LexMOHINI THAPAR (DEAD) BY L. RS. versus C.I.T. (CENTRAL) CALCUTTA & ORS.
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A u c 883 MOIDNI THAPAR (DEAD) BY L. RS. v. C.I.T. (CENTRAL) CALCUTTA & ORS. September 23, 1971 (K. S. HEGDE, A. N. GROVER AND H. R. KHANNA, JJ.] Income-tax Act, 1922, s. 16(3) (a) (iii)-Scope of. The assessee made certain cash gifts to his wife. Out of those gifts she purchased shares and made investments. On the question whether the divide1ds earned and the interests realised were income "from assets transferred directly or indirectly" by the assessee to his wife within the meaning of s. 16(3)(a)(iii) of the Income-tax Act, 1922, HELD: Section 16(3)(a)(iii) includes not merely the income that arises directly from the assets transferred but also the income that arises indirectly 'from those assets. In the present case the income bas a nexus with .the assets transferred and they. are income indirectly receive<) in respect of the transfer of cash directly made. Therefore the department is entitled to include the dividends and interest in question in computing 0 the taxable income of the assessee. [885 C-D] C.I.T. West Bengal III v. Prem Bhai Parakh & Ors., [19701 77 I.T.R. 27, held inapplicable. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1374 and 2146 to 2149 of 1970. E App~als from the judgments and order dated July 30, 1963 and February 11, 1965 of the Calcutta High Court in Income-tax Reference No. 48 of 1959, and 69 ol 1961 respectively. D. Pal, T. A. Ramachandran and D. N. Gupta, for the appel- lants and respondents Nos. 2 to 4 (in all the appeals). f S. C. Manchanda, P. L. Juneja, R. N. Sachthey and B. D. Sharma, for respondent No. 1 (in all the appeals). G H The Judgment of the Court was delivered by Hegde, J, All these appeals by certificate are filed by the legal representatives of Late Karam Chand Thapar who was the as!lessee in ~his case. He died after the a!l'>essments were made. The assessment years with which we are concerned in these appeals are 1949-50, 1950-51, 1951-52, 1952-53 and 1953-54. The facts of the case lie within a narrow compass. Late Karam Chand Thapar made certain cash gifts to his wife Smt. Mohini Thapar. From out of those gifts, she purchased certain shares and the balance amount she invested. The shares earned dividends and the investments yielded interest. The in- terest realised and the clividends earned were included in. the in- cwne of Karam Chand Thapar for the purpose of assessment in \ 884 SUPREME COURT REPORTS [1972] l S.C.R. the assessment years mentioned earlier. The assessee objected A. to the inclusion of that amount in his income. The question is whether the department was entitled to include the dividends and interest in question in computing the taxable income. of the assessee. The Income-tax Officer held that they were liable to be included in the income of the assessee. That decision was upheld by the Appellate Assistant Commissioner. On a further B appeal, taken by the assessee to the Tribunal the Tribunal up- held the order of the Assistant Commissioner. Thereafter at the instance of the assessee, the question set out below was submitted to the High Court under section 66 ( 1) of the Indian Income- tax Act, 1922, in respect of the assessment year 1949-50 : " ( 1) Whether on the facts and on the circums- tances of the case, the income of Rs. 21,225 derived from deposits and shares held by the assessee's wife, Smt. Mohini Devi Thapar was income from assets directly or indirectly transferred by the assessee to his wife within the meaning of Section 16 ( 3) of the In- come-tax Act." Similar questions were referred in respect of other assessment year. The High Court answered these questions in favour of the revenue. Hence these appeals. c D Section 16(3)(a)(iii) of the Act--'the provision relevant for E the purpose of these appeals reads thus : ( 2) "II} computing the total income of any indivi- dual for the purpose of assessment, there shall be included- ( a) so much of the income of a wife or minor child of such individual as arises directly F or indirectly- ( i) ............... . (ii) ............... . (iii) from assets transferred directly or indirect- ly to the wife by the husband otherwise G than for adequate consideration or in connection with an agreement to live apart;" The assets transferred in this case is the glft of cash amounts made by the assessee to his wife. The transfers in question are direct transfers. But those a>eets, as mentione
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