# COL. H. H. SIR HARINDER SINGH v. C.I.T. PUNJAB, HARYANA, J.&K. & HIMACHAL PRADESH

- **Citation:** [1972] 2 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 1971-10-15
- **Case number:** Civil Appeals Nos. 1488 to. 1491 of 1969
- **Bench:** C. A. Vaidialingam, P. Jaganmohan Reddy A~D K. K. Mathew
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/col-h-h-sir-harinder-singh-v-c-i-t-punjab-haryana-j-k-himachal-pradesh-5630
- **Pages:** 15

## Headnote

lncom-tax Act, 1922, ss. 9(2) and 16(3) (b)-Whether allowance
under s. 9(2) can be Riven in respect of more than one residential
house-Applicability of s. l6(3)(b)-Whether applies only to cases when
corpus of propertry is transferred or is ultimately to be tr?n_sferred to wife
or minor child-Whether income of trust or of ,ninor child to be assessed
in father's hands.
The appellant created a trust in 1955 by transferring cortain securities
held by him to a bank as trustee.
One of the beneficiaries of the trust
was the appeliant's minor daughter M. The income accruing to M under
the trust during the previous years relevant to the assessment years 195758, 1958-59, 1959-60 and 1960-61 was included in the assessments made
on the appellant as an individual far those years by applying the provisions
of s. 16(3)(b) of the Indian Income Tax Act 1922.
In the assessment
for the year 1960-61 the Income-tax Ofl\cer had also to deal with the·
appellant's claim for the allowance under s. 9(2) cif the said Act in respect of two separate houses owned by the appellant and maintained by
him for residential purposes in New Delhi. The Income tax Officer allowed the claim only in respect of one of the houses. The appellant's appeals
before the authorities under the Act failed.
The High Court decided the
questions referred to it against the appellant.
In appeals before this Court
on certificate the contentions of the appellant which fell for consideration
were: (i) (a) that s. 16(3) (b) must be strictly construed; (b) that the
asset5 covered by the trust deed not having been transferred to the wife or
minor daughter but to a bank as trustee, s. 16(3)(b) of the Act had no
application; (c) even ifs. 16(3)(b) of the Act applied, what was to be
included in computing the total income o'f the appellant was not the income that had been received by the minor daughter under the trust! deed
but only so much of the income of the trustee as arose from the assets
transferred to the trustee for the benefit of the minor child; (ii) that a
reading of the first and second provisos to s. 9(2) of the Act clearly
showed that the allowance to an assessee is not confined only to one resi-·
dential hou"e
HELD: (t) (aJ It ts true thats. 16(3)(b) creates an artificialliability
and must therefore be strictly construed.
But in construing s. 16(3)(b)
Courts cannot ignore the clear and unambiguous expressions contained'
therein and all those expressions must receive a proper interpretation.
[9 C-D]
C.l.T. Bombay v. Mani/9/ Dhanji,
[1962] 44
1.T.R.
876, C.1.T.,
Gujarat v. Keshav/al Lallubhai Patel, [1965] 55 l.T.R. 637 and; C.l.T.,
West Bengal Ul v. Prem Bhai Parekh & Ors. [1970] 77 I.T.R. 27, considered.
(b) The contentipn that s. 16(3) (b) applies only to those cases where
ultimately the .corpus of the trust property is also transferred to the wifeor the minor child, must be rejected. The provisions of s. 16(3)(b) are
very clear and .the ooly requirement so far as this aspect is concerned is
that the assets ml!St be transferred to any person or 0$SOCiation of persons
and that transfer of assets must be for the benefit of the wife or ·the
2
SUPREME COURT REPORTS
[1972] 2 s.c.R,
minor child or both. In this connection it is pertinent to note the wordings
of s. 16(3)(a)(iii) ands. 16(3)(a)(iv). The former provision clearly
refers to assets transferred directly or indirectly to the wife by the husband
and the latter provision refers to assets transferred directly or indirectly
10 the minor child not being a married daughter,
But in cl. (b) of s.
