(1.) THIS is a reference under Section 66(1) of the Indian Income-tax Act. The question submitted to the Court is in these terms
(2.) WHETHER the sum of Rs. 280 is income arising from assets remaining the property of the assessee, and as such whether it has to be deemed, under the first part of clause (1)(c) of Section 16 of the Income-tax Act, to be the income of the assessee
(3.) NOW it appears that no specific assets were set aside to meet this sum of Rs. 20,000 and that there are no further entries in the books with regard to it. The first question which we have to consider is, what is the correct construction to be put upon this document ? In my judgment it is clearly irrevocable, i.e., the convenanted sum cannot be revoked by the covenantor at any time. In substance it is a convenant to pay the income of Rs. 20,000 with a guarantee that there shall be Rs. 600 a year, and if there is any additional income that some is also to be paid over. I do not think it is necessary to determine whether if the lady chose she could sue to have a sum of Rs. 20,000 to be set apart or ear-marked to provide the covenanted annual sum. It is now necessary to examine the relevant provisions of the Income-tax Act, which is Section 16(1). The section commences with the governing words : In computing the total income of an assessee - we are not concerned with the sub-clauses (a) and (b) but sub-clause (c) is as follows : All income arising to any person by virtue of a settlement or disposition whether revocable or not, and whether affected before or after the commencement of the Indian Income-tax Act (Amendment) Act, 1939, from assets remaining the property of the settlor or disponer, shall be deemed to be income of the settlor or disponer, and all income arising to any person by virtue of revocable transfer of assets shall be deemed to be income of transferor. Then there follow three provisos to that sub-section, the first of which we are not concerned with as it relates to the transfer of assets. The second is a definition clause and it provides that the expression settlement or disposition shall for the purposes of this clause include any disposition, trust, covenant, agreement, or arrangement, and the expression settlor or disponer in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made. NOW turning back for a moment to the main sub-clause (c) it is to be observed that it applies to all income arising to any person by virtue of a covenant whether revocable or not, from assets remaining the property of settlor or disponer. NOW in my judgment that is the position created by this entry in the assessees books. If that is so then it falls to be considered whether the position is taken out of the main sub-clause (c) by the third proviso which is as follows : Provided further that this clause shall not apply to any income arising to any person by virtue of a settlement or disposition which is not revocable for a period exceeding six years or during the life time of the person and from which income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be assessed on the said income as and when the power to revoke arises to him. As I have stated this entry is an irrevocable covenant and it therefore comes within the third proviso unless it can be said that this is income from which the assessee derives a direct or indirect benefit. It is no doubt true that a husband is under an obligation to maintain his wife but it cannot be suggested that this entry is in fulfilment of any such obligation. By the words used the wife is enabled to do what she likes with the covenanted annual sum of Rs. 600. She can either accumulate the same, or she can hand it over to her own parents. There is no obligation on her either to maintain herself or to spend it in buying necessary utensils for the household. In these circumstances in my opinion this is not a benefit either direct or indirect which the assessee derives from this covenant and in my judgment the position falls within the third proviso the sub-clause (c) of sub-section (1) of Section 16 of the Income-tax Act. Accordingly in my judgment the position falls within the answer to the question submitted to the Court is in the negative. The Commissioner must pay the costs of the reference taxed on the original side scale.