Dividends on shares transferred before marriage were taxable in the husband's income, but the transfer was not revocable after marriage.

Dividends from shares transferred by a husband to a woman in contemplation of marriage were includible in the husband's income under section 16(3)(a)(iii) because the transferee had become his legally wedded wife before the income accrued, and the transfer was treated as one made to the wife despite marriage being only valuable, not adequate, consideration. However, the same transfer was not revocable within section 16(1)(c), because any right of reversion existed only before marriage and ceased once the marriage took place; no subsisting revocability remained during the relevant assessment years. The reference was accordingly allowed on the first issue and rejected on the second.

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Issues: (i) Whether dividends arising from shares transferred to a woman in contemplation of marriage could be included in the husband's income under section 16(3)(a)(iii) of the Indian Income-tax Act. (ii) Whether the transfer, being conditional on the forthcoming marriage, was a revocable transfer within section 16(1)(c) of the Indian Income-tax Act.

Issue (i): Whether dividends arising from shares transferred to a woman in contemplation of marriage could be included in the husband's income under section 16(3)(a)(iii) of the Indian Income-tax Act.

Analysis: The statutory provision applies where income of a wife arises from assets transferred by the husband otherwise than for adequate consideration. The relevant relationship for assessment was that of husband and wife during the accounting periods, and the transferee had in fact become the legally wedded wife before the income accrued. The transfer was made expressly in consideration of the forthcoming marriage, and marriage was held to be capable of being valuable consideration, though not adequate consideration for the purpose of the section. The nature and object of the transaction showed that the assets were transferred to the woman as wife and in that capacity.

Conclusion: The dividends were rightly includible in the husband's income under section 16(3)(a)(iii).

Issue (ii): Whether the transfer, being conditional on the forthcoming marriage, was a revocable transfer within section 16(1)(c) of the Indian Income-tax Act.

Analysis: Section 16(1)(c) applies to income from settlements or transfers that are revocable, including cases where the instrument contains a provision for retransfer or otherwise gives a right to reassume power over the assets. On the facts, any right of reversion was confined to the period before marriage. Once the marriage took place, the condition was fulfilled and the transfer became absolute and irrevocable. As the assessment years in question were all after the marriage, no subsisting revocability remained for application of the section.

Conclusion: The dividends could not be included in the husband's total income under section 16(1)(c).

Final Conclusion: The reference succeeded for the revenue on the first question and failed on the second, so the ultimate result was mixed, with no order as to costs.

Ratio Decidendi: For section 16(3)(a)(iii), the material inquiry is whether the income accrued to the legally wedded wife during the assessment period from assets transferred by the husband, and marriage may be valuable but not necessarily adequate consideration; for section 16(1)(c), revocability must subsist during the relevant assessment period.

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