Indirect transfer to wife on partition attracted clubbing of income under the income-tax anti-avoidance rule.

Section 16(3)(a)(iii) of the Indian Income-tax Act, 1922 applied to income arising from an amount allotted to an assessee's wife on partition. The High Court treated the arrangement as an indirect transfer by the husband from his partition share to the wife, and rejected the contention that the sum belonged to the joint family or that the wife had an independent right to it. The description of the payment as maintenance was found unsupported by the record, and the transfer was regarded as not being for adequate consideration. Accordingly, the income from the amount transferred to the wife was includible in the assessee's total income.

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Issues: Whether the income arising from the amount of Rs. 1,00,000 allotted to the assessee's wife on partition was includible in the assessee's total income under section 16(3)(a)(iii) of the Indian Income-tax Act, 1922.

Analysis: The assessee was an individual and the amount allotted to his wife was not a direct transfer, but the provision expressly covered indirect transfers. On the facts, the assessee was entitled to a share of Rs. 1,10,000 on partition and out of that share a sum of Rs. 1,00,000 was allotted to his wife. The arrangement was treated as a transfer by the husband in favour of the wife. The claim that the amount belonged to the joint family or that the wife had an independent right to the share was rejected. The note describing the amount as maintenance was found to be unsupported by the record and not a genuine settlement; the transfer was therefore held to be otherwise than for adequate consideration.

Conclusion: Section 16(3)(a)(iii) applied, and the income from the amount transferred to the wife was rightly included in the assessee's assessment.

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