Law: Income Tax Act, 1922

Section: 16(3)(b)

Income-tax Act (XI of 1922)----S. 16 (3) (b)-Transfer of assets--­Settlement in favour of wife, children and mother-Portion of income reserved for wife and children-Whether included in total income of settlor. Section 16 (3) (b) of the Income-tax Act, 1922 which provides that "so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consi­deration to that person or association by an individual for the benefit of his wife or a minor child or both", shall be included in the total income of that individual, clearly deals with only that portion of the income of the transferee which arises from the assets transferred to him by the individual for the benefit of his wife or minor child or both. The whole of the income need not be reserved for the benefit of the wife or the minor child or both. The presence of the words "or both" does not make the position any different. The use of the expression "so much of the income" shows that a portion of the income of the assets transferred may be reserved for a person other than the wife or a minor child. Held accordingly that where the assessee created a trust in favour of his mother, his wife and his children, three-fourths of the income of the trust which was reserved for the benefit of his wife and minor children should be included in the total income of the assessed, under section 16 (3) (b) of the Income-tax Act. Commissioner of Income-tax v. Mohamed Yusuf Ismail (1944) 12 I T R 8 ref. JUDGMENT MITTER, J.-The question of law referred to this Court under section 66 (1) of the Indian Income-tax Act in this case is: "Whether on the facts and in the circumstances of the case, three-fourths of the income from the trust created by the applicant was includible in his total income under section 16 (3) of the Indian Income-tax Act ?" The facts are very short and not in dispute. One Baidya Nath De executed a trust deed on April 5, 1951, constituting himself as the sole trustee during his lifetime. The beneficiaries under the trust were Baidya Nath De himself, his wife, mother, a minor son, two unmarried daughters, sons to be born and their heirs. The settlor did not…

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