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TMI Blog1993 (9) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1972-73 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest having accrued to the minor son, Shri Rajesh Kumar, cannot be included in the wealth of the assessee under section 4(1)(a)(ii) of the Wealth-tax Act, 1957 ?" The brief facts of the case are that the assessee had a bank account showing the closing balance in the name of his minor son, Rajesh Kumar, on the relevant valuation date and that amount had been shown by him as his wealth in the wealth-tax return. The assessee gifted that amount to his minor son and, by virtue of the provisions of section 4(1)(a) of the Wealth-tax Act, 1957, the assessee disclosed that amount as his wealth. sum of Rs. 36.831 (si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 16(3)(a)(iv), sought to tax in the hands of the assessee the income arising from accretions to the assets transferred by him to his minor children. The facts of that case were that the assessee held 350 shares in a company and transferred those shares to his minor son by way of gift. The minor son was later on allotted 744 bonus shares on account of holding the 350 shares gifted. The question was whether the dividend income from 744 bonus shares allotted to the minor son could be included in the total income of the assessee under section 16(3)(a)(iv) of the Indian Income-tax Act, 1922. The Bombay High Court held that it cannot be included for the reasons mentioned above. The Income-tax Appellate tribunal found that the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount by which the aggregate value computed in accordance with the provisions of the Act of all the assets, wherever located, belonging to the assessee on the valuation date, including the assets required to be included in his net wealth as on that date under the Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than those specified therein. It was held that the words "such assets" really indicate and pinpoint the specific assets which have been transferred. It was found that the intention was made clear by the latter part of the section which says "whether the assets referred to in any of the sub-clauses aforesaid are held in the form in which they were transferred or otherwise". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 90,000 simply as cash, certainly Rs. 90,000 alone would be included in his net wealth. If, on the other hand, instead of transferring Rs. 90,000 to his wife, he himself had built the house out of the sum of Rs. 90,000 it is only the value of the house as on the valuation date that would be included in the net wealth. There is, therefore, no question of the assessee being in a worse position for having made the transfer of a sum of Rs. 90,000 to his wife. In these circumstances, it was held that the value of the house which was constructed from the money transferred has to be included in the net wealth on account of specific provisions of clause (v) of section 4(1)(a), which provides that it is not necessary that the assets transferred sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch income which arose either directly or indirectly from the assets gifted. The transfer was only of the money, the accretions were not transfers. The entirety of the income does not arise from the assets transferred, part of it does arise from the accretions. Such accrual of income as arising from the income of the accretions cannot properly perhaps be described as income arising indirectly from the assets transferred because such income does arise directly but not because of the transfer but out of the accretions. In CIT v. Prem Bhai Parekh [1970] 77 ITR 27, which was also referred, the apex court has observed that section 16(3)(a)(iii) of the Indian Income-tax Act, 1922, created an artificial income. That section must receive strict cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the capital of the firm. In CWT v. T. Saraswathi Achi [1980] 125 ITR 186 (Mad) and in CIT v. T. Saraswathi Achi [1982] 133 ITR 315 (Mad), the Madras High Court, while interpreting the provisions of section 4(1)(a)(ii), has held that the accretion of the assets transferred cannot be included in the chargeable wealth of the assessee and the decision of the Bombay High Court in Popatlal Bhikamchand v. CIT [1959] 36 ITR 577 was relied upon. We have considered the matter. The provisions of section 4 of the Wealth-tax Act create a fiction by which the value of certain assets has to be included in the net wealth. It has been provided under clause (ii) that the value of such assets which have been transferred could be included. The word "suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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