R VENKATACHALA THEVAR Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE writ petitioner is the father propositus. In 1954, he settled properties which belonged to him in favour of his minor son and daughters, who were born by that time, and also in favour of his wife In the process, he settled an extent of 50.05 1/2 acres in favour of his wife, Padmavathi Ammal. This settlement was effected on August 6, 1954. After the execution of the settlement deed, two children were born to the petitioner, one a male, on September 22, 1955, and another, a female, on December 4, 1959. After the birth of these two children, Padmavathi Ammal, purporting to act in her own right, executed a deed of settlement in favour of her after-born children, Rajendran and Parvathi, and under the settlement deed dated March 24, 1960, she gave away an extent of 42 acres in favour of both the children and reserved for herself the balance of 8.05 1/2 acres. Till the assessment year 1961-62, the holding of the writ petitioner was reckoned ignoring the settlements made by him on August 6, 1954, in favour of his wife and minor children and he was assessed accordingly. In fact, these assessments were all under applications for composition made voluntarily by the writ petitioner for the purpose of ultimately reckoning the agricultural income-tax payable by him. Somehow, it is not clear from the record, the income from the extent of the land settled by the writ petitioner on his only son on the date when the settlement deed was made in 1954, was excluded and was not clubbed in the agricultural income of the writ petitioner when he was ultimately assessed to tax in the above circumstances. It is not, however, in dispute that in the composition proceedings, the writ petitioner was assessed to tax on the basis that he was holding not only the extent of land retained by him under the settlement deed dated August 6, 1954, but also as if he held the lands settled by him in favour of his wife and two minor daughters.

(2.) THIS was under section 9(2)(a)(iv) of the Act For the assessment year 1961-62, when the petitioner filed a similar composition application he claimed that an extent of 42 acres should be omitted from his holding for the purpose of reckoning the tax, as the said extent has been settled by his wife, Padmavathi Ammal, in favour of his two after-born children in and by the settlement deed dated 24th March, 1960. Both the Agricultural Income-tax Officer and the Commissioner for Agricultural Income-tax, on revision, felt that Padmavathi Ammal did not have in praesenti a right to dispose of the lands in the manner she did so as to avoid the tax liabilities of the petitioner and that the extent of 42 acres, in the circumstances, should be deemed to be the holding of the writ petitioner and he be dealt with accordingly, and his composition application for the assessment year disposed of in that light. It is against this order the present writ petition has been filedThe learned counsel for the petitioner urges that, as Padmavathi Ammal, the wife of the petitioner, secured an interest over the land specified and delimited in the settlement deed dated August 6, 1954, she had obtained an absolute interest therein and any disposition by way of settlement made by her thereafter should be deemed to be in exercise of a vested right in her, and thus understood, the settlement dated 24th March, 1960, should be fully given effect to, and the 42 acres so settled thereunder should not be taken into consideration for the purposes of determining the income of the petitioner. His contention is that this is not a case in which it could be said that the transfer effected by Padmavathi Ammal should be deemed to be an indirect transfer made by the petitioner within the meaning. of section 9(2)(a)(iv) of the Madras Agricultural Income-tax ActSection 9(2) dealing with computation, of the total agricultural income of any individual for the purpose of assessment provides for certain deeming inclusions in such income, in stated circumstances enumerated therein. One such circumstance is that income from assets transferred directly or indirectly, to the minor child not being a married daughter, by an individual, otherwise than for adequate consideration is liable to be included in the total income of that individual. What are direct transfers are easily discernible, but what are indirect transfers equally easily evade comprehension. But, to decipher whether an asset transferred by an individual would come within the mischief of that sub-clause, the facts and circumstances of each case have to be gauged, as it would be impossible to lay down succinctly as to what ought to be and what would be an indirect transfer coming within the meaning of the above sub-clause. There may be myriad circumstances in which an individual concerned may attempt to make such indirect transfers by legitimate means, such as the execution of registered documents or the execution of settlement deeds for love and affection, etc. But, such transactions have to be viewed with a lynx eye to find out whether it is a transaction which is attributable to the individual, though not directly but indirectlyIn the facts and circumstances of this case, a husband settles properties not for valuable consideration but for love and affection, a larger extent of land, in favour of his wife. He was also careful to settle his properties in favour of his children who were born by then. He, however, had two more children after the settlement was effected.