COMMISSIONER OF INCOME TAX Vs. VIVIAN BOSE

JUDGEMENT

(1.) VIVIAN Bose, the assessee, was married to Miss Irene Mott, a Canadian lady, on December 18, 1930. It is common ground that, under the Canadian law, there must be a pre -nuptial agreement between the couple to the effect that the lady would acquire, after marriage, one -half share in the properties of her husband. Unless Miss Irene Mott could acquire such a right in the properties of the assessee, she could not have any right in her properties in Canada. The assessee, therefore, entered into a pre -nuptial agreement with Miss Irene Mott on August 20, 1930. This agreement, inter alia, provided that the assessee should transfer into the joint and several names of his wife and himself with rights of survivorship between them all his accounts, securities, shares and properties of every sort and kind of which he shall happen to be possessed in his own right at the date of the marriage. The agreement further provided that whatever properties might be acquired by the assessee after the date of the said marriage in his own exclusive right shall either be acquired in the joint and several names of his wife, Irene, and himself or shall as soon thereafter as possible be transferred to their joint and several names, with rights of survivorship between them.

(2.) ON December 5, 1938, one Bimal Kumar Bose sold one -third share in the vacant plot bearing Khasara No. 217/1 situate on the Hennessee Road, Nagpur, to the assessee and his wife for Rs. 4,334. The total consideration therefore was paid by the assessee. On November 23, 1940, the assessee, who had inherited the adjoining plot of land situate on Hennessee Road, being a part of Khasara No. 217/1, transferred the same to himself and his wife. In this sale deed, the vendor described himself as the 'trustee' of the plot and the vendees as the 'beneficiaries'. This transfer was also stated to be in pursuance of the pre -nuptial agreement dated August 20, 1930.

(3.) IN second appeal before the Tribunal, it was sought to be urged on behalf of the assessee, firstly, that by sale deed dated December 5, 1938, B. K. Bose had sold the plot jointly to the assessee and his wife. In other words, the assessee had not transferred this plot to his wife and, accordingly, the income arising to the wife of the assessee from the said plot could not be assessed in the hands of the assessee under s. 64(1)(iii) of the Act. Secondly, it was contended that the sale deed dated November 23, 1940, though between the assessee and his wife, in fact evidenced a transaction between a trustee and a beneficiary and not between husband and wife and, therefore, the provisions of s. 64(1)(iii) were not attracted. Lastly, it was contended that even if the properties in question were considered to have been transferred by the assessee to his wife, the transactions were effected for adequate consideration, viz., promise to marry, and as such the same were not hit by s. 64(1)(iii). On the other hand, it was sought to be contended on behalf of the revenue that the provisions of s. 64(1)(iii) were applicable not only to cases where the assets were directly transferred by the assessee to his spouse but also to those involving indirect transfers. According to the revenue, the transfers of properties evidenced by the sale deeds dated December 5, 1938, and November 23, 1940, fall within the ambit of s. 64(1)(iii). It was urged that there was no consideration for this transfer and as such the revenue was justified in including in the income of the assessee the income of his wife arising from the properties in question. The Tribunal accepted some of the contentions on behalf of the assessee and held that the provisions of s. 64(1)(iii) were not attracted. The Tribunal held that since the sale deed dated December 5, 1938, was executed between B. K. Bose on the one hand and the assessee and his wife on the other, it could not be said that it was the assessee who had transferred the property to his wife by his deed. The Tribunal rejected the contention of the assessee that he had transferred the property referred to in the sale deed dated November 23, 1940, to his wife as a trustee and not as a husband. However, proceeding on the assumption that the properties in question had been indirectly transferred by the assessee to his wife, the Tribunal held that the case of the assessee will go out of the ambit of s. 64(1)(iii) as the property was transferred to the wife pursuant to the provisions contained in the pre -nuptial agreement dated August 20, 1930. The Tribunal emphasised the fact that the validity of the pre -nuptial agreement was not even doubted by the revenue. The Tribunal pointed out that even past consideration is good consideration for a valid transfer and the promise of Miss Irene Mott to marry the assessee constituted a good and valid consideration for transferring the property in question by him or her. The Tribunal relied upon the meaning of the word 'adequate' given in Webster's New World Dictionary as 'equal to requirement or occasion, sufficient, suitable'. The Tribunal, accordingly, held that the transfers of the immovable properties in question were effected for adequate consideration and as such the income of the wife of the assessee from these properties is not liable to be assessed in the hands of the assessee under s. 64(1)(iii) for each of the assessment years in question. For these two assessment years, 1967 -68 and 1968 -69, from this order of the Tribunal, the following question has been referred to us for our determination : 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transfer of the immovable properties by the assessee to his wife was for adequate consideration and the income from the properties so transferred was not includible in the total income of the assessee under section 64(1)(iii) of the Income -tax Act, 1961 ?'