16 ( 3) the transfer of assets is not to the wife or the minor child or both
·but to any person or association of persons. Therefore it is clear that when
1he legislature intended to provide for a direct transfer of assets either to
the wi•fe or to the minor child, ii has used the expressions as are found
ins. 16(3)(a)(iii) ands. 16(3)(a)(iv). The different phraseology used
in cl. (b) of s. 16(3) makes it cle?.r that the transfer of asset

## Text

_Characters 0–39,887 of 41,443. This is a partial read: ask again with offset=39887 for what follows._

• "
~
,
•
A
B
c
D
E
F
G
H
1
COL. H. H. SIR HARINDER SINGH
v.
C.I.T. PUNJAB, HARYANA, J.&K. & HIMACHAL PRADESH
October 15, 1971
[C. A. VAIDIALINGAM,
P. JAGANMOHAN REDDY A~D
K. K. MATHEW, JJ.]
lncom-tax Act, 1922, ss. 9(2) and 16(3) (b)-Whether allowance
under s. 9(2) can be Riven in respect of more than one residential
house-Applicability of s. l6(3)(b)-Whether applies only to cases when
corpus of propertry is transferred or is ultimately to be tr?n_sferred to wife
or minor child-Whether income of trust or of ,ninor child to be assessed
in father's hands.
The appellant created a trust in 1955 by transferring cortain securities
held by him to a bank as trustee.
One of the beneficiaries of the trust
was the appeliant's minor daughter M. The income accruing to M under
the trust during the previous years relevant to the assessment years 195758, 1958-59, 1959-60 and 1960-61 was included in the assessments made
on the appellant as an individual far those years by applying the provisions
of s. 16(3)(b) of the Indian Income Tax Act 1922.
In the assessment
for the year 1960-61 the Income-tax Ofl\cer had also to deal with the·
appellant's claim for the allowance under s. 9(2) cif the said Act in respect of two separate houses owned by the appellant and maintained by
him for residential purposes in New Delhi. The Income tax Officer allowed the claim only in respect of one of the houses. The appellant's appeals
before the authorities under the Act failed.
The High Court decided the
questions referred to it against the appellant.
In appeals before this Court
on certificate the contentions of the appellant which fell for consideration
were: (i) (a) that s. 16(3) (b) must be strictly construed; (b) that the
asset5 covered by the trust deed not having been transferred to the wife or
minor daughter but to a bank as trustee, s. 16(3)(b) of the Act had no
application; (c) even ifs. 16(3)(b) of the Act applied, what was to be
included in computing the total income o'f the appellant was not the income that had been received by the minor daughter under the trust! deed
but only so much of the income of the trustee as arose from the assets
transferred to the trustee for the benefit of the minor child; (ii) that a
reading of the first and second provisos to s. 9(2) of the Act clearly
showed that the allowance to an assessee is not confined only to one resi-·
dential hou"e
HELD: (t) (aJ It ts true thats. 16(3)(b) creates an artificialliability
and must therefore be strictly construed.
But in construing s. 16(3)(b)
Courts cannot ignore the clear and unambiguous expressions contained'
therein and all those expressions must receive a proper interpretation.
[9 C-D]
C.l.T. Bombay v. Mani/9/ Dhanji,
[1962] 44
1.T.R.
876, C.1.T.,
Gujarat v. Keshav/al Lallubhai Patel, [1965] 55 l.T.R. 637 and; C.l.T.,
West Bengal Ul v. Prem Bhai Parekh & Ors. [1970] 77 I.T.R. 27, considered.
(b) The contentipn that s. 16(3) (b) applies only to those cases where
ultimately the .corpus of the trust property is also transferred to the wifeor the minor child, must be rejected. The provisions of s. 16(3)(b) are
very clear and .the ooly requirement so far as this aspect is concerned is
that the assets ml!St be transferred to any person or 0$SOCiation of persons
and that transfer of assets must be for the benefit of the wife or ·the
2
SUPREME COURT REPORTS
[1972] 2 s.c.R,
minor child or both. In this connection it is pertinent to note the wordings
of s. 16(3)(a)(iii) ands. 16(3)(a)(iv). The former provision clearly
refers to assets transferred directly or indirectly to the wife by the husband
and the latter provision refers to assets transferred directly or indirectly
10 the minor child not being a married daughter,
But in cl. (b) of s.
