COMMISSIONER OF INCOME-TAX Vs. MANSUKHRAI MORE

JUDGEMENT

(1.) IN this reference under section 256(2) of the Income -tax Act, 1961, the following question of law has been referred to this court for the assessment year 1962 -63 :

(2.) THE facts of this case, shortly, are that the assessee, an individual, was the real owner of the property at No. 159, Chittaranjan Avenue, Calcutta, though it was nominally purchased under a sale deed dated June 10, 1940, in the name of his first wife, Bhagwan Devi, who died on January 2, 1953, leaving three sons and five daughters. After the death of the first wife, the assessee married one Kusumlata, daughter of Srimati Lakshmi Devi of Benaras, on December 2, 1954. It was the case of the assessee that prior to the marriage, there were negotiations between the assessee and Srimati Lakshmi Devi and there was a pre -nuptial agreement under which the assessee agreed, inter alia, to create a trust in respect of the property at No. 159, Chittaranjan Avenue, Calcutta, for the sole benefit of the children which Kusumlata might give birth to after her marriage with the assessee.

(3.) IN the course of the assessment for the preceding assessment year 1961 -62, the Income -tax Officer applied the provisions of section 16(3) of the Indian Income -tax Act, 1922, and assessed the income from the aforesaid trust property in the hands of the assessee. He rejected the contention that the pre -nuptial agreement was an adequate consideration for the transfer of the property in trust for the benefit of the unborn children and that the provisions of section 16 (3) had no application. In the appeal before the Appellate Assistant Commissioner, the assessee relied upon the affidavits of Srimati Lakshmi Devi, Srimati Kusumlata More and the affidavits of the two mediators, Sri Anantram Poddar and Sri Keshordeo Sangarnia. The Appellate Assistant Commissioner held that the pre -nuptial agreement set up by the assessee sounded incredible in spite of the affidavits of several parties. The Appellate Assistant Commissioner having confirmed the above finding of the Income -tax Officer, the assessee carried the matter in further appeal to the Tribunal. The Tribunal disposed of the said appeal for the assessment year 1961 -62 by its order dated March 9, 1971. On a consideration of the material on record, the Tribunal believed the pre -nuptial agreement pleaded by the assessee and held that it was in fulfilment of the pre -nuptial agreement that the assessee conveyed the property in trust for the benefit of the minor children. The Tribunal further held that this was a case of transfer of property, not out of love or natural affection, but in fulfilment of obligations undertaken under a pre -nuptial agreement and that Srimati Lakshmi Devi agreeing to give her daughter in marriage to the assessee, who was then a widower aged 57 years, was adequate consideration for the transfer and, therefore, the provisions of section 16 (3) had no application. In that view, the Tribunal directed the exclusion of the income from the property at No. 159, Chittaranjan Avenue, from the assessment for the assessment year 1961 -62. I - 174 - 45