Transfer of assets and benami ownership tests fail where the husband's intent at purchase is not proved.

Dividend income from shares bought in the wife's name was not includible in the husband's income under section 16(3)(a)(iii) because the Department failed to show that he had transferred, or intended at the date of purchase to transfer, assets for her acquisition without adequate consideration. Later reimbursement of payments from the wife's dividend income did not itself amount to a transfer of assets. The shares were also not proved to be benami, as the crucial question was beneficial ownership at the time of purchase and the Department did not establish that the husband provided the purchase money then or that the wife was merely a name-lender.

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Issues: Whether dividend income arising from shares purchased in the wife's name could be included in the assessee's total income under section 16(3)(a)(iii) on the footing of transfer of assets by the husband, or on the alternative footing that the shares were benami holdings of the husband.

Analysis: Section 16(3)(a)(iii) applies only where the husband's assets are transferred, directly or indirectly, to the wife otherwise than for adequate consideration. On the facts, the wife contributed part of the purchase price, the remaining payments were made by the husband later and were recouped out of the wife's dividend income, and there was no intention proved that, on the date of purchase, the husband had furnished or intended to furnish the whole consideration for her benefit. A subsequent reimbursement or temporary accommodation cannot by itself amount to a transfer of assets. As to benami, the source of some later payments was not decisive; the crucial question was intention at the date of purchase. The Department failed to prove that the husband provided the purchase money at that time or that the wife held the shares only as his name-lender. Section 82 of the Indian Trusts Act was applied to confirm that beneficial ownership follows payment only where there was no intention to benefit the apparent transferee.

Conclusion: The dividend income was not assessable in the assessee's hands under section 16(3)(a)(iii), and the shares were not proved to be benami for his benefit.

Final Conclusion: The reference was answered against the Revenue and the assessee succeeded on both the statutory inclusion issue and the benami contention.

Ratio Decidendi: For section 16(3)(a)(iii) to apply, the husband must, at the date of purchase, have transferred or intended to transfer assets for the wife's acquisition of the property for inadequate consideration; mere later payments or reimbursement do not suffice, and benami ownership is not established unless the Department proves beneficial ownership in the husband at the time of purchase.

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