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Section 64 of the Income-tax Act, 1961 - Transfer of assets - For benefit of spouse, etc. - Assessee gifted shares in a company to her minor daughter - Subsequently, said company issued bonus shares - Whether since assessee never had any interest or right in said bonus shares and could not effect their transfer, dividend income from said bonus shares could not be included in assessee's total income - Held, yes FACTS The assessee had gifted to her minor daughter 10,000 shares in a company. Subsequently, the said company issued bonus shares as a result of which the minor daughter of the assessee came to own another 10,000 shares. The dividend on the bonus shares was included in the assessee's total income under section 64(iv). The AAC held in favour of the assessee which was again affirmed by the Tribunal on revenue's appeal. On reference : HELD Section 64(iv) is applicable only when there is transfer directly or indirectly of assets to a minor child and, in such a case, it applies to tax the income arising from such asset on the transferor. In the case of bonus shares, the assessee never had any interest or right at all and could effect no transfer. The question of inclusion of the income from the bonus shares, which were never hers so as to be transferred, did not arise. Therefore, the Tribunal was justified in holding that the dividend received by the assessee's minor daughter in respect of the bonus shares could not be said to be income arising from an asset transferred by the assessee directly or indirectly to her minor daughter within the meaning of section 64(iv ) and it could not be included in the total income of the assessee. Note: The reference was decided in favour of the assessee. CASES REFERRED TO: CWT v. T. Saraswathi Achi [1980] 125 ITR 186 (Mad.) and Popatlal Bhikamchand v. CIT [1959] 36 ITR 577 (Bom.). JUDGMENT Sethuraman, J.-This is a reference under s. 256(1) of the I.T. Act, 1961. The following two questions have been referred : "1.Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the dividend income received by the assessee on the bonus shares cannot be included in the total income…

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