P.B.MUKHARJI J. -
(1.) THIS IT ref. under s. 66(1) of the IT Act raises the two following questions of law for our decision :
"In the facts and circumstances of these cases, whether the dividends paid by J. Thomas and Co. Ltd. to Mrs. Judith Thomas, grossed up to the sums of Rs. 97,091, Rs. 78,272, Rs. 1,00,000 and Rs. 16,385 respectively for the four years in question could be included in the income of Mr. P. J. P. Thomas and be taxed in his hands under the provisions of s. 16(3)(a)(iii) of the Indian IT Act ? In the facts and circumstances of these cases, whether the dividends referred to above could be included in the total income of Mr. P. J. P. Thomas under the provisions of s. 16(1)(c) of the Indian IT Act ?"
(2.) THE Tribunal held that the transfer of shares in question in this case was hit by s. 16(3)(a)(iii) of the IT Act and also held that such transfer could be construed to be a revocable one within the meaning of s. 16(1)(c) of the Act.
The facts giving rise to these questions of law may be briefly stated. The assessee is P. J. P. Thomas who held 750 "A" shares in J. Thomas and Co. Ltd., Calcutta. He entered into an engagement to marry one Mrs. Judith Knight. The engagement was announced on the 3rd Sept.,1947. The assessee and Mrs. Judith Knight on the 10th Dec., 1947 presented to the company an application to transfer the said shares to Mrs. Judith Knight. The company transferred those shares to Mrs. Knight and registered the same in the name of Mrs. Knight on its books on the 15th Dec., 1947. Marriage took place between the assessee and Mrs. Judith Knight, within three days after the registration, on the 18th Dec., 1947. The fact of the marriage was communicated to the company on the 26th Jan.,1948, and the name of Mrs. Judith Knight was rectified as Mrs. Judith Thomas in the books of the company.
It is undisputed that during the relevant period the shares stood registered in the name of the assessee's wife and the income in question arose to her as the wife of the assessee. The four accounting years with which the assessments are concerned are those ending respectively on the 30th April, 1948, 30th April, 1949, 30th April, 1950, and 30th April, 1951, and the four assessment years were 1949-1950, 1950-1951, 1951-1952, and 1952- 1953. It will be appropriate at this stage to set out the relevant portion of the transfer deed in respect of the above shares whose interpretation will be relevant to answer the questions stated. The relevant portion of the transfer deed runs as follows :
"I, Philip John Plasket Thomas, of 8, Mission Row, Calcutta, in consideration of my forthcoming marriage with Judith Knight of 35, Ridgeway, Kingsbury, London (hereinafter called the said transferee) do hereby transfer the 750 "A" shares numbered 1-750 standing in my name in the books of J. Thomas and Co. Ltd. to hold to the said transferee, executors, administrators, and assigns, subject to the several conditions on which I hold the same at the time of the execution thereof. And I the said transferee do hereby agree to take the said shares subject to the same conditions."
(3.) THE main argument on behalf of the assessee on s. 16(3)(a)(iii) of the IT Act is that it does not apply because Mrs. Judith Knight was not the wife of Mr. Thomas when he transferred the shares to her. In other words, it is contended on behalf of the assessee that in order to apply and attract s. 16(3)(a)(iii) of the Act, it must be a transfer to the wife as such by the husband as such at the date of the transfer.
This leads to the consideration first of s. 16(3)(a)(iii) and of the exact terms of the deed of transfer. Before setting out the provision of the statute which falls for consideration it may be useful to emphasise and consider the relevant terms of the transfer deed. The important provision in the transfer deed is the mention of the consideration as "in consideration of my forthcoming marriage with Judith Knight." Apparently, at that date Mrs. Judith Knight was either a widow or divorcee-we are told in fact, that she was a divorcee-and had not yet married Mr. Thomas but the fact remains that at the date of the deed of transfer, the transfer was taking place in consideration of the "forthcoming marriage" between Judith Knight and Thomas. The effect of this document is that if the consideration failed, that is, the forthcoming marriage did not take place, then Thomas would be in a position to recall the shares from Mrs. Judith Knight and all or such dividends as she might have withdrawn between the date of the deed and the failure of consideration of the marriage.;