16 ( 3) the transfer of assets is not to the wife or the minor child or both
·but to any person or association of persons. Therefore it is clear that when
1he legislature intended to provide for a direct transfer of assets either to
the wi•fe or to the minor child, ii has used the expressions as are found
ins. 16(3)(a)(iii) ands. 16(3)(a)(iv). The different phraseology used
in cl. (b) of s. 16(3) makes it cle?.r that the transfer of assets need not
be to the wife or the minor child. Nor does the said clause require that
the corpus of the property so transferred to any person or association of
'Persons should ultimately >est in the wife or the minor child L9G-!OB]
C.l.T. Bombay v. Sir Mahomed Yusuf Ismail, (1944]
12 l.T.R. 8
approved.
(c) From a plain reading of s. 16(3) (b) it is clear that what is to
be included in computing the total income of the asse.ssee is that part of
the income of the trust which is received for the benefit in this case of
the minor daughter. It is the share income which has accrued to or has
been received by the minor daughter under the trust deed in the relevant
accounting year, that has to be included in the total income of the father,
the assessee.
The expression "so much Of the income
1
' occurring in this
clause also makes it clear that the said provision relates to the share income of the minor daughter, in this case, and nor that o'f the trustee bank.
[IJB-C]
Tulsidas Kilachand and ors. v. C.l.T, Bomhay City /, (1961] 42 l.T.R.
1 and C.I.T. Bmnhay v. Manila/ Dhanji, [1962] 44 l.T.R. 876 applied.
A
B
c
D
(ii) A reading of the second proviso to sub-section (2) of s. 9 clearly
E
indicates that the first proviso \\'ill take in more. than one residential house,
if the assessee is able to establish that all the houses are occupied by him
for purposes of his own residence. f.l 5A-B]
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1488 to.
1491 of 1969.
Appeals from the judgment and order dated August 1, l 968
F
of the Punjab and Haryana High Court in Income-tax reference
No. 20 of 1964.
K. C. Puri, S. K. Mehta and K. L. Mehta, for the appelbnt
(in a!J the appeals).
B. Sen, P. L. Juneja and R. N. Sachthey, for the respondent
(in all the appeals).
The Judgment of the Court was delivered by
Vaidialingam,
J.
These
fom
appeals,
on
certificate,
are directed by the assessee against the judgment and order dated
August 1., 1968 of the High Court of Punjab and Haryana at
Chandigarh in Income-tax Reference No. 20 of 1964.
Two qu~stions of law were
referred
by the
Income-tax
Appellate Tribunal, Delhi Bench 'C' to the High Court.
Both
G
H
"
--,-
)
'
A
B
D
E
F
HARINDER SINGH v. C.l.T. (Vaidialingam, !.)
3
the questions were answered in favour of the Revenue and against
the assessee.
The appellant-assessee was the Ruler of Faridkot and he was
assessed in the status of an individual for the assessment years
1957-58 to 1960-61, corresponding to the accounting years being
the period
ending
12-4-1957,
12-4-1958;
12-4-1959
and
12-4-1960 respectively.
The assessee had executed a registered
trust deed dated April 1, 1955 marked Aunexure "A" whereunder
he had transferred the United Kingdom Government's Securities
of the face value of £ 1,80,000 to the Grindlays Bank, London,
as trustee, to be held in trust in accordance with the terms and
conditions set out therein.
As there is no dispute
that
these
Government securities were transferred to the Bank and also
regarding the provisions contained therein for distribution of the
income accruing from the securities, it is not necessary for us to
set out the various clauses in the trust deed.
By clause ( 2) the
trustee was directed to divide the trust property into two equal
parts.
By clause ( 3) the trustee, after meeting all outstanding
and contingent liabilities, was required to pay the balance income
to all or any of the children of the Settlor other than _his eldest
son, living at the respective dates of payment in equal shares.
Similarly, under clause ( 4) the trustee after meeting all outstanding and contingent liabilities, was directed to pay the balance
income to the eldest son of the Settlor Tikka Harmohinder Singh
of Faridkot, during his life.
Clauses 3(b) and 4(c) provided
that at the termination of the period of distribution, the Bank
shall stand possessed of the capital and income of both parts
upon trust for the person who, at the date of such termination,
shall be the successor of the Settlor according to the Rule of
Primogeniture applicable to the dynasty of the Settlor absolutely.
Clause ( 5) defined the period of distribution to be the life of the
Settlor and the children of the Settlor living at the date thereof
and the lives and life of the surviwrs and survivor of them and
the period of 21 years after the death of such survivor.
