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TMI Blog1960 (3) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 24,000. ₹ 4,000 was paid immediately in cash by the lady, that amount having been obtained by her by selling her gold ornament (kasumalai), and for the balance of ₹ 20,000 she executed a promissory note in favour of Mr. Jackson, whereby she undertook to repay the balance of the sale price of ₹ 20,000 without interest before the end of 1949. There is no material on record to show whether the lady had on the date of purchase the wherewithal to pay the sum of ₹ 20,000. It was evidently anticipated that she would be able to get that money from out of the income from the dividends on the shares purchased. The stipulation in the promissory note that the balance of purchase money as to be paid by the end of 1949, would indicate that the parties to the transaction contemplated that the purchaser should pay the money from out of the dividends. Mr. Jackson had to leave India sometime between April and June, 1949. He evidently wanted to realise the money before leaving India, and Mr. Murthi paid him the entire amount of ₹ 20,000 in liquidation of the amount due on the following dates in the manner indicated. Rs. Paid on 26th September, 1947 ... 6,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im. On appeal, the Appellate Assistant Commissioner was the opinion that the purchase was made in pursuance of an ingenious plan to keep the transactions outside the mischief of section 16(3), and that the entire amount of dividends received would be assessable to tax. On a further appeal, the Appellate Tribunal held that, out of the total consideration for purchase, at least ₹ 20,000 should be held to have come out of the funds of the assessee in the first instance, and that, therefore, the assessee and his wife should be entitled to the dividends in proportion to the monies respectively advanced by them, namely, ₹ 20,000 and ₹ 4,000. In the result, the Tribunal allowed the assessees appeal in part and gave direction that only 5/6th of the dividend income should be included in the assessees total income and the 1/6th should be excluded as relating to an investment made by the wife out of her funds, not transferred to her without adequate consideration. 7. The order of the officers of the Income Tax Department as well as that of the Tribunal reveal that there has been a mixing up of two distinct legal conceptions. The order of the Appellate Tribunal suffers from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 24,000. The assessee is a director and normally one would expect him to purchase the shares of his company. The consideration to the extent of ₹ 20,000 in the first instance certainly flowed from him. Furthermore, when Mr. Jackson was so meticulous and exacting as to take a pronote from his colleagues wife, there was no good and sufficient reason why, if the assessee was making large payments to Mr. Jackson, he should not also in his turn have taken a pronote or at least a receipt ? It is also not without some significance that the assessee, before his wife purchased the shares of Mr. Jackson, was entitled to commission on gross earning from particular branches only but thereafter his commission was increased and he also became entitled to commission on entire turnover like Mr. Jackson. Having given the matter our anxious consideration, we cannot persuade ourselves to accede to the assessees claim. All the circumstances seem to lead to the irresistible conclusion that at least to the extend seem to lead to the irresistible conclusion that at least to the extend of ₹ 20,000, transaction was benami as the funds to this extent for the impugned purchase had flowed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than for adequate consideration or in connection with an agreement to live apart. 11. In the present case, there has been no transfer of the shares as such by Mr. Murthi to his wife. But it is not necessary that there should be a direct transfer of the shares by the husband. If the purchase money for the shares was paid by the husband, with a view to benefit the wife, to enable her to purchase the shares, the provisions of the section would be satisfied, as it could be held to be a case of a transfer of the husbands assets. But the essential ingredient is the transfer of the husbands assets to enable the acquisition by the wife. A mere payment of money by the husband unaccompanied by an intention to transfer it to the wife will not be sufficient though to the extent of that payment the wife's contractual obligation to Mr. Jackson was discharged. The crucial date on which the intention of the parties is to be ascertained is the date of the purchase. If on that date, the husband furnished or at least intended to furnish the entire consideration for the purchase, and subsequently so furnished it, it can be said that there was a transfer of the assets by the husband to the wife. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty stands in the name of the wife cannot in the absence of evidence and proof show that she holds it benami for her husband. The question whether a purchase in the name of the wife by the husband out of the money provided by him is benami for his own benefit would depend on the intention of the parties at the time of purchase. For example, a husband may out of affection intend that the real title should be with the wife. Source of purchase money is not always decisive of the real ownership of the property, though it may prima facie show that he who provides the money does not intend to part with the beneficial interest in the property. The law as enacted in section 82 of the Trust Act applies to benami transactions as well. Section 82 enacts : Where property is transferred to one person for a consideration paid or provided by another and it appears that such other person did not intend to pay or provide such consideration for the benefit of the transfer the transfer must hold the property for the benefit of the person paying or providing the consideration....." (The rest of the section is omitted as unnecessary"). 13. Payment of consideration for the purchase of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld only vest in the ostensible purchaser. If on the date of purchase the assessee did not pay, no presumption can be raised in his favour and no kind of beneficial interest in the property will vest in him. It is found that subsequently a large portion of the consideration was paid by him. The case for the assessee is that all those monies were loans and that they have been repaid. Rejecting that case for a moment, how does the fact of subsequent payment alter the situation ? The title that vested in the purchaser will stand, it cannot be divested merely for the reason that the balance of purchases money was subsequently paid by the assessee. 15. Mr. Rama Rao Sahib contended that the following circumstances taken cumulatively would show that the transaction was benami : (1) that the transaction was brought about by the husband, (2) the payment towards the pronote was made by him. (3) A false case was put forward to connect the receipts issued by Mr. Jackson to Mr. Murthi as evidencing the actual payments towards the pronote, and that the amounts paid to Mr. Jackson by the assessee was only a temporary accommodation. (4) There was no proof of adjustment of rights between the husban ..... X X X X Extracts X X X X X X X X Extracts X X X X
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