Indirect transfer through a trust attracted clubbing of wife's income in the husband's hands to the extent of his contribution.

The clubbing provision applied to trust-generated interest income where the assessee had contributed the substantial part of the trust property and the arrangement ultimately transferred part of that contribution to the wife without adequate consideration. Interposing trustees and the lapse of the trust period did not break the chain of indirect transfer, because the statutory language covered both direct and indirect transfers. The wife's income was therefore includible in the husband's hands only to the extent attributable to his contribution; on these facts, 3/5ths was assessable, not 4/5ths.

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Issues: Whether 3/5ths of the interest income arising from trust assets transferred under the trust deed was assessable in the hands of the assessee under the clubbing provision relating to assets transferred directly or indirectly to the wife otherwise than for adequate consideration.

Analysis: The trust deed showed that the assessee had contributed the substantial part of the trust property and that the arrangement was intended to result, after the prescribed period, in a transfer of part of that contribution to the wife. The interposition of trustees and the expiry of the trust period did not break the chain of transfer, because the statutory words covered indirect transfer as well as direct transfer. The provision dealing with income of a wife from assets transferred for her benefit through a person or association was not the governing clause on these facts after the trust had worked itself out. The Court further held that the arrangement lacked adequate consideration to the extent necessary to exclude the statutory clubbing rule, and only the portion attributable to the husband's contribution could be treated as transferred by him.

Conclusion: The statutory clubbing provision applied, but only 3/5ths of the wife's interest income was correctly assessable in the assessee's hands, not 4/5ths.

Ratio Decidendi: For purposes of the clubbing provision, a transfer may be indirect and effected through a chain of transactions, and the income of the wife will be includible in the husband's hands to the extent the husband's assets are ultimately transferred to her without adequate consideration.

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