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TMI Blog1971 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... l for answering the reference may briefly be stated: The assessee, who was assessed to tax in the status of individual, transferred promissory notes and cash of the total value of Rs. 40,000 to his wife on June 19, 1962. The assessee's wife invested a portion of the said assets in a cloth business of her own. For the assessment year 1965-66 the assessee's wife filed a return of her own, showing an income of Rs. 4,934 from the said cloth business. The Income-tax Officer was of the view that the said income arose to the assessee's wife out of the assets transferred to her without adequate consideration by the assessee and was, therefore, includible in the assessment of the assessee for the relevant assessment year under section 64(iii) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon the decision of the Supreme Court in Commissioner of Income-tax v. Prem Bhai Parekh. Sri K. Srinivasa Murthy, the learned counsel appear in for the department, contended to the contra. His contention was that the meaning that was to be given to the phrase "adequate consideration" was consideration in money or money's worth. What the court has to see is whether the assessee in consideration of the transfer made by him to his wife, received either money or money's worth, which was equivalent to the value of the assets so transferred. In return for assets of R. 40,000 transferred by him to his wife, the assessee received the consect of his wife for adopting a son. That may give spiritual benefit to the assessee. Spiritual benefit ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is advantageous to notice the relevant portion of section 64(iii) of the Act: "In computing the total income of any individual, there shall be included all such income as arises directly or indirectly-- (iii) subject to the provisions of clause (i) of section 27, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart." Section 27(1) of the Act relates to transfer of a house by an individual to the spouse, with which we are not concerned here. The transfer of the assets by the assessee to his wife was not made in connection with an agreement to live apart. On a plain reading of section 64( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case. In Commissioner of Income-tax v. Prem Bhai Parekh an individual, who was a partner in a firm having seven annas share, retired from the firm and on the following day transferred Rs. 75,000 to each of his four sons, three of whom were minors. The firm was reconstituted. The major son of the individual was taken as partner and the three minor sons of the individual were admitted to the benefits of the partnership. The Tribunal found that the capital invested by the minors came from the gifts made to them by their father. On those facts the question that arose before the court was, whether the income that fell to the share of the minors arose to them directly or indirectly from out of the assets transferred to them by their father. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other person. The income, therefore, arose to the wife directly from the assets transferred to her by her husband. There is a proximate connection or nexus between the assets transferred by the husband to the wife and the income that arose therefrom. We have, therefore, necessarily to hold that the decision in Commissioner of Income-tax v. Prem Bhai Parekh does not apply to the facts of this case. Having held that the income, in question, has been earned by the wife out of the assets transferred to her by her husband, the next question that arises for our consideration is whether those assets were transferred by the assessee to his wife otherwise than for adequate consideration. This brings us to the question as to what, constitutes, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mere giving of consent by the wife to the husband for adoption entirely enured for the benefit of the husband. Giving consent for the adoption also enures to the benefit of the wife. Even assuming for a moment that giving consent to her husband for adopting a boy formed a legal and valid consideration for the transfer, still it cannot be said that it has brought any benefit to the assessee in terms of money or money's worth. Since the law insists that the consideration for transfer must be adequate, there must be some means to measure the adequacy of the consideration. That is to say, the consideration that supports the transfer should be one the value of which can be measured in terms of money or money's worth. In the instant case the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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