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TMI Blog1977 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... pin and Kamla. On June 14, 1952, Keshavji, the assessee, transferred a sum of Rs. 5 lakhs to his Son, Jaysinh. By an indenture of trust executed on February 22, 1954, Keshavji settled upon trust properties of the value of Rs. 4,41,000 in favour of his minor grandchildren, Bipin and Kamla. On the same day Jaysinh, the son of the assessee, by another indenture of trust settled a sum of Rs. 1,54,000 upon his three sisters, Indumati, Kusum and Dipika. In the assessment of the assessee and Jaysinh for the relevant years of assessment the Income-tax Officer held that the simultaneous execution of the two above indentures of trust constituted indirect transfer of assets by the assesee, i.e , Keshavji, to his three daughters and by Jaysinh to his two infant children. The Income-tax Officer apparently, came to the conclusion that the execution of the two indentures of trust amounted to indirect transfer as stated above on the only basis of it being simultaneous on the same day. He took the view that the income from the properties taken as so indirectly transferred had to be included in the total income of the assessee and his son in their respective assessments under section 16(3)(a)(iv) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... children." The Appellate Assistant Commissioner, however, clarified that the income which could be included in the total income of the assessee would be only such as related to the interest in the assets conveyed in favour of the minors and not the income of the whole of the assets. The appeals that the assessee and his son preferred against the Appellate Assistant Commissioner's decision were confirmed by the Tribunal holding that " the gifts by the father and son of February 22, 1954, have been mutually prompted so that it is impossible to escape the conclusion that each of the so-called gifts had provided the consideration for the other. It cannot be denied that the minor children of each of the two assessees have received benefit to the extent of at least Rs. 1, 54,000 along with a simultaneous and equal depletion of their parent's resources. This to our mind clearly constitutes an indirect transfer by each of the assessees to his respective minor child or children." At the instance of the assessee and his son the following two questions were referred to for determination by the High Court : " 1. Whether, on the facts of the case, the provisions of section 16(3)(a)(iv) are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son; that the father had made a settlement in favour of his grandchildren simultaneously with the execution of a deed of settlement by the son in favour of his sisters one of whom was a minor; that from the description given in the two deeds of settlement both the settlors were residing in the same house ; that no explanation was given why Keshavji and his son, Jaysinh, executed the two deeds of settlement simultaneously." The Supreme Court took the view that the observations made by the Madras High Court in the case of L. G. Balakrishnan v. Commissioner of Income-tax [1963] 49 ITR 102 to the effect that " if cross transactions are independent of each other, the section cannot have any application. Even if they are parts of the same transaction they would fall outside the section if they are real. But if they are no more than mere appearances devised to circumvent the section assiduously maintained, the department can lift the veil and declare the true nature of the transaction as being one within the section ", do not correctly interpret section 16(3)(a), clauses (iii) and (iv). According to the Supreme Court what is material is not the unreality of the cross transactions, nor w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand on behalf of the revenue submitted that the decision of the Bombay High Court in Framji Commissariat's case [1967] 64 ITR 588 should not be regarded as good law, because the Division Bench completely overlooked the object with which section 16 was enacted. His submission is that the provisions of section 16(3)(a)(iv) will be attracted even in the case of trust, if the other conditions laid down in that clause are fulfilled and that the mere fact that assets are transferred by execution of an indenture of trust will not be sufficient to exclude them from the operation of section 16(3)(a)(iv). It will be pertinent to notice that both the questions that have been referred for our determination are confined to the provisions of section 16(3)(a)(iv) and if in view of a decision of a Division Bench of this court that clause is not applicable when a trust deed is executed, we have no other option but to answer the question in favour of the assessee. In Framji Commissariat's case [1967] 64 ITR 588 (Bom) the asseesee and his brother created separate trusts each, in favour of his minor nephew (son of the other), of his undivided half share in immovable property possessed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being included in the assessment of the assessee." This being a decision of the Division Bench is binding on us. In the present case by the cross-transfers assets are transferred in trust for the benefit of the assessee's children and when such is the case according to this decision the provision of section 16(3)(a)(iv) is inapplicable. So also the provision of section 16(3)(b) is inapplicable. So far as this court is concerned, it is not possible for us to ignore this judgment unless our attention is drawn to any decision by which it is directly or impliedly overruled. It was urged by Mr. Joshi that the decision in Framji Commissariat's case [1967] 64 ITR 588 (Bom) should not be treated as good law in view of the observations of the Supreme Court approving of the observations of Lord Macmillan in Chamberlain v. Inland Revenue Commissioners [1943] 25 TC 317, 329 (HL). He relied upon the decision of the Supreme Court in the case of Tulsidas Kilachand v. Commissioner of income-tax [1961] 42 ITR 1. At page 4, the Supreme Court has pointed out the object with which section 16 was enacted. It is observed : " The object of framing section 16 can almost be taken from the observation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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