Law: Income Tax Act, 1961

Section: 64

Section 64 of the Income-tax Act, 1961 [Corresponding to section 16(3) of the Indian Income-tax Act, 1922] - Transfer of assets - For benefit of spouse etc. - Assessment year 1957-58 - Assessee and his brother created trust in favour of assessee's nephew of undivided half share which each of them had in immovable property - Whether income arising from transferred property could not be included in assessee's income under section 16(3)(a)(iv) or under section 16(3)(b) of 1922 Act - Held, yes FACTS The assessee and his brother had equal shares in an immovable property. On 26-9-1956, each of the assessee and his brother created a trust in favour of his nephew of the undivided half share which each of them had in the said immovable property. In the assessee's assessment for the assessment year 1957-58, the assessee claimed that Rs. 6,045, which represented the income of the property conveyed by him in trust for the benefit of his nephew, should be excluded from his income. The ITO refused to do so and included the same in assessee's assessment under section 16(3)(a)(iv) of 1922 Act. The AAC agreed with the view taken by the ITO. In the further appeal, however, the Tribunal held that the income was not liable to be included in the assessee's assessment, as the same did not arise from the property which was transferred by the assessee to his minor son because that property was transferred in favour of his nephew. On reference: HELD Section 16(3)(a)(iv) of 1922 Act applied to assets transferred directly or indirectly to the minor child, not being a married daughter, by the assessee otherwise than for adequate consideration. In the instant case, however, the assets were not transferred either directly or indirectly to the minor but they were transferred to the trustee for the benefit of the minor. To such cases the provision applicable would be of section 16(3)(b) of 1922 Act. In section 16(3)(b) of 1922 Act, the words "directly or indirectly" in relation to the transfer, which were used in sub-section (3)(a)(iv) of section 16 of 1922 Act, were omitted. Consequently, it was not possible to avail of this provision in the case of indirect transfers effected by…

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