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TMI Blog1961 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... the inclusion in the assessee's total income of the profits settled by him on his wife and two daughters is justified in law ? " The High Court answered the question in the affirmative. The appeals have been filed with a certificate granted by the High Court. Rangachari was one of five partners of a firm, Messrs. Chari and Ram, and held a six-anna share in the profits and loss of the partnership. On September 22, 1947, he executed three deeds of settlement, which are marked exhibits A, A-1 and A-2, in favour of his wife, a married adult daughter and a minor daughter. To each of them, he assigned a fourth share of the profits of the firm payable to him (but not the losses), for a period of 8 years, vesting the right in them to receive th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irrevocable." For the assessment year 1947-48 corresponding to the previous year ending on April 13, 1947, the profits due to Rangachari amounted to Rs. 86,491-13-0. This amount was credited to the account of Rangachari and Rs. 21,622-15-3, being one-fourth thereof, were transferred to the accounts of each of the three disponees. In the same way, the profits of the previous year ending April 13, 1948, were disposed of. The assessee claimed that these amounts could not be included in his total income for purposes of assessment, being excluded by reason of the third proviso to section 16(1)(c) of the Income-tax Act. He also contended that the amount payable to his wife and two daughters never became his income, being diverted by an overrid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded three cases, which have a direct bearing in this connection. In Provat Kumar Mitter's case the assessee had executed a deed of trust under which dividends from certain shares, which continued to be his assets, were transferred to his wife. It was held that the case did not fall within section 16(1)(c) and that the rule in Bejoy Singh Dudhuria's case also did not apply. In Tulsidas Kilachand v. Commissioner of Income-tax the husband had created a trust of the shares, constituting himself as the trustee, to pay to the wife dividends from those shares for a period of seven years. It was held that the case was not governed by section 16(1)(c) but by section 16(3)(b). In Commissioner of Income-tax v. Sitaldas Tirathdas the rule laid down by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds in question, the assessee merely allowed a payment to his wife and daughters to constitute a valid discharge in favour of the firm ; but what was paid was, in law, a portion of his profits, or, in other words, his income. A glance at the account books of, the firm, Messrs. Chari and Ram, clearly shows that the amounts were first credited in the khata of Rangachari and then under his directions were transferred from his khata to those of his wife and daughters. The dispositions, therefore, were, in law and in fact, portions of the income of Rangachari, after the income had accrued to him and tax was payable by him at the point of accrual. In view of the decision of this court in Sitaldas Tirathdas's case it cannot be said that the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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