Law: Income Tax Act, 1922

Section: 16(3)(a)(iv)

JUDGMENT V.S. Desai, J.-Two questions have been referred to this court by the Income-tax Appellate Tribunal under section 66(1) of the Indian Income-tax Act and they are as follows : "(1)Whether on the facts of the case the provisions of section 16(3)(a)(iv ) are applicable to the two trusts created by Keshavji Morarji and Jaysinh Keshavji both on February 22, 1952 ? and (2)Whether, on the facts and in the circumstances of the case, the creation of a trust by the assessee in favour of his minor grand children, concurrently with the creation of a trust by the assessee's son in favour of the assessee's daughters, constitutes an indirect transfer of assets to his children, for the purposes of section 16(3)(a)(iv ) of the Act ?" The assessee, Keshavji Morarji, transferred a sum of Rs. 5,00,000 to his son, Jaysinh, on the 14th of June, 1952. Thereafter, on the 22nd of February, 1954, Keshavji made a settlement of Rs. 4,41,000 in favour of his minor grandchildren, who were the son and daughter respectively of his son, Jaysinh, under a deed dated 22nd of February, 1954. On the same day Jaysinh, the son of Keshavji, executed a trust deed settling a sum of Rs. 1,54,000 upon his three sisters, Indumati, Kusum and Dipika, the last of whom, that is, Dipika, was a minor. In the assessment of Keshavji and his son, Jaysinh, the Income-tax Officer held that the simultaneous execution of the trust deeds by Keshavji and Jaysinh constituted indirect transfers of assets by Keshavji to his daughters and by Jaysinh to his children. He accordingly held that the income from these transfers had to be included in the total income of the assessees under section 16(3)(a)( iv) of the Income-tax Act. In the appeals filed by the assessees to the Appellate Assistant Commissioner, the view taken by the Income-tax Officer with regard to the nature of these transactions was confirmed by the Appellate Assistant Commissioner. He, however, held that the income which could be so included in the total income of the assessees would be only such as related to the interest in the assets conveyed in favour of the minors and not the income of the whole of the assets. The Income-tax Appellate Tribunal…

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