LexTULSIDAS KILACHAND versus THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY I.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
3 S.C.R. SUPREME COURT REPORTS
351
TULSIDAS KILACHAND
v.
THE COMMISSIONER OF INCOME-TAX,
BOMBAY CITY I.
[And connected appeals]
(J. L. KAPUR, M. HIDAYATULLAH and J. C. SHAH, JJ.)
Income Tax-Holder of shares becoming trustee for the benefit
of wife-Liability to tax of such shareholder-" Adequate considera-
tion", meaning of-Indian Income-tax Act, I9Z2 (II of 1922),
SS. I6(I)(c), I6{J)(a)(iii), l6(J)(b).
By a deed dated March s. 1951, the appellant made a decla-
ration of trust in favour of his wife as follows: "I.. ....... hereby
declare that I hold 244 shares ............ upon trust to pay the
income thereof to my wife ......... for a period of seven years from
the date hereof or her death (whichever event may be earlier) ·
and I hereby declare that this trust shall not be revocable". In
the year of account, 1951, a sum of Rs. 30,404 was received as
dividend income on those shares and the appellant claimed
before the income-tax authorities that this sum was not liable
to be included in his total income in view of the third proviso to
s~ r6(r)(c) of the Indian-Income-tax Act, 1922, but this claim
was rejected on the ground that th~ case was covered either by
s. 16(3)(a)(iii) or by s. r6(3)lb) of the Act. The appellant's con·
tention was that under the deed of trust there was no transfer
of assets either to the wife or to any person for the benefit of
the wife but merely a creation of a trust in respect of the
shares, the dividends from which were payable to the wife, that
even if it be held that there was such a transfer, it was for ade~
quate consideration being for love and affection which was a
good consideration, and that thus s. 16(3)(a){iii) or s. 16(3)(b) was
not applicable.
Held, that on a true construction of the deed dated March
15, 1951, there was a transfer of the shares by the husband to
himself as a trustee for the benefit of the wife and that even
though .the husband was the same individual, in his capacity
.. as a trustee he must be regarded as a person distinct from the
. transferor.
· Held, further, that the words "adequate consideration" in
· s. r6(3) ·of the Indian Income-tax Act, 1922, denoted considera-
+tion other than mere love and affection, which, in the case.of a
wife; may be presumed.
Accordingly, the present case fell within s. r6(3}{b) of the
Act and not within the third proviso to s. I6(r)(c).
P~ovat Kuma~ Mitter v. Commissioner ' of Income-tax, [rg6r]
3 S.C.R. 37, distinguished. .
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January J.
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352
SUPREME COURT REPORTS
(1961]
:r96r
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
134 to 137 of 1959.
Tt<l~idas
• l l
f
h .
Kilachand
Appeals by spema
eave rom t e Judgment and
v.
order dated September 20, 1957, of the Bombay High
Commissiouer of Court in Income Tax Reference No. 14 of 1957.
Income-la:o
N
..
R. J. Kolah, S. . Andley, J. B. DadachanJt, Ramesh-
Hsdayatrrllals ].
war Nath and P. L. Voltra, for the appellants.
K. N. Rajagopal Sastri and D. Gupta, for the res-
pondent.
1961. January 3. The Judgment of the Court
was delivered by
HIDAYATULLAH, J.-Tbis judgment governs the
disposal of Civil Appeals N'os. 134 to 137 of 1959.
They have been filed by four assessees with special
leave, and adse out of similar facts, and it is not
necessary to refer to more than one case to consider
the point in question.
The assessment year under con,;idoratlon is 1952-53,
and the previous year, the Calendar yea.r, 1951. In
that year, ~k Tulsidas Kilachand, one of the four
appellant~, made a dPclaration of trust in favour
of his wife, a portion of which may be quoted here:
" .......•. I, Tuh;idas Kilacho.nd ......... hereby de-
clare that I hold 244 shares of Kesa.r Corporation
Ltd. and 120 shares of Kilachand Dovchand & Co.,
Ltd .......... upon trust to pay the income thereof to
my wife Vimla. for a period of seven years from the
date hereof or he.r death (whichever event may be
earlier) and I hereby declare that this trust shall
not be revocable."
In the year of account, a. sum of Rs. 30,404 was receiv-
ed a8 dividend income on thmm Hharos, and the t\sscs·
see contended that thiK income, after being grossed
up, was not liable to be included in hiK ·total income,
in viow of tho third proviso to 8. IG(l)(c) of tho Indin.u
Income-tax Act.
The Incomo-ta.x: Officer diJ not
acct>pt thiR contt-ntion, and though the assessment
order is not before us, we gather from the sta.teroeuExcerpt shown. Read the full judgment & AI analysis in Lexace.