TMI Blog1962 (10) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact and circumstances of the case. The assessee is one L. G. Balakrishnan, who had declared his status as a Hindu undivided family with one minor son. The accounting year is the year ended 31st March, 1958, and the assessment year is 1958-59. In computing the assessable income the Additional Income-tax Officer, Coimbatore, included a sum of ₹ 933 as the assessees income but it was objected to by him. The Income-tax Officer claimed to include this amount, as in his view the income arose out of a transfer of assets by the assess which fell within the mischief of section 16(3)(a)(iv) of the Act. In the course of the scrutiny of the accounts of the firm of Messrs. L. G. Balakrishnan and Brothers, the Income-tax Officer found the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 16(3)(a)(iv). He, therefore, subjected the income of ₹ 933 to tax in the hands of Balakrishnan. This sum of ₹ 933 admittedly arose by way of income from the sum of ₹ 50,000, credited in the firms accounts in the name of Vijayakumar, the minor son of Balakrishnan. The assessee preferred an appeal to the Appellate Assistant Commissioner, Coimbatore. He affirmed the decision of the Income-tax Officer. He expressed his conclusion thus : In my opinion, there was very strong grounds in the present case warranting the conclusion that the transfers are mutual and part and parcel of one pre-conceived arrangement. The amounts involved are exactly identical. The gifts have been made almost simultaneously. Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 transferred to him by way of gift by his uncle L. G. Ramamurrthi in the hands of the assessee invoking the provisions of section 16(3)(a)(iv) is lega ? We have already set out the relevant statutory provisions. The object of section 16(3)(a)(iv) is plain. The assessee would like to lessen the burden of taxation by transferring his assets to his minor children so that he may not pay tax in the income of those assets and yet at the same time retain the income in his hands ostensibly as the guardian of the minors. Such types of transactions caused leakage of the revenue and the legislature introduced this measure to curb them. If an individual assessee transfers assets to his minor children without consideration and the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration, would not be recognised for income-tax purposes and the income would be treated as the income of the assessee. Learned counsel for the assessee contends that the case is not covered by the section as the assessee did not transfer any assets to this minor son and that assuming his brother made a gift to his son because the assessee had made a gift to the minor son of his another brother, that cannot lead to the inference of a gift by the assessee to his son. The outward appearance of the transaction lends support to his contention. But this cannot conclude the question whether there was in substance a transfer by the assessee to his son. The decision in C. M. Kothari v. Commissioner of Income-tax has been very mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. This court held that the fact that there were cross-gifts either by itself or taken with the fact that the gifts were simultaneous in point of time did not establish that each transfer constituted the consideration of the other, and that the transfers were mutual. It was further held that there was no material on record to justify the conclusion that the transfer of assets effected by K in favour of his daughter-in-law, Mrs. D. constituted an indirect transfer by D of his assets to his wife or that the transfer of his assets effected by D in favour of his mother constituted an indirect transfer by K to his wife, and that therefore the provisions of section 16(3)(a)(iii) did not apply. We do not think that the above case lays down any ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment can lift the veil and declare the true nature of the transaction as being one within the section. The finding of the department as well as of the Tribunal is that there was an indirect transfer of assets by L. G. Balakrishnan to his minor son, Vijayakumar. This is certainly based on the evidence on record and it seems to us that this finding is fully justified and warranted. As stated already, the decision of the Division Bench in C. M. Kothari v. Commissioner of Income-tax, is no authority for the proposition that in every case of gifts and mutual transactions, the assessee can repel the applicability of section 16(3)(a)(iv) merely on that ground. If such a contention were to be upheld, it would enable the assessee to defeat tax by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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