Law:

Section:

Section 4 of the Income-Tax Act, 1961 - Income - Diversion of at source by overriding title - Assessment years 1957-58 to 1960-61 - Assessee executed gift deed transferring his right to receive share in managing agency commission to donees and claimed that same did not accrue to him and therefore not assessable in his hands - Whether since operative part of gift deed made it clear that from and after execution of deed of gift right to receive share in managing agency company commission was vested forever in donees in equal shares absolutely and it further provided that such vesting was to entire exclusion of right of assessee or of any benefit to him by contract or otherwise. Effect of gift deed was to transfer source of income itself to donees before income either accrued or arose to assessee and, therefore, said commission could not be included in income of assessee - Held, yes FACTS The share of managing agency commission was receivable under an agreement dated 26-2-1951, entered into between the assessee and his brother on the one hand and 'the managing agency company'. The managing agency company was the managing agent of the Mills Co. since 1935. The assessee and his brother, acquired numerous shares in the mills company but the mills company refused to have the transfers registered in its books, with the result that certain disputes arose between the mills company and the managing agency company on the one hand and the assessee and his brother on the other. These disputes were ultimately settled in accordance with the terms of the deed of agreement entered into between the assessee as representing himself and his brother, on the one hand and the managing agency company on the other. The agreement is dated 26-2-1951. Clause 6 and clause 9 of this agreement dealt with the rights of the assessee and his brother, to receive their shares in the commission as therein provided. Under clause 6 out of the managing agency commission received by the managing agency company 7½ was receivable by the assessee and the other 7½ per cent was receivable by his brother. Up to and including the assessment year 1956-57, the assessee's 7½ per cent share in the managing agency…

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