Case: Mohini Thapar (Dead) By L.Rs Vs. Commissioner of Income Tax (Central) Calcutta and Others

1. All these appeals by certificate are filed by the legal representatives of Late Karam Chand Thapar who was the assessee in this case. He died after the assessments were made. The assessment years with which we are concerned in these appeals are3 andThe facts of the case lie within a narrow compass. Late Karam Chand Thapar made certain cash gifts to his wife Smt. Mohini Thapar. From out of those gifts, she purchased certain shares and the balance amount she invested. The shares earned dividends and the investments yielded interest. The interest realised and the dividends earned were included in the income of Karam Chand Thapar for the purpose of assessment in the assessment years mentioned earlier. The assessee objected to the inclusion of that amount in his income. The question is whether the department was entitled to include the dividends and interest in question in computing the taxable income. of the assessee. TheOfficer held that they were liable to be included in the income of the assessee. That decision was upheld by the Appellate Assistant Commissioner. On a further appeal, taken by the assessee to the Tribunal the Tribunal upheld the order of the Assistant Commissioner. Thereafter at the instance of the assessee, the question set out below was submitted to the High Court under section 66(1) of the IndianAct, 1922, in respect of the assessment yearWhether on the facts and on the circumstances of the case, the income of Rs. 21, 225 derived from deposits and shares held by the assessees wife, Smt. Mohini Devi Thapar was income from assets directly or indirectly transferred by the assessee to his wife within the meaning of Section 16(3) of theAct."Similar questions were referred in respect of other assessment year. The High Court answered these questions in favour of the revenue. Hence these appeals.

Reasoning: This contention of the revenue appears to be sound. That position clearly emerges from the plain language of theare unable to accept this contention as sound. Otherwise the expression as arises directly or indirectly in section 16(3)(a) would become redundant. The net cast by section 16(3)(a) (iii) includes not merely the income that arises directly from the assets transferred but also that arises indirectly from the assets transferred. We are in agreement with the contention of Dr. Pal that the income that can be brought to tax under section 16 (3) (a) (iii) must have a nexus with the assets transferred directly or indirectly. But in this case the income with which we are concerned has a nexus with the assets transferred.Here we are dealing with an income which has proximate connection with the transfer of the assets made by the assessee.