Assignment of income at source: gifted commission rights accrued only to the daughters, not the assessee.

A right to receive a defined share of managing agency commission was treated as an actionable claim capable of assignment. After the assessee executed a deed of gift transferring that right to his two daughters in equal shares, and intimation was given to the company, the right to receive the commission stood diverted to the daughters to the assessee's entire exclusion. Applying the distinction between diversion of income at source and mere application of income after accrual, the commission did not first accrue as the assessee's income after the transfer. It was therefore not assessable in his hands for the years in question.

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Issues: Whether the assessee's 7 1/2% share of managing agency commission was taxable in his hands after he executed a deed of gift transferring that right to receive the commission to his two daughters.

Analysis: The agreement of 26 February 1951 created in favour of the assessee a right to receive a defined share of the managing agency commission, but the deed of gift of 20 October 1955 transferred that right itself to the donees in equal shares to the entire exclusion of the assessee. The right to receive the commission was an actionable claim capable of assignment, and the transfer, once intimation was given to the managing agency company, operated so that the income would accrue only to the daughters and not to the assessee. On the settled distinction between diversion of income at source and mere application of income after accrual, the commission did not first reach the assessee as his income after the gift.

Conclusion: The commission was not assessable in the assessee's hands for the years in question.

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