Appeals Nos 134 to 137 of 1959
Appeals by special leave from the judgment and order dated September 201957 of the Bombay High Court in Income Tax Reference No 14 of 1957
R J Kolah section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the appellants
K N Rajagopal Sastri and D Gupta for the respondent
January 3
The Judgment of the Court was delivered by HIDAYATULLAH J
This judgment governs the disposal of Civil Appeals Nos
134 to 137 of 1959
They have been filed by four assessees with special leave and arise out of similar facts and it is not necessary to refer to more than one case to consider the point in question
The assessment year under consideration is 1952 53 and the previous year the Calendar year 1951
In that year Mr Tulsidas Kilachand one of the four appellants made a declaration of trust in favour of his wife a portion of which may be quoted here    1 Tulsidas Kilachand hereby de clare that I hold 244 shares of Kesar Corporation Ltd and 120 shares of Kilachand Devchand  Co Ltd upon trust to pay the income thereof to my wife Vimla for a period of seven years from the date hereof or her death whichever event may be earlier and I hereby declare that this trust shall not be revocable In the year of account a sum of Rs 30404 was received as dividend income on those shares and the assessee contended that this income after being grossed up was not liable to be included in his total income in view of the third proviso to section 161c of the Indian Income tax Act
The Income tax Officer did not accept this contention and though the assessment order is not before us we gather from the statement of the case that the reason he gave was that the income had accrued to or had arisen in the hands of 353 Mr Tulsidas Kilachand and had been paid by him to his wife
The Income tax Officer held that the words of the proviso income arising to any person by virtue of a settlement or disposition did not apply to this income
On appeal the Appellate Assistant Commissioner held that the case was governed by section 163b and need not be considered under the third proviso
to section 161c of the Act
It appears to have been conceded before him that if the former provision applied the proviso would not save the income from being assessed in the hands of Mr Tulsidas Kilachand
The appeal was dismissed
In the appeal before the Tribunal Mr Tulsidas Kilachand again relied upon the third proviso to section 161c and contended that the case was riot governed by section 163b and that the dividend income could not be included in his assessment
The Tribunal came to the conclusion that the case was covered either by section 163aiii or by section 163b and that the income from the shares was therefore liable to be included in the income of Mr Tulsidas Kilachand
The Tribunal however raised and referred the following question under section 661 of the Act to the High Court of Bombay Whether on a true construction of the deed of declaration of trust dated 5th March  1951 the net dividend income of Rs 30404 on 120 shares of Kilachand Devchand  Co Ltd and 244 shares of Kesar Corporation Ltd held under trust by the assessee for the benefit of his wife was income liable to be included in the total income of the assessee The High Court came to the conclusion that though section 161c was not satisfied in view of the third proviso section 163b was applicable to the case and answered the question in the affirmative
In the appeal before us the case for the Department was based both on section 163aiii and section 163b while the appellants contended that this disposition fell within the third proviso to section 161c
The relevant provisions are 45 354  16
Exemptions and exclusions in determining the total income 1 In computing the total income of an assessee         c all income arising to any person by virtue of a settlement or disposition whether revocable or not and whether effected before or after the commencement of the Indian Income tax Amendment Act 1939 7 of 1939 from assets remaining the property of the settlor or disponer shall be deemed to be income of the settlor or disponer and all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income of the transferor Provided        
Provided further       
Provided further that this clause shall not apply to any income arising to any person by virtue of a settlement or disposition which is not revocable for a period exceeding six years or during the lifetime of the person and from which income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be assessed on the said income as and when the power to revoke arises to him
2        omitted 3
In computing the total income of any individual for the purpose of assessment there shall be included a so much of the income of a wife or minor child of such individual as arises directly or indirectly i         ii          iii from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart or b so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or 355 association by such individual for the benefit of his wife or a minor child or both
 The object of framing section 16 can almost be taken from the observations of Lord Macmillan in Chamberlain vs Inland Revenue Commissioners 1 where he stated as follows This legislation  is designed to overtake and circumvent a growing tendency on the part of taxpayers to endeavour to avoid or reduce tax liability by means of settlements
Stated quite generally the method consisted in the disposal by the taxpayer of part of his property in such a way that the income should no longer be receivable by him while at the same time he retained certain powers over or interests in the property or its income
The legislature s counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should notwithstanding be treated as still his income and taxed in his hands accordingly
 These observations apply also to the section under consideration and the Indian provision is enacted with the same intent and for the same purpose
Section 16 thus lays down certain exemptions and exclusions in determining the total income of an assessee
Some of the provisions lay down the conditions for inclusion of certain income while others lay down the conditions for exclusion of other income
We are concerned with the income accruing in case of settlements and the conditions under which income of a wife is treated as the income of the settlor or disponer or as the income of the husband
We have to see if the pro visions for exclusion or inclusion apply to this case
Section 161c provides that income from assets remaining the property of the settlor or disponer or arising to any person by virtue of a revocable transfer of assets shall be deemed to be the income of the transferor
What cl
