material consists of the letters aforesaid. It is not possible therefrom to spell out any agreement enforceable at law. To begin with, it is not even known as to who the parties are who could possibly be held bound by the agreement, if any, or between whom there can be said to have been a consensus ad idem. At best, the letters show that some kind of a pious wish was expressed by the secretary of the assessee to the Dewan of the State to which the lessee belonged that some assets would be transferred. The marriage of the lessee, however, was not conditional upon the transfer being made. There was no marriage settlement made. Nor was any attempt made even after two years of the marriage to give effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being taken into consideration. Arguments that were addressed on the scope of sections 91 and 92 of the Indian Evidence Act need not, therefore, be adverted to. It may be observed, however, that the Evidence Act itself does not apply to the income-tax authorities or proceedings. Lastly, it was contended that some kind of double assessment would result in this case inasmuch as the royalty of Rs. 4,000 would be assessed in the hands of the assessee, though this payment would have been made by his wife to him under the lease and in addition the income from quarries determined at Rs. 20,360 would also be included in his hands by virtue of section 16(3)(a)(iii) of the Act. To that there is a complete answer in the decision of the Supreme Court in Income-tax Officer v. Bachu Lal Kapoor, where their Lordships repelled a similar argument, though in a somewhat different context, observing : "None the less, if, under some mistake, such income was assessed to tax in the hands of the individual members, which should not have been done, when a proper assessment was made on the Hindu undivided family in respect of that income, the revenue had to make appropriate adjustments ; otherwise, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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