T V KRISHNA IYER Vs. CIT

JUDGEMENT

(1.) The two questions stated in this reference are:

(2.) The facts leading to this reference may be shortly stated. The assessee, who has since died, was a Brahmin and a salt manufacturer in South Travancore producing and selling salt from factories owned by him, and also taken on lease. Before 1103 he had married a lady of his own caste, Lekshmi Ammal, and they had a son and a daughter. After 1103 he was living with a Nair lady Gourikutty Amma. This relation appears to have continued for a number of years and the assessee had, from this lady, three sons and a daughter. In 1118 the assessee married again a lady of his own caste, who is also called Lekshmi Ammal. After the last marriage he made a settlement in favour of the Nair lady and his issue from her, and the two questions relate to the income which the lady and the children derive out of the settlement. The deed of settlement is of November 30th, 1949, and the assessee had thereby settled Rs. 85,000 in favour of the Nair lady and his four children from her. Gourikutty Amma was given Rs. 25,000 and each of the four children Rs. 15,000. The assessee had earlier converted his salt business into a private limited company under the name and style of Sri Sankara Allom Ltd., and had floated another company under the name of T. V. Krishnaier & Co. Ltd. to act as the Managing Agent of the private company. The trustee of the settlement in favour of the Nair lady and her children has invested the amounts allotted to them in the private company and the dividend incomes from these shares came to Rs. 12,020 for the assessment year 1950-1951. They have been included in the total income of the assessee under S.16(3) of the Income Tax Act.

(3.) The claim put forward before the Income Tax Officer was that the amounts cannot be included, because the lady was not the married wife nor the children the legitimate issue of the assessee; but this objection was rejected. The Appellate Assistant Commissioner has dismissed the appeal on the ground that the Nair lady was a wife and her children the legitimate children of the assessee under the Hindu Marriage Validation Act. This ground has, however, not been pressed before us by the Counsel of the Department. The Appellate Tribunal also found the reason for excluding the amounts from the assessment inadequate and dismissed the appeal. Thereupon an application under S.66(1) of the Income Tax Act was filed and the first question before us was stated to this court. Thereafter a Division Bench of this Court by an order of July 10th, 1958, further directed the Tribunal to state the second question, which concerns the children.