The assessee owned a house known
as Faridkot House
situated at Lytton Road, New Delhi, during the assessment year
G
1960-61.
During the same period, the assessee also owned a
second property known as Faridkot House, situated in Diplomatic
Enclave, New Delhi.
B
~ajkumari Maheepinder Kaur, minor daughter of the assessee
received from the trustee as per the PJOvisions of the trust deed
dated April 1, 1955, Rs. 15,570/-, Rs. 15,570/-. Rs. 12,446/-
and Rs. 10,310/- during the relevant accounting years corresponding to the assessment years 1957-58 to 1960-61. ' In the
assessment of the assessee as an individual during the said
4
SUPREME COURT REPORTS
(1972)2 S.C.R.
assessment years, the Income-tax Officer District
'A' Ward,
A
Bhatinda, notwithstanding the objections raised by the assessee,
included the amounts received by the minor daughter in the
total assessable income of the appellant for each of the assessment
years under s. 16 ( 3 )( b) of the Indian Income-tax Act
1922
(hereinafter to be referred to as the Act). The order of assessment for the assessment year 1957-58 was passed on April 27,
B
1959 and for the ether three assessment years on March 23,
1961.
On appeal by the assessee, the Appellate Assistant Commissioner of Income-tax; Rohtak Range, confirmed the orders of the
Inc:ome-tax Officer.
The order of the Appellate Assistant Commissioner for the .assessment year 1957-58 is dated July 25, 1961
C'
and for the remaining years, the orders were passed on November 4, 1961. The Appellate Assistant Commissioner accepted
-Ole contention of the appellant that s. 16 (1 )( c) of the Act has
no appli!=ation, but agreed with the view of the Income-tax
Officer that the income received by the minor daughter is to be
included in the total taxable income
of the
assessee
under D
$. J6(3)(b).
The assessee carried the matter in further appeal before the
Income-tax Appellate Tribunal, Delhi Bench 'C',
in
Incometax Appeals Nos. 6075, and 8423-8425, all of 1961-62, regarding the assessment years 1957-58 to 1960-61 respectively.
The
Appellate Tribunal agreed with the view of the Income-tax
E:
Officer and the Appellate Assistant Commissioner that the inclusion of the minor daughter's income under s.
l 6(3)(b) was
.correct.
The order of the Appellate Tribunal for all the assessment years is dated August 7, 1962, though a separate order has
.been passed in respect of the assessment year 1960-61.
From the narration of the above .facts, it will be seen that the
Income-tax Officer, the Appellate Assistant Commissioner and
the Appellate Tribunal have all held that the income received by
the minor daughter of the assessee under the trust deed has to
be included under s. 16(3)(b) of the Act in the total taxable
income of the assessee for each of the assessment years.
We have earlier referred to the fact that the appellant owned
F'
G
two houses in New Delhi. both known as Faridkot House, one at
Lytton Road and the other in Diplomatic Enclave, during the
accounting year ending April 12. 1960. The assessee claimed
reductiqn of the annual letting value in respect of both these
houses on the gro1md that they were use.d as his residence.
This
H
~l11im i:egar4ing the houses arises only in the .asses.sment .year
1960•6L The Income-tax Officer allowed th.e reduction in ,the
annual letting value only in respect of one house at Lytton .Road.
•
•
.. ;
A
B
HARINDl;R SINGH v. C.I.T. (Vaidialingam, J.)
5
There is no discussion in the order as to why the claim for the
second house at Diplomatic Enclave was rejected.
The J\ppellate Assistant Commissioner held that as deduction has already
been given by the Income-tax Officer in respect of the Faridkot
House in Lytton Road, the assessee is not entitled to a further
allowance in respect of the house at Diplomatic Enclave.
It is
the further view of the Appellate Assistant Commissioner that
under s. 9(2) of the Act, the assessee is not entitled to a further
allowance in respect o~ the second house and that both the houses
occupied for residential purposes have to be treated as one unit.
On this ground he rejected the claim of the assessee regarding the
allowance in respect of the
Faridkot
House
in
Diplomatic
c Enclave.
The Appellate Tribunal,
when
dealing
with
the
appeal relating to the assessment year 1960-61 dealt with this
claim of the assessee a little more elaborately.
After a reference
to the provisions of s. 9 ( 2) of the Act, the Appellate Tribunal
held that there is nothing in the said provision which_ entitles the
assessee to claim benefit in respect of more residential housesthan one.
