9911796707
TMI Blog1993 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ?" Facts: The assessee, i.e., Mehmoodmian A. Topiwala, is being assessed in the status of an individual. This reference relates to the assessment year 1974-75. Three brothers, i.e., (1) Shri Abdullahmian A. Topiwala, (2) Shri Mohammed Husein A. Topiwala, and (3) Shri Mehmoodmian A. Topiwala, were joint owners of a land admeasuring 7,629 sq. yards situated at Paldi in Ahmedabad. The assessee gifted his one-third share in the land situated at Paldi, Ahmedabad, to the two sons of Shri Abdullahmian A. Topiwala on March 25, 1966. On the same day, the assessee's brother, i.e., Shri Abdullahmian A. Topiwala, transferred his one-third share belonging to him in the said land to the assessee's wife, Hafsabanu. The assessee's wife sold the land received by her as a gift from the assessee's elder brother. The sale of the land resulted in capital gains of Rs. 23,830 for the assessment year 1968-69 and Rs. 44,300 for the assessment year 1969-70. The amounts received by the wife of the assessee were invested by her with the assessee. The assessee had paid interest of Rs. 2,860 and Rs. 7,195 to his wife. While working out the income of the assessee for the assessment year 1974-75, the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 711 (Guj). The Division Bench of this court comprising G. T. Nanavati J. (as he then was) and Y. B. Bhatt J., has held that the transfer of one-third share in the land made by the assessee's brother in favour of the assessee's wife was indirectly a transfer by the assessee as contemplated by section 64(1)(iii) because the assessee had transferred the land to his brother's sons and the said brother, in his turn, had transferred his one-third share in the same land to the wife of the assessee in order to get out of the legal liability. In view of the above decision between the same parties, we are of the opinion that, on the facts and in the circumstances of the case, the Tribunal was not right in law in holding that as the assessee had made gifts to his major nephews, the gift made by the assessee's brother to his wife would not come within the mischief of section 64. However, Mr. R. D. Pathak, learned counsel for the assessee, vehemently submitted that in the abovementioned reported case, the Tribunal had recorded a finding of fact which was not accepted by the court in reference made under section 256(1) though the said finding was not challenged by the Revenue as a perverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle for appreciation of evidence or provision of law is to be applied, then it cannot be said that it remains a finding of fact only. It becomes a mixed question of law and fact and that is how question No. 1 has been referred to this court. It was not the contention of learned counsel for the assessee that question No. 1 was wrongly referred to this court. He did concede that question No. 1 is a question of law as contemplated by section 256(1)." In view of the aforesaid binding decision between the parties, we hold that the contention raised by learned counsel for the assessee is without any substance. Still, however, we would deal with the contention raised by learned counsel for the assessee. In the case of Greaves Cotton and Co. Ltd. [1968] 68 ITR 200, the Supreme Court has held that it is well-established that the High Court is not a court of appeal in a reference under section 66 of the Indian Income-tax Act, 1922, and it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at findings of fact contrary to those of the Tribunal. It has been further held therein that the High Court should confine itself to the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the finding recorded by the Tribunal to the effect that there was no intimate connection between the two transfers was an inference having no basis at all. The court took into consideration the fact that what the assessee and his brother did was to transfer their one-third share in the same piece of land situated at Paldi, Ahmedabad, and it was of equal value and there was no special reason for effecting said transfers. The court has also noted that the transfers were made on the same day and, in such circumstances, the court interfered with the legal inference drawn by the Tribunal and came to the conclusion that there was intimate connection between the two transfers even though the assessee's brother, Abdullahmian, did not directly benefit as a result of the said transfer. It may be noted that in the case of G. Venkataswami Naidu and Co. v. CIT [1959] 35 ITR 594, the Supreme Court has held that if the finding of fact is based on an inference drawn from the primary evidentiary facts proved in the case, its correctness or validity is open to challenge in reference proceedings within the narrow limits. It has been further held therein that it is open to the parties to challenge a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reconstitution of the firm with effect from July 2, 1954, whereby the major son became a partner and the minor sons were admitted to the benefits of partnership in the firm. The question was whether the income arising to the minors by virtue of their admission to the benefits of partnership in the firm could be included in the total income of the assessee under section 16(3)(a)(iv) a provision similar to section 16(3)(a)(iii). The Tribunal found that the capital investe by the minors in the firm came from the gifts made in their favour by their father, the assessee. The Supreme Court, while overruling the contention of the Revenue, came to the conclusion that the connection between the gifts made by the assessee and the income of the minors from the firm was a remote one and that it could not be said that the income arose directly or indirectly from the assets transferred. The Supreme Court, therefore, held that the income that arose to the three minor sons of the assessee by virtue of their admission to the benefits of partnership in the firm could not be included in the total income of the assessee. It appears that the main reason why the Supreme Court so held in the said case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om out of those gifts, she purchased certain shares and the balance amount she invested. The shares earned dividends and the investments yielded interest. The interest realises and the dividends earned were included in the income of Karam Chand Thapar for the purpose of assessment. The assessee objected to the inclusion of that amount in his income. The question was whether the Department was entitled to include the dividends and interest in question in computing the taxable income of the assessee. The Income-tax Officer held that they were liable to be included in the income of the assessee. That decision was upheld by the Appellate Assistant Commissioner. On a reference, the Calcutta High Court confirmed the view taken by the Tribunal. The Supreme Court referred to the decision rendered by it in the case of Prem Bhai Parekh [1970] 77 ITR 27 (SC). On the facts of the case, the Supreme Court found that the income had a proximate connection with the transfer of the assets made by the assessee and, therefore, held that the ratio laid down in the case of Prem Bhai Parekh [1970] 77 ITR 27 (SC), was not applicable to the facts of the said case. In other words, the Supreme Court held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he wife became a member of the partnership and the mere contribution of capital by the wife did not automatically entitle her to partnership in the firm. As the partnership was based on agreement and it was the event of agreement between the partners that brought the respondent's wife into partnership as a partner, it was held therein that the share of profits of the wife could not be included in the respondent's total income under section 64(1)(iii). The income in the said case accrued neither directly nor indirectly inasmuch as such accrual of income depended upon the volition or discretion of the partners of the firm to admit the respondent's wife into the partnership as a partner. It is in that sense that the test of proximate or remote connection has been laid down by the Supreme Court in the said case. In our view, the principles laid down in the said case would not apply to the facts of the present case at all inasmuch as, as noted earlier, after the sale of the land, which was gifted to her by the assessee's elder brother, the wife of the assessee had invested that amount received as consideration, with the assessee and the assessee was paying interest to his wife on the am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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