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Applicability of section 16(3)(a)(iv) of the Indian Income-tax Act to the case involving transfers of assets to minor children without consideration. Analysis: The judgment concerns the interpretation and application of section 16(3)(a)(iv) of the Indian Income-tax Act in a case involving transfers of assets to minor children without consideration. The case involved an assessee who declared his status as a Hindu undivided family with a minor son. The Income-tax Officer included a sum as the assessee's income, alleging it arose from transfers of assets to the minor son falling within the purview of section 16(3)(a)(iv). The transactions involved cross gifts among family members, raising concerns about circumventing tax provisions. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal affirmed the Income-tax Officer's decision, emphasizing the mutual understanding among the family members to avoid tax liability. The Tribunal found that the income derived by the minor son resulted from an indirect transfer of assets, thus attracting the provisions of the said subsection. The judgment delves into the legislative intent behind section 16(3)(a)(iv) to prevent tax avoidance through transfers of assets to minor children without consideration. It highlights that such transactions aim to shift the tax burden while retaining control over the income ostensibly for the minors' benefit. The provision aims to prevent revenue leakage by treating such income as that of the assessee if it benefits the minor children. The judgment emphasizes that direct or indirect transfers, as well as direct or indirect benefits to the transferee, are covered under the provision to prevent circumvention of tax laws through clever schemes. The judgment addresses the contention that the case did not involve a direct transfer of assets by the assessee to his minor son but rather involved gifts among family members. It distinguishes the case from precedent by emphasizing that cross-gifts or mutual transactions do not automatically fall outside the scope of section 16(3)(a)(iv). The judgment underscores that if transactions are independent or real, they may not attract the provision, but if they are mere appearances concealing the true nature of an indirect transfer, the tax authorities can unveil the actual transaction for tax purposes. Ultimately, the court affirms the applicability of section 16(3)(a)(iv) to the case, ruling that the gifts to the minor son were, in essence, transfers by the assessee himself. The judgment rejects the argument that mutual transactions or cross-gifts can always escape the provision's ambit, emphasizing the need to prevent tax evasion through sophisticated schemes. The court answers the reference question in the affirmative, holding the assessee liable for the costs and counsel's fee.
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