TMI Blog1993 (3) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961, in the total income of the assessee for the assessment years 1971-72 and 1972-73 ?" This reference relates to two assessment years, viz., 1971-72 and 1972-73, the relevant previous years being the financial years 1970-71 and 1971-72, respectively. In making the assessment of the income of the assessee, the Income-tax Officer included in his income for the two assessment years sums of Rs. 56,236 and Rs. 53,834, respectively, under section 64(1)(v) of the Income-tax Act, 1961 ("the Act"), being the shares of the two minor sons of the assessee from a family trust known as the Shaikhali Family Trust. The Income-tax Officer did so as he found that the assessee and two others had settled a sum of Rs. 1 lakh each in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner accepted the contention of the assessee and held that the income includible under section 64 should be pro rata, the property being constructed by using borrowed capital which was almost equal to the settled amount of Rs. 3 lakhs. The Appellate Assistant Commissioner, therefore, held that the income includible under section 64(1)(v) in respect of the two minor sons should be taken at the fair return yield of 12 per cent. on the said amount of Rs. 1 lakh, namely, Rs. 12,000 each year. Aggrieved by the orders of the Appellate Assistant Commissioner, the Revenue preferred appeals before the Tribunal. The contention of the Revenue was that, in view of the clear language of section 64(1) of the Act which provides for inclusion of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 975, with effect from April 1, 1976, whereby sub-section (1) of section 64 was substituted and in clause (vii) which was the corresponding provision for the old clause (v), the words "from assets transferred" were substituted by the words "from assets transferred directly or indirectly". This submission of the assessee, according to learned counsel for the Revenue, is misconceived and is based on a wrong reading of section 64(1)(v) of the Act. It was contended that the inclusion of the words "directly or indirectly" in the new clause (vii) referred to transfer of assets and not to arising of income. In respect of income, this expression was very much there in section 64 of the Act from the very inception. In this connection, learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or her spouse or minor child (not being a married daughter) or both." (emphasis supplied). The corresponding provision of sub-section (1), as substituted with effect from April 1, 1976, reads : "64. (1) . . . . (vii) to any person or association of persons from assets transferred directly or indirectly otherwise than for adequate consideration to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit of his or her spouse or minor child (not being a married daughter) or both. " A plain reading of the above provisions makes it clear that, under clause (v) of section 64(1), all such income as "arises directly or indirectly" to any person or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money settled by the three persons in favour of their six minor children, a property was purchased and it is the income that arose from that property which was taken into consideration for inclusion under section 64(1)(v) of the Act by the Income-tax Officer. The contribution of the assessee being one-third of the total contribution, the benefit accruing to his minor sons was also one-third of the total income, the Income-tax Officer took into account only one-third of the income of the trust and included the same in the income of the assessee. It is this action of the Income-tax Officer which was approved by the Tribunal. On a perusal of the language of section 64(1)(v) of the Act, we do not find any infirmity in the above action. Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndirectly", then as observed by the Supreme Court in CIT v. C. M. Kothari [1963] 49 ITR 107 (SC), the very purpose of using this expression in sub-section (1) of section 64 will be defeated. The word "indirectly" is meant to cover cases of the present type where the income arises not from the assets transferred directly but indirectly. In view of the foregoing discussion, we are of the clear opinion that the sums of Rs. 56,236 and Rs. 53,834 had been rightly included under section 64(1)(v) of the Income-tax Act, 1961, in the total income of the assessee for the assessment years 1971-72 and 1972-73. The question referred to us is, therefore, answered in the affirmative, i.e., in favour of the Revenue and against the assessee. Under the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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