Law:

Section:

Section 64(iii) [as it stood before 1-4-1971 and now section 64(1)(iv)] of the income-tax act, 1961-Transfer of assets-For benefit of spouse or minor child-sometime prior to 1945, assessee transferred 400 shares to his wife on which she subsequently received 160 bonus shares-whether dividend income received by assessee's wife from bonus shares taxable in assessee's hand under section 64(iii)-Held, on facts, no Facts Sometime prior to 1945, the deceased assessee had transferred 400 shares of a company to his wife. Subsequently, the assessee's wife received 160 bonus shares on the original holding of 400 shares. During the accounting years relevant for the assessment years 19%-69 and 1969-70, besides receiving dividend on the original 400 shares, the assessee's wife also received certain amounts as dividend on the aforesaid bonus shares. The assessee included in his return for the assessment years 1968-69 and 1969-70 two-thirds of the dividend income from the original 400 shares under section 64(iii) but omitted from the return the dividend income in respect of the bonus shares. The ITO included the dividend income from the bonus shares also in the income of the assessee under section 64(iii), taking the view that the original holding of 400 shares had increased to 560 shares as a result of the issue of bonus shares, so that the entire 560 shares should be regarded as assets transferred by the assessee to his wife. On appeal, the AAC reversed the ITO's order. On further appeal, the Tribunal upheld the AAC's order. On reference: Held The question involved in the instant case stood covered by the of this Court in the case of Popatlal Bhikamchand v. CIT [1959] 36 ITR 577 wherein it was held that in a case of this nature, although the bonus shares would be undoubtedly an accretion to the assets transferred by the assessee to the person concerned, they could not be regarded as "assets transferred" by the assessee, and that, therefore, the dividend income could not be regarded as arising even indirectly from the assets transferred by the assessee and so it could not be taxed in the hands of the assessee. Consequently, the dividend income from the bonus shares, in the…

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