COMMISSIONER OF WEALTH TAX Vs. SARASWATHI ACHI T

JUDGEMENT

(1.) THESE are references under Section 27(1) of the W.T. Act, 1957. The following questions have been referred :

(2.) THE assessee gifted to her minor daughter 10,000 shares in M/s. Rajendra Mills Ltd. on September 22, 1960. During the course of the year ending March 31, 1969, M/s. Rajendra Mills Ltd. issued bonus shares as a result of which the minor daughter came to own another 10,000 shares. THE value of the entire 20,000 shares was included in the total wealth of the assessee by invoking Section 4(1)(a)(ii) of the W.T. Act. THE AAC, on appeal, following the judgment of the Bombay High Court in Popatlal Bhikamchand v. CIT, 1959 36 ITR 577, held that the value of the bonus shares cannot be included in the chargeable wealth of the assessee. THE WTO took the matter on further appeal to the Tribunal and the Tribunal held that the bonus shares in the hands of the minor daughter could not be regarded as assets transferred by the assessee either directly or indirectly so as to fall within the ambit of Section 4(1)(a)(ii) of the W.T. Act and that the AAC was, therefore, justified in excluding the value of the bonus shares issued to the minor daughter. THE questions extracted already have been referred as arising out of this order of the Tribunal.

(3.) THE learned standing counsel drew our attention to the decision of this court in J. K. Sayani v. CIT, 1963 49 ITR 903. In that case, on the dissolution of a partnership, it was agreed that the assessee's eldest brother should continue to carry on the business with such partners as he liked. It was also agreed that the sum of Rs. 97,329, which stood to the credit of the assessee, should be retained in the business and on the retirement of the assessee, this amount should be transferred to the credit of the assessee's minor son. A new partnership deed was executed a few days later under which the assessee's brother admitted the assessee's minor son to the benefits of the partnership and allotted to him a 3 annas share which the assessee had in the old partnership. It was conceded by the assessee that there was a transfer of Rs. 97,329 by him to his son and that the interest paid to his son by the new firm on the amount so transferred could be included in the income of the assessee under Section 16(3)(a)(iv) of the Indian I.T. Act, 1922. But, he contended that the share income of the son in the new firm could not be so included as the share was not an asset transferred by the assessee to his minor child. It was held that the share interest in the new firm was an asset which was transferred by the assessee to his minor son though the transfer was effected by indirect means. THE wording of Section 16(3)(a)(iv) was found to be wide enough to cover the operations of this kind.