TMI Blog1973 (11) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... tled on Jayaprakash and Natesan. These minors leased the premises to the same partnership for an annual rent of Rs. 6,000. The value of the properties so settled amounted to Rs. 1,38,000. By the other deed, the premises occupied by the Meenakshi Match Factory was settled on Thilakaraj and Rajasekhara. These minors leased the properties to the assessee for an annual rent of Rs. 6,000 for carrying on the business, Meenakshi Match Factory. The value of the properties so settled amounted to Rs. 69,000. The value of the assets held by the assessee as on February 5, 1956, after effecting the above settlements was Rs. 1,80,410. The assessee maintained separate accounts for the income from the properties thus transferred and the educational expenses of his four minor sons were being debited in these separate accounts. The minor children were being put in English public school in Yercaud, Salem District. For the assessment years 1957-58 and 1958-59, the Income-tax Officer accepted the settlements as irrevocable and genuine and did not apply the provisions of section 16(3)(a)(iv) of the Indian Income-tax Act, 1922. For the assessment years 1959-60 and 1960-61, the Income-tax Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of a Hindu father mentioned in texts of Hindu law. Thus, in the circumstances of this case, it cannot be said that the assets in question had been transferred to liquidate the legal liabilities of a Hindu father. Transfer of assets out of parental affection and love so that the children might lead a luxurious life and have a very costly education cannot be said to be for adequate consideration." The Tribunal considered that though under the Hindu law a father is under a legal obligation to maintain his minor children according to his status, and if he neglects to do so, the next friend of the minors can proceed against him in a court of law by enforcing his legal obligation, that obligation is restricted to his means and there is no legal obligation to maintain his minor children beyond his means. It was also of the view that if the value of the assets transferred to the minor children is far in excess of the legal obligation to maintain them, then, it would amount to a transfer of the assets otherwise than for consideration and proceeded to consider as to whether the value of the assets transferred were far in excess of the legal obligation to maintain them. It then came t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and treatment. It is true that the Act came into force on December 21, 1956, subsequent to the execution of these settlement deeds. But, as held by the Supreme Court in Nanak Chand v. Chandra Kishore Aggarwal, the Act is one to amend and codify the law relating to adoptions and maintenance among Hindus and the law prior to the Act in respect of maintenance of children was substantially similar. There can be no doubt, therefore, that the assessee was under an obligation to maintain his children and to educate them according to his status. We are unable to agree with the Tribunal and the Appellate Assistant Commissioner that the assessee had provided maintenance for his children far beyond his means or extravagantly. It is not the province of the income-tax authorities as to where and how the assessee had to educate his children. There is no warrant or authority for the observation made by the Tribunal and the Appellate Assistant Commissioner that the father is under an obligation to provide only the minimum education and not the best possible. As already stated, the finding of the authorities below is that the income from the properties so settled were more or less fully utilise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled a consideration for the promise." Section 25 of the Indian Contract Act provides that an agreement made without consideration is void unless it is expressed in writing and registered under the law for the time being in force for the registration of documents and is made on account of natural love and affection between parties standing in a near relation to each other. Thus, natural love and affection may support and validate a contract or an agreement. Tulsidas Kilachand v. Commissioner of Income-tax considered this question with reference to section 16(3)(a) and (b) where also a similar expression occurs. The following passage in that judgment may be usefully quoted : " Reliance has been placed only upon love and affection. The words 'adequate consideration' 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 good consideration to support a contract, but adequate consideration to avoid tax is quite a different thing." In Potti Veerayya Sresty v. Commissioner of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull Bench pointed out that the decision in S. Viswasom v. Commissioner of Income-tax related to a Christian father settling the properties on the minor children as in the Full Bench case. But the Division Bench in S. Viswasom v. Commissioner of Income-tax, overlooked that there is no enforceable legal obligation on the part of a Christian father to maintain his minor children. After noting that there was not much of discussion in S. Viswasom v. Commissioner of Income-tax it was held that love and affection cannot be adequate consideration. The Full Bench also held that as a minor son had no contracting capacity, he could not have made any valid promise to give up his right to seek maintenance. A consideration of these cases would show that in order to take the case out of the provisions of section 16(3)(a)(iv), the consideration must be a valuable consideration and the use of the word " adequate " before the word " consideration " implies that the valuable consideration should be measurable in terms of money or money's worth. In other words, if the consideration could not be measured in terms of money or money's worth and there is no objective measure for assessing the adequacy, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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