But the Appellate Tribunal was prepared to accept
D
the position that the second proviso to s. 9 ( 2) indicates that the
property referred to in the first proviso may consist of more than
one residential houses, but that by itself does not lead to the conclusion that the benefit under the first proviso can be claimed in
respect of inore than one property.
In this view, the Appellate
Tribunal also agreed with the rejection, by the two officers, of the
E
claim made by the appellant in respect of the house situated in
Diplomatic Enclave.
The assessee filed four applications
before the AppeJiatc
Tribunal praying to refer to the -High Court, with a statement of
case, two questions of law--one relating -to the inclusion in the
r
four assessment years of the income received by the minor daughter in the total income of the assessee; and the other relating to
the rejection by the Revenue, of the assessee's claim for allowance
for the assessment year 1960-61 in respect of the Faridkot House
in Diplomatic Enclave.
The Income-tax Appellate
Tribunal,
accordingly, referred, for the opinion of the High Court the
G foJiowing two questions of law :
" ( 1) Whether on the facts and in the circumstances of the case, the amounts of Rs. 15,5'70, 15,570,
12,446 and 10,310 received by the assessee's minor
daughter Rajkumari Maheepinder Kaur in the assessment years 1957-58, 1958-59, 1959-60. and 1960-61
H
under the terms of the Trust Deed dated the 1st April,
1955 have been rightly included in the hands of the
assessee under Section 16 ( 3) (b) of the Indian Incometax Act, 1922 ?
6
SUPREME COURT REPORTS
[1972] 2 $.C.R.
" ( 2) Whether on the facts and in the circumsA
tances of the case the assessee is entitled to the reduction of the annual letting value of the Faridkot House
in Diplomatic Enclave New Delhi, by
Rs.
1,800/.
under the first proviso to Section 9 ( 2) of the Incometax Act, 1922 notwithstanding the fact that' the annual
letting value of the Faridkot House situated at Lytton
B:
Road, New Delhi, is already reduced by Rs. 1,800/· ?"
The High Court, by its judgment and order under attack, has
answered the first question in the affirmative and the second in
the negative.
The answers in respect of both the
questions.-
given by the High Court are against thL assessee.
Before the High Court, the appellant appears to have urged
thats. 16(1)(c) of the Act is the only provision that could
apply in the present case of settlement and that
as such, the
amounts received by the minor daughter of the assessee
under
c
the trust deed could not be added to the income of the assessee
under s., 16(3)(b) of the-Act.
The High Court rejected this
D
contention of the assessee.
The
assessee
further contended
before the High Court thats. 16(3) (b) will apply only if assets
had been transferred for the benefit of the wife or minor child
and that as the. wife or minor child was •not entitled to the corpus
of the trust property .. that provision does not apply.
This contention was also rejected by the High Court.
The further contention of the assessee was that to attract s. 16 ( 3) (b) the transE
fer should be one exclusively for the benefit of the wife or minor
child and that the said provision will have no application when
the benefit that is sought to be conferred, takes in as in the case
of the present trust deed other persons like the major children.
This contention again was rejected by the High Court.
The last
contention on this aspect that was urged appears to have been
that, in any event, u11der s. 16(3)(b) what could be included is
only so much of the income of any person or association of per·
sons to whom the property had been transferred for the benefit
of the wife or the minor child and not the income received by the
minor child.
This contention again was not accepted by
the
High Court.
The High Court ultimately held that the amounts
received by the minor daughter of the assessee under the trust
deed have been rightly included under s. 16(3) (b) of the Act in
the total assessable income of the appellant in all the four assessment years.
Regarding the deduction claimed during the assessment year
1960-61 in respect of the house situated at Diplomatic Enclave,
the High Court is of the view that the assessee can claim such a
benefit by way of allowance under s. 9 ( 2) only in respect of one
house.
Such allowance having been given by the Revenue ill.
F
G
H
i
A
B
c
D
E
F
G
H
HARINDER SINGH v. C.J. T. ( Vaidia/ingam, J.)
7
respect of the residential house at Lytton Road, New Delhi, it is
the view of the High Court that the appellant's claim with regard
to the house at Diplomatic Enclave has be<1n rightly rejected by
the Revenue.
