TMI Blog1971 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ot of land on Gariahat Road was purchased on November 28, 1950, from the Government of West Bengal for the sum of Rs. 29,292. A building was constructed on the land at a cost of approximately Rs. 57,500. This construction was financed by the assessee by withdrawals from his provident fund and the proceeds of his insurance policies. The construction was started in or about April, 1955. The. ground floor was completed by the end of 1955 and the first and second floors by July, 1957. The income from this property was returned by and assessed in the assessee's hands for the first few years. In the original returns for the assessment years 1963-64 and 1964-65 the assessee included the incomes from this property. But subsequently he filed revised returns in which these incomes were not shown. At this stage we may conveniently set out the relevant provisions of sections 22, 27 and 64(iii) of the Income-tax Act, 1961. These provisions are as follows: Section 22 : " The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application. 3. Section 64 contemplates real and sustentative income and not notional income. 4. If the subject-matter of the assessment is income from the immovable property then the person in whose name the title deeds stand is the owner thereof and until the title is transferred, no one else could be taken as the owner as there is no power under the Income-tax Act to dislodge the title of the ostensible owner. 5. The Income-tax Officer himself had treated the assessee's wife as the owner of the property in the earlier assessment. The department did not discharge the onus of proving that the assessee's wife was a mere benamidar. There was no evidence otherwise available to support it. The Income-tax Officer was, therefore, wrong in going back from the position he had taken earlier. The department submitted, (a) that the assessee obtained the plot of land on Gariahat Road because of his high position under the West Bengal Government; (b) that practically the whole of the consideration was provided by the assessee or obtained from resources traceable to the assessee; (c) that in a case like this where the parties are husband and wife, there could be no independent proof of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provident fund dues and from moneys received by him under the insurance policies; but this building was constructed on the land owned by the assessee's wife. And payments of moneys by the assessee for the building did not create any interest in favour of the assessee either in the land or in the building. In these premises, argues Mr. Mukherjee, the assessee did not own any house property or have any interest in house property which he could transfer to his spouse within the meaning of section 27 of the Act. Mr. Mukherjee submits that unless section 64(iii) can be brought within the ambit of section 22 through section 27(i), chargeability is not possible. It must be remembered, according to Mr. Mukherjee, that section 27(i) creates a fiction. And it is well-settled that a legal fiction is limited to the purpose for which it is created and should not be extended beyond its legitimate field. Section 64(iii), therefore, should be construed, says Mr. Mukherjee, in a manner which carries out the intention of the legislature. And that intention has to be gathered from the language of the statute. Counsel for the assessee has relied on a number of authorities in support of his argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for the purchase, and subsequently, so furnished it, it could be said that there was a transfer of the asset by the husband to the wife. In the present case, there was, however, no such intention on the part of the assessee on that date, but on the contrary the wife furnished a portion of the purchase money herself, and intended to pay the balance out of her own income. In these premises no question of a transfer of the husband's assets, direct or indirect, could arise.' The subsequent advance of moneys by the assessee for discharging his wife's obligation did not, according to the Madras High Court, convert the shares which vested in the wife into assets indirectly transferred by the husband, as the moneys were ultimately repaid. Secondly, the Madras High Court says, it could not be held that the assessee has purchased the shares in his wife's benami and the beneficial interest vested in him. The reasons are that, on the date of purchase of the shares the assessee did not pay, no presumption could be raised in his favour and no kind of beneficial interest could vest in him. The title that vested in the wife stood and was not divested merely because the assessee subsequently p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) and (iv) of the Indian Income-tax Act, 1922. It was held: (1) that section 16(3) created an artificial income and had to be construed strictly ; (2) that the word " transfer " was used in section 16(3)(a)(iii) and (iv) in the strict sense and not in the sense of including every means by which property may be passed from one to another; (3) that the word " indirectly " did not destroy the significance of the word " transfer " (4) that partition of a joint Hindu family property was not " transfer " in the strict sense; and (5) that there was no transfer of assets, direct or indirect, within the meaning of section 16(3)(a)(iii) or (iv) to the respondent's wife or minor son. The Supreme Court was of opinion that