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TMI Blog1971 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's income for the assessment year 1965-66 under section 64(iii) of the Income-tax Act, 1961?" The facts that are material for answering the reference may briefly be stated: The assessee, who was assessed to tax in the status of individual, transferred promissory notes and cash of the total value of Rs. 40,000 to his wife on June 19, 1962. The assessee's wife invested a portion of the said assets in a cloth business of her own. For the assessment year 1965-66 the assessee's wife filed a return of her own, showing an income of Rs. 4,934 from the said cloth business. The Income-tax Officer was of the view that the said income arose to the assessee's wife out of the assets transferred to her without adequate consideration by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the income of Rs. 4,934 was not includible in the total income of the assessee. In support of his argument the learned counsel relied upon the decision of the Supreme Court in Commissioner of Income-tax v. Prem Bhai Parekh. Sri K. Srinivasa Murthy, the learned counsel appear in for the department, contended to the contra. His contention was that the meaning that was to be given to the phrase "adequate consideration" was consideration in money or money's worth. What the court has to see is whether the assessee in consideration of the transfer made by him to his wife, received either money or money's worth, which was equivalent to the value of the assets so transferred. In return for assets of R. 40,000 transferred by him to his wife, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wife in the total income of the assessee under section 64(iii) of the Act. For appreciating the contentions raised in this case, it is advantageous to notice the relevant portion of section 64(iii) of the Act: "In computing the total income of any individual, there shall be included all such income as arises directly or indirectly-- (iii) subject to the provisions of clause (i) of section 27, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart." Section 27(1) of the Act relates to transfer of a house by an individual to the spouse, with which we are not concerned here. The transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in Commissioner of Income-tax v. Prem Bhai Parekh strongly relied upon by the assessee's counsel, did not apply to the facts of this case. In Commissioner of Income-tax v. Prem Bhai Parekh an individual, who was a partner in a firm having seven annas share, retired from the firm and on the following day transferred Rs. 75,000 to each of his four sons, three of whom were minors. The firm was reconstituted. The major son of the individual was taken as partner and the three minor sons of the individual were admitted to the benefits of the partnership. The Tribunal found that the capital invested by the minors came from the gifts made to them by their father. On those facts the question that arose before the court was, whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esting all or some of the assets transferred to her by her husband, in a business of her own, she did not require the consent or agreement of any other person. The income, therefore, arose to the wife directly from the assets transferred to her by her husband. There is a proximate connection or nexus between the assets transferred by the husband to the wife and the income that arose therefrom. We have, therefore, necessarily to hold that the decision in Commissioner of Income-tax v. Prem Bhai Parekh does not apply to the facts of this case. Having held that the income, in question, has been earned by the wife out of the assets transferred to her by her husband, the next question that arises for our consideration is whether those assets we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. In Hindu law adoption of a son to the husband may bring religious benefit both to the father and mother. To that extent it cannot be said that the mere giving of consent by the wife to the husband for adoption entirely enured for the benefit of the husband. Giving consent for the adoption also enures to the benefit of the wife. Even assuming for a moment that giving consent to her husband for adopting a boy formed a legal and valid consideration for the transfer, still it cannot be said that it has brought any benefit to the assessee in terms of money or money's worth. Since the law insists that the consideration for transfer must be adequate, there must be some means to measure the adequacy of the consideration. That is to say, the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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