COMMISSIONER OF INCOME TAX MADRAS Vs. C M KOTHARI MADRAS DEA AND AFTER HIM HIS LEGAL REPRESENTATIVE AND WIFE RAMA KOTHARI:

JUDGEMENT

(1.) , J.: The High Court of Madras in a Reference under S. 66 (i) of the Indian Income Tax Act, answered in the negative the following question :

(2.) MESSRS. Kothari and Sons is a firm of stock brokers. In 1947, the firm consisted of C. M. Kothari and his two sons, D. C. Kothari and H. C. Kothari. Their respective shares were 6 : 5 : 5. On 7/10/1947, the firm entered into an agreement for the purchase of a house in Sterling Road, Madras, for Rs. 90,000, and the same day paid an advance of Rs. 5,000. This sum was debited in the books of the firm to the accounts of the three partners as follows :- <FRM>JUDGEMENT_331_AIR(SC)_1964Html1.htm</FRM>

(3.) IT is argued that the first requisite of the section is that the assets must be those of the husband and that is not the case here. IT is true that the section, says that the assets must be those of the husband, but it does not mean that the same assets should reach the wife. IT may be that the assets in the course of being transferred, may be changed deliberately into assets of a like value of another person, as has happened in the present case. A chain of transfers, if not comprehended by the word "in directly"' would easily defeat the object of the law which is to tax the income of the wife in the hands of the husband, if the income of the wife arises to her from assets transferred by the husband. The present case is an admirable instance of how indirect transfers can be made by substituting the assets of another person who has benefited to the same or nearly the same extent from assets transferred to him by the husband.