LexCOMMISSIONER OF INCOME-TAX, MADRAS versus C. M. KOTHARI, MADRAS (DEAD), AND AFTER HIM HIS LEGAL REPRESENTATIVE
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... 2 s.c.R. · sui>R:E~E cbu1tr REPo:Rts 531 COMMISSIONER OF INCOME-TAX, MADRAS v. C. M. KOTHARI, MADRAS (DEAD), AND AFTER HIM HIS LEGAL REPRESENT A TI VE (S. K. DAS, A. K. SARKAR and M. HIDAYATULLAH JJ.) Income '!'ax-Income from property in the name of wife-,- Money coming into the haw• of wife from husband iwirectly- lVhether income of wife to be included into that of husband- "Transf<rred directly or indirectly to the wife," Meaning of- lndiJn Income-tax Act, 1922 (11of1922), •· 16 (3) (a) (iii).· Messrs Kothari and Sons is a firm of stock brokers. The firm consisted of Shri C. M. Kothari and his two sons, Shri D. C. Kothari and Shri H. C. Kothari. The firm entered into an agreement for the purchase of a house and the earnest money was paid by it. Later on, the house was bought in the name of Mrs. C. M. Kothari, Mrs. D. C. Kothari and Shri H. C. Kothari. The house was bought for Rs. 90,000/- and both Mrs. C. M. Kothari and Mrs. D. C. Kothari received Rs. 30,000 each from the firm. In the case of Mrs. C. M. Kothari, she got that amount in the form of birthday gift and Diwali gift from her son, D. C. Kothari. Mrs. D. C. Kothari also received Rs. 30,000 from the firm as a gift from Shri C. M. Kothari, h.er father-in-law. The Income-tax Officer assessed the income of Mrs. C. M. Kothari and Mrs. D. C. Kothari from the said house as the income of their husbands. The appeals of the assessees were dismissed by the Appellate Assistant Commissioner and the Tribunal. The Tribunal confirmed the finding of the Income Tax Officer that the two ladies had acquired their shares in the huuse out of the assets of their husbands indirectly transferred to them. Boweyer, the Tribunal did not hold that the transaction was benami. · The Tribunal referred the case to the High Court for opinion whether the income arising to Mrs. C. M. Kothari and Mrs. D. C, Kothari from the property arose out of the assets transferred indirectly by their husbands ·so as to attract the provisions of s. 16 (3) (a) (iii) of the Income-tax Act, 1922. The High Court answered .. the reference in. the negative, The Conunissioner of Income-tax, Madras, can1e to this·Court in appeal. ._ .. )963 ·~:Mar-eh 2r;· ··1.:· r JJfJ c ..... iui..,,.J lnenu•ta, MUr&J v. C. M. K11U.i 532 SUPREME cotJRT REi>ORtS [1064] Vot. Held that the answer given by the High Court must be set uide and the reference made by the Tribunal must be answered in the affirmative. The object of law is to tax the income of the wife in the hands of the husband if the income of the wife arises to her from assets transferred to her by her husband. In the present ease, the son transferred the assets to hil mother and the father-in-law transferred his assets to his daughter-in·law. The term "indirectly" is intended to cover such tricks. If two transfers al"<' inter-connected and arc parts of the aame transaction in such a way that it can be said that a circuitous method has been adopted as a device to evade the implications of s. !6 (3) (a) (iii), the case will fall within this section. In the present ease, the device is palpable and the two transferrers are so intimately connected that they cannot but be regarded as a part of a single transaction. ft was not successfully explained why the father-in-law made a big gift to his daughter-in-law and the son made an equally big gift to his mother. CIVIL APPELLATE JnusuICTION : Civil Appeals Nos. 34 to 36 of 1962. Appeals from the judgment and order dated March 25, 1958, of the Madras High Court in Case Referred No. 12 of 1954. K. N. Rajagopal Sa8tri and R. N. Sachthey, for the appellant. R. Gopa/,akrishnan, for the respondent. 1963. March 26. The Judgment of the Court was delivered by HIDAYAl'ULLAH J.- The High Court of Madras in a Reference under s.66 (1) of the Indian Income Tax Act, answered in the negative the following question:- "Whethcr there was material for the Appellate Tribunal to hold that the income arismg to Mrs. C.M. Kothari and Mrs. D. C. Kothari from the property arose indirectly out of the 2 S.C.R. SUPREME COURT REPORTS 533 assests transferred indirectly by their husbands so as to attract the provisions of s.16 (3)(a)(iii)." In our opm10n, these appeals by the Commissioner of Income-tax, Madras, must be allowed. Messrs Kothari and Sons is a firm of stock brokers. In 194 7, the firm consisted of C.M. Kothari and his two sons, D. C. Kothari
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