ADDITIONAL COMMISSIONER OF INCOME TAX Vs. LAXMI NIGAM

JUDGEMENT

(1.) SMT . Laxmi Nigam, the respondent in this appeal (herein after referred to as "the assessee") is the wife of Sri C. M. Nigam, I. A. S. They had three minor children in the relevant asst. yr. 1964-65 of which the relevant previous year is the financial year ending on 31st March, 1964. Out of these children two were sons whereas the third one was a daughter. They were Aditya Mohan Nigam aged about 13 years, Km. Priti Nigam and Arvind Kumar Nigam aged about 3 years & 4 months. In the assessment proceedings of the year 1964-65 Smt. Laxmi Devi Nigam claimed that out of love and affection she gifted on 21st March, 1963 the half portion of her house 'Kiram Kunj', Gokhale Marg, Lucknow to her minor sons, Sri Aditya Mohan Nighan and Sri Arvind Mohan Nigam., and therefore, her income from the property was only half and that alone was incredible in her income. The ITO did not accept the case of the assessee and held that income from the property transferred by the assessee in favour of her sons, was liable to be included in her income under s. 64 of the IT Act, 1961. On this view, the ITO assessed the income of the whole house mentioned above in her hands. The assessee preferred an appeal before the AAC. Before the AAC the assessee pointed out that her husband Sri C. M. Nigam was the owner of a house; hnown as 'Kalpana' at Lucknow. By a deed of agreement dt. 20th March, 1963 executed by C. M. Nigam in favour of the assessee, he agreed to make a gift of the aforesaid house in her favour, in lieu whereof she undertook the responsibility upon herself for maintaining and educating the said three children. It was further pleaded that Sri C. M. Nigam was anxious for being assured that after the gift deed of his house was made in favour of the assessee, she would discharge her obligation of maintaining the children faithfully, therefore, by another deed of agreement dt. 20th March, 1963 the assessee agreed to execute another gift of half share of her house 'Kiran Kunj' in favour of her two minor sons. In pursuance of these agreements the registered gift deeds were executed on 21st March, 1963; one by C. M. Nigam in favour of the assessee donating his house 'Kalpana' in her favour, the other by the assessee giving half share in 'Kiran Kunj' to her minor sons. The assessee contended before the AAC that as the IT Department had accepted the transfer made by C. M. Nigam in favour of the assessee, therefore, the transfer of the assessee should also be held to have been made for adequate consideration. The AAC accepted the case of the assessee and holding that inclusion of half of the income from the property in question was not justified in the hands of the assessee, directing the same to be separately assessed as the income derived by the minors for their benefit out of their property.

(2.) FEELING aggrieved, the Department filed a second appeal before the Tribunal, Allahabad. The Tribunal found the two sets of documents, one set executed on 20th March, 1963 and the other set executed on 31st March, 1963, spelt out direct transfer of assets for adequate consideration and not indirect transfer of assets without adequate consideration. As these transactions in the opinion of the Tribunal were direct transfer of assets for adequate consideration the provisions of ss. 64(iii) and 64(iv) were not attracted. The Tribunal, accordingly, found that the appeal of the Department had no substance hence dismissed the same.

(3.) BEFORE attempting to answer the question it may be useful to refer to the provisions of the IT Act itself. The relevant provisions of S. 64(1)(iv) reads as under :-