DAMODAR K SHAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) FOR the asst. yrs. 1979 80 and 1980 81, at the instance of the assessee, the following three questions of law based on interpretation of S. 64(1)(iv) of the IT Act, 1961, have been referred and all the three questions deserve a common answer :

(2.) ALL the three questions mould down to one common question as stated by the Tribunal, as to whether there was any transfer of asset by the assessee as the husband to his wife and whether it was without any consideration and interest income derived by the wife on the maturity value of the insurance policy can be taxed as income of the husband by recourse to S. 64(1)(iv) of the Act. Provisions of S. 64(1)(iv) of the Act read :

(3.) MR . K.H. Kaji appearing for the assessee in assailing the conclusion of the Tribunal in its order submits that premium amount for the policy was paid under contract of insurance. Under the contract of insurance, full agreed sum was payable in the event of premature death of the husband during the currency of the policy and maturity value of the amount of insurance was payable on payment of entire amount of premium. The premium amount paid for the insurance policy, according to his argument, is not an 'asset' transferred directly or indirectly to the wife. The interest income earned on the amount received on the maturity value of the policy was not includible in the income of the husband under S. 64(1)(iv) of the Act. Very strong reliance has been placed on two decisions of the Supreme Court in the case of CIT vs. Keshavlal Lallubhai Patel (1965) 55 ITR 637 (SC) : TC 42R.719. By relying on the aforesaid decision, it is submitted that the word "transfer" used in S. 16(3)(a) has to be strictly construed to include within the word 'transfer' only transfers in the strict sense.