TaxTMI 
TaxTMI 
TaxTMI 
1963 (3) TMI 45
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.... presented to the Company an application to transfer the said 750 'A' shares to Mrs.Judith Knight. A transfer deed of that date stated : "I, Philip John Plasket Thomas of 8, Mission Row, Calcutta, in consideration of my forthcoming marriage with Judith Knight of 35, Ridgeway, Kingsbury, London (hereinafter called the said transferee) do hereby transfer to the said transferee the 750 'A' shares numbered 1750 standing in my name in the books of J. Thomas & Co., Ltd., to hold to the said transferee Executors, administrators and assigns, subject to the several conditions on which I hold the same at the time of the execution thereof. And 1, the said transferee, do hereby agree to take the said shares subject to the same conditions." On December 15, 1947 the Company transferred the shares to Mrs. Judith Knight and registered her as the owner of the shares. On December 18, 1947 the marriage was solemnised. On January 26, 1948 the fact of marriage was communicated to the Company and the name of the shareholder was changed in the books of the company to Mrs. Judith Thomas. It is undisputed that during the relevant periods the shares stood registered in the name of the assessee's wife and ....
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....fective only after the marriage. It further held that the transfer could also be construed as a revocable transfer within the meaning of s. 16 (1) (c) of the Act. Therefore the Appellate Tribunal dismissed the four appeals. The assessee then made four applications for referring two questions of law arising out of the Tribunal's order to the High Court. These questions were: 1.In the faces and circumstances of these cases, whether the dividends paid by j. Thomas & Co. Ltd., to Mrs. Judith Thomas, grossed up to the sums of Rs. 97,091/-, Rs. 78,272/, Rs. 1,00,000/. and Rs. 16,385/respectively for the four years in question could be included in the income of Mr. P.J.P. Thomas and be taxed in his hands under the provisions of section 16 (3) (a) (iii) of the Indian lncome-tax Act? 2.In the facts and circumstances of these cases, whether the dividends referred to above could be included in the total income of Mr. P. J. P. Thomas under the provisions of sec. 16 (1) (c) of the Indian Income-tax Act ? The Tribunal accepted these applications and referred the aforesaid two questions to the High Court. By its decision dated February 28, 1961 the High Court answered the first question agains....
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....ection deals only with income arising after its introduction. It clearly aims at foiling an individual's attempt to avoid or reduce the incidence of tax by transfering his assets to his wife or minor child, or admitting his wife as a partner or admitting his minor child to the benefits of partnership, in a firm in which such individual is a partner. It creates an artificial income and must be strictly construed see Bhogilal Laherchand v. Commissioner of Income-tax (1) (1) [1954] 25 I.T.R. 523. Clauses (a) (i) and (a) (ii) of the sub-section provide that in computing the total income of an individual there should be included the income arising directly or indirectly to his wife from her share as a partner or to his minor child from the admission to the benefits of partnership, in a firm of which such individual is a partner. We are not directly concerned with cls.(a)(i) and (a) (ii). We are concerned with cl. (a) as sets transferred by an individual to his wife has to be included in the transferor's total income. There are two exceptions to this rule, viz., (1) where the transfer is for adequate consideration, or (2) where it is in connection with an agreement to live apart. The se....
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....tive wife. He accepted the view that the words 'husband' and 'wife' must mean legal husband and legal wife. Even so he expressed the view that on a true construction of s. 16 (3) (a) (iii) the time when the relationship has to be construed is the time when the computation of the total income of the husband is made. Learned counsel for the appellant has very strongly contended before us that the view expressed by the learned judges of the High Court as to the proper interpretation of cl. (a) (iii) is not correct. On a plain reading of sub-s. (3) of s. 16 it seems clear to us that at the time when the income accrues, it must be the income of the wife of that individual whose total income is to be computed for the purpose of assessment : this seems to follow clearly from cl. (a) of sub-s. (3). Therefore, in a sense it is right to say that the relationship of husband and wife must subsist at the time of the accrual of the income: otherwise the income will not be the income of the wife, for the word 'wife' predicates a marital relationship. The matter does not however end there. When we go to sub-cl. (iii) we find that only so much of the income of the wife as arises directly or indire....
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....by the husband". We fail to see how any disharmony results from giving full effect to the adjectival clause in sub-cl.(iii). Nor do we see why the words 'husband' and 'wife' should be taken in the archaic sense contended for by the learned counsel for the respondent. In re Smalley, Smalley v. Scotton [1929] 2 Ch. 112., a decision on which learned counsel for the respondent relies, the facts were these. A testator by his will gave all his property to "my wife E.A.S". The testator left a lawful wife M.A.S. and children by her and contributed to their support, but about five years before his death had contracted a bigamous marriage with a widow E. A. Xi. Who lived with him and was known as E.A.S., and believed she was and was reputed to be his wife. The will was produced, by E.A.M. It was held that the will taken in connection with the surrouding circumstance%, indicated that the testator intended to benefit E.A.M., she being in a secondary sense and by repute his wife. The rules of construction which were followed in that case were those laid down by Lord Abinger in Doe v. Hiscoks Lord Abinger (1) (1839) 5 M. & W. 863, 367.said: "The object in all cases is to discover the intention ....
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....ps had to consider the earlier decision of the Court of Appeal in Commissioners of Inland Revenue v. Gaunt (1941) 24 T.C. 69. which held that the one word included the other. Their Lordships ultimately held, overruling the decision in Gaunt's case, that the word "wife" did not include a "widow." The English decisions proceeded on the footing that in England it is a principle of Income Tax law, embodied in rule 16 of the General Rules, that for Income Tax Purposes husband and wife living together are one. lord Morton said: "I think that the treatment of husband and wife by the Legislature for Income Tax purposes rests on the view that any income enjoyed by one spouse is a benefit to the other spouse. It is not surprising, therefore, that in the Sections now under consideration a benefit to the wife of the settlor is treated a% being a benefit to the settlor, but it seems to me unlikely that this principle is being extended by these Sections to the widow of the settlor." Now, it is quite clear to us that the treatment of husband and wife in the Indian Income-tax Act, 1922 does not rest on the view that any income enjoyed by one spouse is a benefit to the other spouse ; for sub-s. (....