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TMI Blog1978 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... me in trust for the benefit of the wife and two daughters of the said J. N. Chowdhury. On the same day, J. N. Chowdhury executed a similar trust in respect of assets and properties of the same nature and value as conveyed in trust by the assessee. In the trust executed by J. N. Chowdhury, the assessee was appointed as the trustee and the benefit thereunder was conferred on the assessee's wife and his major son. In the assessment years 1958-59 and 1959-60, the ITO in computing the income of the assessee included the income arising from the assets transferred to J. N. Chowdhury as aforesaid under s. 16(3)(b) of the Indian I.T. Act, 1922, on the ground that the respective transfers by the assessee to his brother were made with a view to avoid the income from the assets and properties being taxed in the hands of the transferor. He treated the transfer by the assessee in favour of J. N. Chowdhury as a transfer in favour of the assessee's wife and son. On appeal, the AAC confirmed the assessment to the extent of the income, the benefit whereof went to the wife of the assessee but held that the income accruing in favour of the major son should be excluded. On further appeal, the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 ;...... (b) so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both. Income-tax Act, 1961. " Section 64. Income of individual to include income of spouse, minor child, etc.--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 ;...... (v) to any person or association of persons from assets transferred otherwise than for adequate consideration to the person or association of persons by such individual, to the extent to which the income from s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fe, the son and the daughter-in-law. The ladies drew cheques from their respective bank accounts but amounts were credited in the bank accounts by debiting the son in the firm in the case of his mother, viz., the wife of the assessee, and by debiting, the assessee in the said firm in the case of the daughter-in-law. The amounts were shown as gift by the son to the mother and by the assessee to his daughter-in-law. In the assessment years 1948-49, 1950-51 and 1951-52, the ITO assessed the income from the respective 1/3rd share of the said house in the hands of assessee and his son and not in the hands of his wife and the daughter-in-law. The AAC and the Tribunal upheld the order of the ITO. The question which was referred to the High Court was as follows : " Whether there was material for the Appellate Tribunal to hold that the income arising to Mrs. C. M. Kothari and Mrs. D. C. Kothari from the property arose indirectly out of the assets transferred indirectly by their husbands so as to attract the provisions of section 16(3)(a)(iii)." The assessee succeeded before the High Court and the matter finally came up on appeal before the Supreme Court. The Supreme Court construed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y sought to distinguish this decision by contending, firstly, that there was no trust involved in the case before the Supreme Court and, secondly, there is no finding in the present case that there were chain transactions. In our view, the distinctions sought to be drawn by Mr. Roy are of little consequence. The words " directly and/or indirectly ", in our opinion, covers the case of a trust, and the nature of the transactions in the instant case appear to us to be similar to that which was before the Supreme Court. In the case before us transfers have been made by the brothers in favour of their respective wives and children whereas in the case before the Supreme Court, the transfers were made by the father and the son in favour respectively of the mother and the daughter-in-law. The assets of the assessee in the process of being transferred in favour of his wife have been deliberately and in a planned manner turned into the assets of a like value in the hands of another person and on the basis of exchange the income is indirectly reaching the hands of the assessee's wife. Mr. B. L. Pal, learned counsel for the revenue, has contended before us that s. 64(iii) of the I.T. Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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