Strict construction of spousal transfer provision excludes pre-marriage share transfers from husband's taxable income.

Section 16(3)(a)(iii) of the Indian Income-tax Act, 1922 applies only where the husband transfers assets to his wife during the subsisting marital relationship. A transfer made before marriage cannot be treated as a transfer to a wife merely because the transferee later becomes the wife, and the provision, being an exception creating artificial income, must be strictly construed. On the facts, the share transfer operated immediately on execution before marriage, so the statutory condition was not met. The dividends were therefore not includible in the husband's total income.

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Issues: Whether dividends arising from shares transferred to a woman before marriage, but received by her after marriage, could be included in the transferor-husband's income under section 16(3)(a)(iii) of the Indian Income-tax Act, 1922.

Analysis: Section 16(3)(a)(iii) is an exception creating an artificial income and must be strictly construed. For the provision to apply, the assets must be transferred by the husband to his wife, so the marital relationship must exist when the transfer is made. A transfer made before marriage cannot be treated as a transfer by the husband to the wife merely because the transferee later becomes the wife. On the facts, the transfer deed operated immediately on the date of execution and was not postponed until the marriage, even if the marriage was contemplated or later solemnised. The income therefore arose from assets transferred before the relationship of husband and wife existed, and the statutory condition was not satisfied.

Conclusion: Section 16(3)(a)(iii) did not apply, and the dividends were not includible in the assessee-husband's total income.

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