Before we refer to the contentions of the counsel for the
assessee and the Revenue, it is necessary to refer to the relevant
provisions of the Act in respect of the two points arising for consideration, one relating to the amounts received by the minor
daughter and the other relating to an allowance in respect of a
second residential house.
Though the reie"ant provision in respect of the 1st aspect is only clause (b) of s. 16(3), it is desirable to quote all the provisions of
s.
16 (3)
which run as.
follows:
S. 16. (3) In computing the total income of any
individual for the purpose of assessment, there shall be
included-
(a) so much of the income of a wife or minor child
of such
individual
as
arises
directly or
indirectly
(i) from the membership of the wife in a finn
of which her husband is a partner;
(ii) from the admission of the minor to the
benefits of partnership in a firm of which
such individual is a partner;
(iii) from assets transferred
directly
or indirectly to the wife by the husband otherwise than for adequate consideration or in
connection with an agreement to live apart;
or
(iv) from assets transferred directly or indirectly to the minor child, not being 11 married
daughter, by such
individual
otherwise
than for adequate consideration; and
(b) so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor
child or both."
8
SUPREME COURT REPORTS
(1972] 2 S.C.R.
The relevant provisions bearing on the claim in respect of the
A
house in Diplomatic Enclave, are the two provisos in s. 9(2).
Section 9 (2) with the relevant two provisos is as follows :
"9(2) For the
purposes
of this section,
the
annual value of any property shall be deemed to be the
sum for which the property might reasonably be expected to let from year to year.
Provided that, where the property is in the occupation of the owner for the purposes of his own residence,
the annual value thereof shall first be determined in the
same manner as if the property had been let to a tenant
and the amount so determined shall be reduced by onehalf of it or eighteen hundred rupees, whichever is less,
so however that where the sum so reduced exceeds ten
per cent of the total income of the owner the annual
value of the property shall be deemed to be ten
per
cent of such total income.
Provided further that where the property referred
.to in the preceding proviso consists of one residential
house only and it cannot actually be occupied by the
owner by reason of the fact that owing to his employment, business, profession or vocation carried on at any
·other place, he has to reside at that other place in a
building not belonging to him and the residential house
is not actually let and no other benefit
therefrom
is
·derived by the owner, the income of such
property
.under this section shall,
if
the property was
not
occupied during the whole of the previous
year
be
taken to be nil and if it was occupied for a part of the
previous year be computed proportionately, so
however that the income in respect of such property shall
in no case be a loss."
We will first deal with the point covered by question No. 1
regarding the inclusion in the relevant assessment years in the
B
c
D
E
F
· taxable income of the appellant, the amounts received by his
minor daughter under the trust deed dated April l, 1955. Though
G
several contentions have been raised before the High Court and
the Appellate Tribunal, Mr. K. C. Puri, learned counsel for the
.appellant, has raised before us only two contentions, namely,
(1) the assets of £
1,80,000 covered by the trust deed not
having been transferred to the wife or minor daughter in question,
I
'r
but to the Grindlays Bank, as trustee, s. 16(3)(b) of the Act has
H
no application; and ( 2) even if section 16 ( 3 )(b) of the Act
applies, what is to be included in computing the total income of
·I
the assessee is not the income that has been received by the minor
A
HARINDER SINGH V. C.l.T. (Vaidia/ingam, J.)
9
daughter under the trust deed, but only so much of the income
of any person or association of persons (in this case the trustee)
to whom the assets have been transferred for the benefit of the
wife or the minor child.
The counsel referred to the decisions
of this Court in Commissioner of Income-tax, Bombay v. Manila/
Dhanji( 1 ); Commissioner of Income-tax, Gujarat v.
Keshavlal
B Lal/ubhai Patel(') and Commissioner of Int:ome··tax, West Bengal
Ill v. Prem Bhai Parekh and others(") and urged thats. 16(3)
of the Act created an artificial income and had to be construed
strictly.
That is, according to the learned counsel, the wordings
of s. 16(3) (b) have to be construed strictly and literally.
On
the basis of snch a strict and literal construction,
the
counsel
c
urged that the two propositions nrged by him earlie1 are
ampl~
borne out bys. 16(3) (b).
It is no doubt true that the above
decisions lay down the proposition that s. 16 ( 3)
of the Act
creates an artificial income and it must receive a strict construction.