a court is not entitled to say that for the purpose of taxation the actual transaction is to be disregarded as a " machinery " and that the substance or equivalent financial results are the relevant considerations. Mr. Nirmal Mukherjee pleads in the context of the facts in the instant reference that the word " transfer " is to be strictly construed. And since the house property itself was not transferred by the assessee to the assessee's wife, section 64(iii) was not att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. There was no evidence that the gift was made for a specific purpose. In our case there is evidence that moneys were paid by the husband to the wife for the specific purposes of purchasing the land and constructing the building thereon. Learned counsel for the assessee also relied on the Supreme Court's decision in Philip, John Plasket Thomas v. Commissioner of Income-tax, the assessee, held 750 " A " shares in a company. He was engaged to be married to Mrs. J. K., a divorcee. The engagement was announced on September 3, 1947. The assessee and Mrs. J. K. presented an application to the company for transfer of the shares on December 10, 1947. The deed of transfer ran as follows: " I, T,... in consideration of my forthcoming marriage with J. K. (hereinafter called the ' said transferee') do hereby transfer the 750 ' A ' shares...... standing in my name in the books of (the company)......... to the said transferee...... subject to the several conditions on which I held the same at the time of the execution thereof. And I, the said transferee, do hereby agree to take the said shares subject to the same conditions." The company transferred the shares to Mrs. J. K. and registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pement of proper tax liability. This situation should be remedied by suitable amendment in section 9(2) of the Income-tax Act." The Tribunal has quoted this passage from the Committee's Report while considering the provisions of section 27(i) of the Income-tax Act, 1961. Mr. Mukherjee contend; that the Tribunal should not have been influenced by this report as there was no ambiguity in the provisions the Tribunal was construing. He relied on several authorities in support of this proposition. It might have been relevant for us to discuss this point further, if the Tribunal had, in fact, based its conclusions on this report. But we find that after quoting the passage set out above the Tribunal itself has said: " We are referring to this passage not for interpreting the provision but to find out what was the mischief that was sought to be remedied by the introduction of the new provision ........" We find also that before referring to this passage the Tribunal has observed : " The provision is clearly, on its language, applicable only where there is a transfer of a house as such by the assessee to his wife. Where the assessee has transferred only the money for purchasing or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re: Dalgleish v. Leighton. In this case the Court of Appeal was constructing a deed of settlement and a will Clause 3 of the deed of settlement opened with the words " subject to the provisions of the preceding clause the trust fund and the income thereof shall be held upon trust." The Court of Appeal held that the words " subject to the provisions of the preceding clause " in clause 3 were apt to meet an attempt to deal with the property under clause 2 which failed, not from any lack of intention, on the part of the testator or any insufficiency of the language, but becasue some rule of law made it incapable of achievement, and, consequently, clause 3 operated on the whole of the residuary estate. In our case also section 64(iii) means that in a case to which section 27(i) is not attracted the other provisions of section 64(iii) would apply if the facts came within the purview of those provisions. We may usefully refer to the decision of the Madras High Court in R. Ganesan v. Commissioner of Income-tax. In this case the assessee transferred an amount to his wife for construction of a house otherwise than for adequate consideration or otherwise than in connection with an agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heritages capable of actual occupation, of whatever nature, and for whatever purpose occupied or enjoyed, and of whatever value ...... the annual value shall be understood to be . . ." And section I of the Income-tax Act of 1918 said : " Where any Act enacts that income-tax shall be charged for any year at any rate, the tax at that rate shall be charged for that year in respect of all property, profits, or gains respectively, described or comprised in the Schedules marked A contained in the First Schedule to this Act ....... " Construing these provisions in Shanks v. Commissioners of Inland Revenue, Greer L.J. at page 268 says: " An argument has been founded on the use in some of the sections of the Act of the word ' property ' to the effect that a person is not liable to tax under Schedule A unless he takes the property in the land. I think the answer to that argument is that the Act of Parliament as a whole uses the word ' property ', not in any technical sense, but as including any right of occupation which gives the occupier the benefit of the annual value. ' The House of Lords gave its approval to this decision in Lady Miller v. Commissioner of InIand Revenue. It s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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