9911796707
TMI Blog1970 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... y in 1952 or thereabout. By a deed of sale dated August 31, 1956, the assessee sold this immovable property to his wife in consideration of the price of Rs. 1,00,000 paid to him. In connection with the return for wealth-tax, the assessee's consulting engineer valued the property at Rs. 1,50,000 as on April 1, 1957. On February 8, 1957, the assessee gave 55 shares of Miraj State Bank Ltd. to his sister, Smt. Mangalaraje, and 60 shares of the same bank to his maternal uncle, R. K. Apte. These two donees gifted the same 55 and 60 shares on June 22, 1957, i.e., about 4 months and 14 days after the first gifts to two minor sons of the assessee. In the assessment year 1957-58, relying upon the provisions of section 16(3)(a)(iii), the income from the above immovable property and the dividends earned from these shares were included in the income of the assessee. This was continued to be done even for the assessment years 1958-59-1960-61. Appeals filed by the assessee were dismissed by the Appellate Assistant Commissioner. In the appeal before the Appellate Tribunal, it was held in favour of the assessee that he was entitled to the exclusion of the 2/3rds of the income from the immovabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3 referred to us. In connection with these rival contentions, it is first necessary to refer to the relevant parts of the sub-sections (3)(a)(iii) and (iv) of section 16 which run as follows : " 16. (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 ; 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 ". The contention of Mr. Palkhivala for the assessee was that, in connection with the true construction and effect of the provisions in section 16(3)(a) (iii) and (iv), it requires to be first noticed that by the provision in the section income from properties not of the ownership of an asssessee being a husband and/or a father is directly to be deemed to be income of the husband and/or father. This is an artificial liability im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was a genuine transaction of sale for the large price of Rs. 1,00,000, a finding should be made that the consideration was adequate. Now, it appears to us that the question of the consideration being adequate or otherwise must largely depend on the opinion to be formulated by the authority concerned on the facts proved before it. Apparently, the intent of the provision in sub-clause (iii) is that the income from assets transferred to his wife by the husband otherwise than for adequate consideration must be included in the income of the assessee. It is clear that to the extent that the consideration is adequte the income from the transferred assets could not be made part of the income of the assessee. The provision in sub-clause (iii) has not the effect of making the transfers in favour of the wife altogether void. In ordinary law, therefore, the income from the transferred assets would belong to the wife. In so far as the consideration is held to be not adequate, under the provisions in sub-clause (iii), the income of the property must be included in the income of the husband. As regards the question whether the consideration was adequate, the relevant facts are that the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent that the consideration was found inadequate. The purpose of the sub-clause would be satisfied totally by including in the income of the husband and/or the father the income from the transferred assets to the extent only that the consideration is found to be inadequate. For this reason, as already discussed in the foregoing part of this judgment, we are of the opinion that the income from the transferred assets which can be included in the income of the husband and/or the father would only be to the extent and/or in the proportion that the consideration is found to be inadequate. We are, therefore, unable to accept Mr. Joshi's submission that the Tribunal was wrong in holding that 1/3rd of the income from the Kolhapur property was includible in the income of the assessee and further holding that 2/3rds of the income could not be included in the income of the assessee for the assessment year mentioned in the two questions which are being decided by these observations. That contention of Mr. Joshi, therefore, fails. As regards the question of the dividend income of the 55 and 60 shares transferred by gifts by the assessee, in the first instance, to his sister and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provi sion ns in sub-clause (iv). Now, in this connection, it requires to be noticed that it is impossible for Mr. Joshi to argue that any facts regarding an agreement made for transfer by gifts of these very shares by the sister and maternal uncle of the assessee are brought on the record and/or are proved. The whole of the submission by Mr. Joshi is that the facts as stated above prove that there was inter-connection between the transaction of these gifts and this was a circuitous method adopted as a device to evade the implications of the provisions in sub-clause (iv). We find it extremely difficult, merely on the basis of the subject-matter of the gifts being the same, to make a finding that the transactions of gifts first-made in February, 1957, between the assessee and his sister and maternal uncle and the gifts made by these two parties on June 22, 1957, were interconnected transactions and/or parts of the same transaction. On the contrary, we find it extremely difficult to reject the finding of the Tribunal that there is nothing whatsoever on record to suggest that there was any diabolical scheme of which both the transfers were inseparable parts. It should have been possib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a device to evade the implications of this section, the case will fall within the section. Having regard to the above observations of the Supreme Court, we have examined the evidence on record to ascertain if the gifts made in February in the first instance and thereafter by the donees in August were inter-connected and parts of the same transaction and formed part of a circuitous method adopted as a device to evade the implications of the section. As already discussed above, for want of sufficient evidence on record, we have not been able to arrive at the above conclusion as submitted on behalf of the revenue. Now, in the case before the Supreme Court, the inference as necessary could be made, because it was found that there was no explanation why the father-in-law had made " such a big gift to his daughter-in-law on the occasion of Diwali and why the son made a belated gift, equally big, to his mother on the occasion of her birthday which took place several months before. These two gifts match each other as regards the amount ". The further fact which was relied upon was that that " though the three purchasers were to get 1/3rd share each, Mrs. C. M. Kothari paid Rs. 200 more t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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