c means was decided by this Court in Provat Kumar Mitter vs Commissioner of Income tax 2
There Provat Kumar Mitter had assigned the dividends only and had not transferred the relevant shares
It was held by this Court that this 1  329
2 356 was a case of application of one s own income and not assignment of the source from which the income was derived which alone saved the income from tax subject however to provisions like section 161c and section 163
The deed in favour of the wife in that case gave only a right to the dividends and not being a transfer of an existing property of the assessee section 161c and the third proviso were not attracted
That case thus has no application to the facts of the present case where the disposition is differently made
The disposition here is for a period of seven years or the life of the settle  whichever is shorter
During that period or the life of the settlee Mr Tulsidas Kilachand has bound himself upon trust to pay the dividends to his wife and not to revoke the settlement
The intention is obviously to put this case within the third proviso to section 161c because cl
c does not apply to any income arising to any other person provided the disponer derives no direct or indirect benefit even though the assets remain his property
If it were only a question of the application of the proviso this disposition would be exempt
But by the deed of trust the settlor holds the shares in trust the shares do not remain the property of the settlor
Section 161c has therefore no application and the proviso is not attracted
The section goes on to deal with other situations and to provide for them specially
Sub section 3 provides specially for assets transferred to the wife or minor child
Income from assets transferred to the wife is still to be included in the total income of the husband a if the assets have been transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration vide sub section
3aiii or b so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife vide sub section
3b
The first question is whether there can be said to be transfer of assets to the wife or to any person  for the benefit of the wife
The second question is whether there was adequate consideration for the transfer if 357 there was one The contention of the assessee is that there was no transfer of any assets at all
It is contended that the ownership of shares involves a bundle of rights and that they are generally speaking a right to vote b right to participate in the distribution of assets on dissolution and c right to participate in the profits e g dividends which might be Hi declared
It is pointed out that none of these rights was transferred to the wife because transfer of assets connotes a creation of a right in the assets in praesenti
It is urged that there was no transfer of assets either to the wife or to any person for the benefit of the wife but merely a creation of a trust in respect of the shares the dividends from which were payable to the wife and that thus section 163aiii or section 163b was not applicable
It is lastly contended that even if it be held that there was such a transfer it was for adequate consideration being for love and affection which is a good consideration
The contention that there was no transfer at all in this case is not sound
The shares were previously held by Mr Tulsidas Kilachand for himself
After the declaration of trust by him they were held by him not in his personal capacity but as a trustee
No doubt under sections 5 and 6 of the Indian Trusts Act if the declarer of the trust is himself the trustee also there is no need that he must transfer the property to himself as trustee but the law implies that such a transfer has been made by him and no overt act except a declaration of trust is necessary
The capacity of the declarer of trust and his capacity as trustee are different and after the declaration of trust he holds the assets as a trustee
Under the Transfer of Property Act there can be a transfer by a person to himself or to himself and another person or persons
In our opinion there was in this case a transfer by Mr Tulsidas Kilachand to himself as a trustee though there was no formal transfer
The assessee also stresses the words any person or association of persons in section 163b and contends that such a person must be other than the husband who transfers
The word any person is wide 358 enough to include the husband when he transfers property to himself in another capacity
The change of capacity makes him answer the description any person
This deed must be regarded as involving a transfer by the husband to a trustee and even though the husband is the same individual in his capacity as a trustee he must be regarded as a person distinct from the transferor
In our opinion section 163b covers the case
It remains to consider whether there was adequate consideration for the transfer
Reliance has been placed only upon love and affection
The words adequate consideration denote Consideration other than mere love and affection which in the case of a wife may be presumed
When the law insists that there should be adequate consideration and not good consideration it excludes mere love and affection
They may be good consideration to support a contract but adequate consideration to avoid tax is quite a different thing
To insist on the other meaning is really to say that consideration must only be looked for when love and affection cease to exist
In our opinion this case falls within the special rules concerning wife and minor child laid down in section 163b and not within the third proviso to section 161c
It must thus be held that there was a transfer of the assets to the husband trustee for the benefit of the wife The answer given by the High Court was thus correct
The appeals fail and are dismissed with costs
One hearing fee
Appeals dismissed


Summary:
The assessee owned an Estate of 590 acres out of which 235 acres were occupied by immature non bearing rubber trees for the maintenance and upkeep of which the respondent claimed expenses from out of the income which was allowed both by the Agricultural Income Tax Tribunal and the High Court
The appellant came up by special leave
Held that the provisions of section 5e of the Madras Planta tions Agricultural Income Tax Act 1955 Mad
V of 1955 applicable to the present case and those of section 51 of the Travancore Cochin Agricultural Income Tax Act 1950 Tr
Co XXII of 1950 being the same the judgment in Travancore Rubber  Tea Co Ltd vs The Commissioner of Agricultural Income tax Kerala in which the question of deductibility of sums expended for purposes of forking manuring etc
of immature rubber trees had been decided will govern this case
Travancore Rubber  Tea Co Ltd vs The Commissioner of Agricultural Income tax Kerala   applied