V.G. Oak C.J. - (1.) THIS is a reference under Section 66 of the Indian Income-tax Act, 1922. Rajendra Lal is the assessee. He has been assessed as an individual. He is the son of Sir Shadi Lal. The assessement year is 1961-62. The relevant accounting period ended on March 31, 1961.
(2.) CERTAIN shares worth Rs. 2,20,000 belonged to the joint Hindu family consisting of Sir Shadi Lal and his sons. There was a partial partition in the family on August 18, 1959. The shares worth Rs. 2,20,000 were divided among the different members of the family as follows : JUDGEMENT_803_ITR78_1970Html1.htm At the time of assessment for 1961-62, the Income-tax Officer noticed certain income received by Smt. Sushila Devi towards interest or dividend on Rs. 1,00,000, The Income-tax Officer included this income in the assessment of Rajendra Lal on the footing that the sum of Rs. 1,00,000 had been transferred in 1959 by Rajendra Lal in favour of his wife, Smt. Sushila Devi. Her income was included in Rajendra Lal's assessment under Section 16 (3)(a) of the Act. This decision was upheld in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. At the request of the assessee, the Tribunal has referred the following question of law to this court. ''Whether, in the facts and circumstances of the case, the provisions of Section 16(3)(a) are applicable ? The question for consideration is whether the present case falls under Sub-section (3) of Section 16 of the Act. Sub-section (3) of Section 16 of the Act stated; "In computing the total income of any individual for the purpose of assessment, there shall be included- (a) so much of the income of a wife or a minor child of such individual as arises directly or indirectly--.... (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart ;...." The question for consideration is whether the present case is covered by Sub-clause (iii) of Clause (a) of sub-section (3) of Section 16. It is true that Rajendra Lal did not make a transfer in favour of his wife directly. But Sub-clause (iii) covers cases of indirect transfer also. We have, therefore, to consider whether there is a case of indirect transfer of assets by Rajendra Lal in favour of his wife.
(3.) IN 1959 Rajendra Lal and Narendra Lal were, the two coparceners, who were entitled to receive shares in the property worth Rs. 2,20,000. Each of the two brothers was entitled to a share worth Rs. 1,10,000. But the two brothers decided to allot certain shares to other members of the family. According to that plan, a sum of Rs, 1,00,000 was allotted to Smt. Sushila Devi from the total share of Rs. 1,10,000, to which Rajendra Lal was entitled under the partition. This was an indirect transfer by Rajendra Lal in favour of his wife of assets worth Rs. 1,00,000. The main contention of the learned counsel for the assessee is that the sum of Rs. 1,10,000 did not belong to Rajendra Lal in his individual capacity, but as karta of the smaller joint family consisting of himself and his wife. Reliance was placed upon a decision of this court in Commissioner of Income-tax v. Beni Prasad Tandon, 1969 71 ITR 322. It was held by this court that a share of family property received by the member of a Hindu undivided family who has no male issue but only a wife and daughters on partition of the undivided family should be treated as property belonging to the Hindu undivided family consisting of the assessee, his wife and minor daughters, and not property exclusively belonging to the assessee.;