TMI Blog1977 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... further provided that whatever properties might be acquired by the assessee after the date of the said marriage in his own exclusive right shall either be acquired in the joint and several names of his wife, Irene, and himself or shall as soon thereafter as possible be transferred to their joint and several names, with rights of survivorship between them. On December 5, 1938, one Bimal Kumar Bose sold one-third share in the vacant plot bearing Khasara No. 217/1 situate on the Hennessee Road, Nagpur, to the assessee and his wife for Rs. 4,334. The total consideration therefor was paid by the assessee. On November 23, 1940, the assessee, who had inherited the adjoining plot of land situate on Hennessee Road, being a part of Khasara No. 217/ 1, transferred the same to himself and his wife. In this sale deed, the vendor described himself as the " trustee " of the plot and the vendees as the " beneficiaries ". This transfer was also stated to be in pursuance of the pre-nuptial agreement dated August 20, 1930. In the course of assessment proceedings for the assessment years 1967-68 and 1968-69, the assessee contended that even if it is considered that the immovable properties were t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be said that it was the assessee who had transferred the property to his wife by this deed. The Tribunal rejected the contention of the assessee that he had transferred the property referred to in the sale deed dated November 23, 1940, to his wife as a trustee and not as a husband. However, proceeding on the assumption that the properties in question had been indirectly transferred by the assessee to his wife, the Tribunal held that the case of the assessee will go out of the ambit of s. 64(1)(iii) as the property as transferred to the wife pursuant to the provisions contained in the pre-nuptial agreement dated August 20, 1930. The Tribunal emphasised the fact that the validity of the pre-nuptial agreement was not even doubted by the revenue. The Tribunal pointed out that even past consideration is good consideration for a valid transfer and the promise of Miss Irene Mott to marry the assessee constituted a good and valid consideration for transferring the property in question by him to her. The Tribunal relied upon the meaning of the word " adequate " given in Webster's New World Dictionary as " equal to requirement or occasion, sufficient, suitable ". The Tribunal, accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration ", according to his submission, it is meant such consideration value of which can be measured in terms of money or money's worth. A promise to marry, according to his submission, cannot be regarded as a consideration the value of which can be measured in terms of money or money's worth and, therefore, when the properties were transferred pursuant to a promise to marry, it cannot be said that they were transferred for adequate consideration. According to his submission, the Tribunal was in error in taking the view that as the properties were transferred pursuant to the pre-nuptial agreement, they were transferred for " adequate consideration " and the income from these properties was not liable to be included in the income of the assessee under s. 64(1)(iii). Mr. Thakur, on the other hand, on behalf of the assessee submitted that it is not merely pursuant to a pre-nuptial agreement or a promise to marry that the movable properties are transferred to Miss Irene Mott. He urged that Miss Irene Mott was a Canadian lady and under the Canadian law it was necessary that the " would be bridegroom " enters into a pre-nuptial agreement with the " would be bride " in order that sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cements upon the meaning of the expression " adequate consideration " either occurring in this section or in the corresponding section of the Indian I.T. Act, 1922. It would be relevant in view of this position to refer to the relevant judicial pronouncements to which our attention has been drawn. In Tulsidas Kilachand v. ClT [1961] 42 ITR 1, the Supreme Court had occasion to construe the meaning of the expression " adequate consideration " as occurring in s. 16(3)(b) of the Indian I.T. Act, 1922 (corresponding to s. 64(1)(iii) of the I.T. Act, 1961). The Supreme Court then points out that the words " adequate consideration " in s. 16(3)(b) of the I.T. Act, denote consideration other than mere love and affection, which, in the case of a wife, may be presumed. When the law insists that there should be " adequate consideration " and not " good consideration ", it excludes mere love and affection. They may be regarded as " good consideration " to support a contract, but " adequate consideration " to avoid tax is quite a different thing. This decision of the Supreme Court clearly indicates that there is a well recognised distinction between the expression " good consideration " and " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an secures her financially before marriage and in such an event the financial and monetary consideration is enough consideration to support a contract but that does not solve the difficulty in the interpretation of section 16(3)(a)(iii) of the Act because the adequacy of such consideration is put down as a test. What will induce a woman to feel financially secure before she marries a man cannot be a justiciable concept by either the income-tax authorities or the Income-tax Tribunal or even by this court. It is also difficult to dissociate from such monetary consideration how much of it is affected by the question of natural love and affection which are excluded from its consideration. The price that a spouse might put on her marriage may be a matter of her own assessment but it can never provide a dependable test for courts, Tribunals or taxing authorities for interpreting the adequacy of the consideration involved...Therefore, as an ante-nuptial arrangement of this nature where marriage is put forward as valuable and financial consideration itself, it is not possible to determine the adequacy of such consideration and hence in the context of the expression ' adequate consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect meaning has been assigned to the expression " adequate consideration " by the Andhra Pradesh High Court in the case of CWT v. Khan Saheb Dost Mohd. Alladin [1973) 91 ITR 179 (AP). At page 186, it is pointed out: " ' Adequate consideration ' cannot be equated to sufficient consideration, good consideration or valid consideration ; it means something more than good or valid consideration. Natural love and affection may be regarded as good consideration as seen from the provisions of section 25 of the Indian Contract Act which states that an agreement without consideration is void. However, such consideration cannot be termed as ' adequate consideration ' which means valuable consideration. In other words, adequate consideration must be held to be valuable consideration which can only be measured or tested on the basis of money's worth. ' Adequate consideration ', within the meaning of section 4(1)(a)(i) (of the Wealth-tax Act, 1957), must, in our judgment, be construed as valuable consideration capable of being compared and measured with money or money's worth. Where a transfer is gratuitous or made only out of natural love and affection but not for any valuable consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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