TMI Blog1965 (11) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign income not remitted to India---the said assets fell outside the ken of the said sub-section also rejected as the sub-section was designedly couched in the widest phraseology to prevent evasion of tax in the manner prescribed thereunder. If it was not so, a person can transfer his assets to another in a year they have not yielded any income at all, reserving indirectly the right to enjoy the income therefrom in future or he may transfer his assets when they are not yielding any income, but which may, under a scheme of future development, yield enormous profits. On the other hand, a bona fide transferor is amply protected by sub-section (3) of section 44D of the Act. As it is recorded in the statement of case that it was conceded before the Tribunal that the assessees had power to enjoy the income of the assets transferred within the meaning of section 44D(1) of the Act. In the circumstances, the High Court rightly held that the assessees had the power to enjoy the income within the meaning of section 44D(1) of the Act. The Tribunal found as a fact on the material placed before it that the transfer was to avoid the liability to taxation ; and that being a finding of fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration distributed bonus shares of the value of Rs. 5 lakhs out of the profits of Rs. 5,04.084 which had become accumulated in the Corporation up to December 31, 1937. On December 31, 1938, out of the total shares of 2,271 in the Corporation, the said two sons and the widow of Sir M. Ct. M. Muthiah Chettiar held 1944 shares. From the assessment year 1933-34 to the assessment year 1938-39, the firm was treated as the agent of the Corporation and its income arising and accruing in British India was assessed in the hands of the firm which had its head office in Madras. For the assessment years 1939-40, 1940-41 and 1941-42, the Income-tax Officer, I Circle, Madras, assessed the said partners of the firm separately under section 44D of the Act in respect of the income of the Corporation. Against the orders of the Income-tax Officer, the three partners preferred appeals to the Appellate Assistant Commissioner, who rejected the same. Against the orders of the Appellate Assistant Commissioner rejecting the appeals, the assessees preferred appeals to the Income-tax Appellate Tribunal, Madras Bench 'A'. The Tribunal allowed the appeals of the assessees on the ground that the income from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Act. " Chapter V-B was inserted in the Income-tax Act, 1922, by the Indian Income-tax (Amendment) Act, 1939 (Act VII of 1939). Section 44D is one of the sections of that Chapter. The provisions of this Chapter were, modelled on section 18 of the English Finance Act of 1936, as amended by section 28 of the English Finance Act of 1938. The object of section 44D of the Act, as disclosed by the provisions thereof, was to prevent residents of India from evading the payment of income-tax by transferring their assets to non-residents while enjoying the income by adopting devious methods. The sub-section suffers from want of clarity, but a deeper scrutiny brings out the following ingredients of it : (i) there must be a transfer of assets ; (ii) by reason of that transfer, income traceable to the said assets becomes payable to a person non-resident or to a person resident but not ordinarily resident in the taxable territories ; (iii) the resident by means of the transfer alone or in conjunction with associated operations, acquires a right to enjoy such income ; (iv) the income from the said assets, if it was the income of the resident, would be chargeable to income-tax ; and (v) in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of the Income-tax Acts." It would be noticed that in the said sub-section, as in section 44D(1) of the Act, both the expressions " by means of any such transfer " and " acquired " are present. In Congreve and Congreve v. Commissioners Of Inland Revenue. Lord Simonds, repelling the argument similar to that presented to us, observed : " ... it is to my mind clear, first, that in their ordinary grammatical sense the words 'by means of' do not connote any personal activity on the part of the person who is said to enjoy or suffer something by those means, and, secondly, that in their present context it is not necessary or legitimate in order to give a limiting sense to the words to read them as if they were followed by such words as 'effected by him'." This view was followed by Harman J. in Bambridge v. Commissioners of Inland Revenue. The words " by means of a transfer of assets " mean nothing more than " as a result or by virtue or in consequence of the transfer ". We, therefore, reject the first contention of the learned counsel. The second contention is that the said sub-section can be invoked only if at the time of the transfer the income from the said asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not so, a person can transfer his assets to another in a year they have not yielded any income at all, reserving indirectly the right to enjoy the income therefrom in future or he may transfer his assets when they are not yielding any income, but which may, under a scheme of future development, yield enormous profits. On the other hand, a bona fide transferor is amply protected by sub-section (3) of section 44D of the Act. We, therefore, find no merits in this contention either. The next submission of the learned counsel for the assessees is that the assessees had not acquired, by means of the said transfer of assets to the Corporation or in consequence thereof, any power to enjoy the income therefrom within the meaning of section 44D(1) of the Act. While conceding that, if the assessees had the controlling share in the Corporation, they would have the power to enjoy its income, it was said that there was no evidence on which it could be held that the assessees, though closely related, were acting in unison and were controlling the affairs of the Corporation. Sub-section (5) of section 44D gives an enlarged meaning to the words " power to enjoy " in sub-section (1). The releva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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