9911796707
TMI Blog1983 (8) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... eluva Co. was assessable in the hands of the applicant, for assessment year in question ? " The facts necessary for answering the references are these : The assessee is an individual by name Gadi Cheluvaraya Chetty. He was the proprietor of a business firm run under the name and style of Messrs Cheluva Co., in Russel Market, Bangalore. On August 12, 1960, the assessee executed a settlement deed in favour of his wife, six daughters and his son-in-law called Chandra Mohan settling 1/9th undivided share in the business of " Cheluva and Co., on each of them. " On March 15,1961, the assessee constituted a partnership firm comprising of himself, his wife and six daughters as partners. The last two partners being minor daughters were admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from the firm was assessed separately in the hands of the said partners as per their share of profits provided in the partnership deed for the accounting periods starting from March 31, 1963, and ending with March 31, 1969. For the assessment year 1972-73, however, the ITO brought to tax the entire income of M/s. Cheluva Co. in the hands of the assessee on the ground that the said settlement deed was revocable. After passing the said order for 1972-73, the ITO reopened the assessment for the assessment years 1963-64 to 1969-70 and assessed the entire income of M/s. Cheluva Co. in the individual assessment of the assessee. Appeals were preferred by the assessee against the said assessment orders before the Appellate Assistant Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income of the transferor. Section 62 stipulates that the provisions of s. 61, that is to say, addition of income by virtue of a revocable transfer of assets to the income of the transferor, should not apply to income arising to any person by virtue of a transfer by way of, inter alia, a transfer which is not revocable during the lifetime of the beneficiary or made before April 1, 1961, which is not revocable for a period exceeding six years. But sub-s. (1) of s. 62 is hedged by a proviso, which is applicable, provided that the transferor does not derive any direct or indirect benefit from such income in either case. If the transferor does derive, in fact, direct or indirect benefit from a transfer and even if the conditions of sub-clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a portion of the trust amount to the transferor. The question was whether that term rendered the whole of the trust income assessable in the hands of the transferor. The High Court held in the negative. It was observed that the assessability of the settlor could only arise with respect to the portion of the income in which he was found to have a direct or indirect interest without affecting chargeability of the other portions of the income to others where no question of revocability arose and only Rs. 400 payable to the settlor per month became assessable in his hands. The above reasoning of the Calcutta High Court has been approved by the Supreme Court in Hrishikesh Ganguly v. CIT [1971] 82 ITR 160. The Supreme Court observed at page 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferor, the transfer shall be deemed to be revocable. The case on hand falls squarely and fairly within s. 63(a)(i) of the Act. Our view also receives support from the decision of the Madras High Court in K. Subramania Pillai v. Agrl. ITO [1964] 53 ITR 764. Therein, the Madras High Court was considering a settlement deed containing revocable clause with reference to s. 9(1) of the Travancore Cochin Agricultural Income-tax Act, 1950, which corresponds to s. 16(1)(c) of the Indian I.T. Act, 1922. Under clause (6) of the settlement deed dated August 12, 1960, the transferor gave to Chandra Mohan 1/9th share in the business of Cheluva Co., in consideration of his undertaking to manage it. The clause also stipulated that in the even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share to which the partners are entitled to under the deed of settlement. The partnership deed is, therefore, not a relevant document for the purpose of determining whether the deed of settlement is a revocable one or not. Mr. Sarangan, counsel for the assessee, however, urged that the revocable transfer is confined only to the share of Chandra Mohan and, therefore, his share amount alone shall be included in the total income of the assessee and not the income to which the other sharers are entitled to. We do not think that this contention could be accepted unless we agree with the learned counsel that the deed of settlement contained nine independent transfers. If we peruse the deed, it is impossible to subscribe to the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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