Strict construction of clubbing provisions: absence of material showing husband's transfer to wife defeated tax liability.

Section 16(3) of the Income-tax Act, 1922 applies only where the revenue brings material showing that a wife's income arose from assets transferred by the husband, directly or indirectly, otherwise than for adequate consideration. Because the provision creates an artificial tax liability, it must be strictly construed and the burden remains on the revenue to prove the transfer by direct evidence or established surrounding circumstances. Here, the only adverse feature was rejection of the assessee's explanation about the wife's independent source of assets. As no independent material or reasonable inference of transfer was available, the Tribunal had no basis to invoke the provision, and the answer was in favour of the assessee.

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Issues: Whether there was material before the Tribunal for holding that the income of Rs. 2,600 earned by the assessee's wife was from assets transferred directly or indirectly to her by the assessee otherwise than for adequate consideration.

Analysis: Section 16(3) of the Income-tax Act, 1922 applies only where there is material from which it can reasonably be inferred that the wife's income arose from assets transferred by the husband directly or indirectly otherwise than for adequate consideration. The provision creates an artificial liability and must therefore be strictly construed. On the record, the only circumstance against the assessee was that his explanation about the wife's independent source of assets was not accepted. No independent material was brought by the revenue to show transfer by the husband, no direct proof of such transfer was available, and no surrounding facts were established from which such transfer could reasonably be inferred. The burden remained on the revenue to establish liability under the provision.

Conclusion: There was no material before the Tribunal to hold that the wife's income arose from assets transferred by the assessee-husband within section 16(3) of the Income-tax Act, 1922; the answer is in favour of the assessee.

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