We may also point out that the first decision, referred to
above dealt with a case under s. 16(3)(b) and has specifically
D laid down the p~oposition that the said provision creates an artificial liability to tax and must 'be strictly construed.
But in
construing s. 16(3)(b) the Courts cannot ignore the clear and
unambiguous expressions contained therein and all those expressions must receive a proper interpretation.
E
F
G
II
Taking the first contention of Mr. Puri, according to him the
corpus of the property covered by the trust (in this
case
the
Government Securities) should have been transferred for
the
benefit of the wife or the minor child.
The minor daughter, in
this case, was not entitled to the corpus of the trust property,
namely. the securities.
We understood Mr. Puri to
urge
that
s. 16 ( 3 )( b) of the Act will apply only to
those cases where
ultimately the corpus of the trust property is also transferred to
the wife or the minor child, as the case may be.
We have no
hesitation in rejecting this contention of Mr. Puri.
The provisions of s. 16(3)(b) are very clear and the only requirement,
so far as this aspect is concerned, is that the assets must be
transferred to any person or associatio.1 of persons and
that
transfer of assets must be for the benefit of the wife or the minor
child or both.
In this connection it is pertinent to note the
wordings of s. f6(3)(b)(iii) ands. J6(3)(a)(iv). The former
provision clearly refors to assets tran~ferred directly or indirectly
to the wife by the husband and the latter provision refers to
assets transferred directly or indirectly to the minor child
not
being a married daughter. But in cl. (b) of s. 16(3) the transfer of assets is not to the wife or the minor child or both but to
Iii [1%'.!] 44 1.T.R. 876.
i!) [1965] <5 J.T.R. 6)7.
1)1 [1910) 1- l.T.R. ?7
10
SUPREME COURT REPORTS
(1972] 2 S.C.R.
any person or association of persons.
Therefore, it is clear that
A
when the legislature intended to provide for a direct transfer of
assets either to the wife or to the minor child, it has used the
express10ns as are found in s. 16(3)(a) (iii) ands. 16(3)(a)
(iv). The different phraseology used in cl. (b) of s.
16(3)
makes it clear that the transfer of assets need not be to the wife
or the minor child.
Nor does the said clause require that the
B
corpus of the property, so transferred to any person or associatio_n of persons, should ultimately vest in the wife or the minor
child.
Mr. Puri quite frankly admitted that there is no decision
to support his contention.
On the other hand, we find that there
is a decision of the Bombay High Court in Commissioner of
ln,come-tax, Bombay v, Sir Mahomed Yusuf Jsmail(1) which is
C
against the contention advanced by Mr. Puri. In that decision
one of the questions that arose for consideration was whether the
income received by the wife of the assessee under a deed of wakf
can be included in the assessment of the husband under
s. 16(3) (b).
The assessee therein had executed a deed of wakf.
Under the terms of the said deed, the assessee's wi.fe was to get
21 % of the income accruing from the property which was
the
D
~ubject of the wakf deed.
It was contended that as no part of
the assets or the corpus had been transferred to the wife,
the
income received by the latter cannot be included in the taxable
income of her husband, the assessee.
A Division Bench of the
Bombay High Court rejected this contention and held that as
assets had been transferred, under the wakf deed, to the trustees
E
and as the transfer was beneficial to the wife and that as she had
got 21 % of the income. from the properties, section 16 ( 3) (b) of
the Act was properly applied by the Revenue.
We are in agreement with this decision of the Bombay High Court and as such
the first contention of Mr. Puri will have to be rejected.
Coming to the second contention, according to Mr. Puri under
F
s. 16(3)(b) of the Act, only so much of the income of the person or association of persons to whom the property has been
transferred for the benefit of the wife or the minor child and not
the income received by the minor that can be included in the
taxable income of the assessee.
According to the counsel, what
has been done by the Revenue is to include in the assessment of
G
the appellant's the income received by the minor daughter in the
relevant accounting years.
That procedure
is
opposed
to
s. 16(3)(b) of the Act.
Here again, the contention of the
learned counsel cannot be accepted. If this contention is accepted, the position will be that the Revenue might have included the
whole of the income arising from the assets transferred to the
Grindlays Bank and not merely that portion of the income which H
has been received by the minor daughter.
Such a construction
(1) [1944] 12 l.T.R. 8.
'
B
c
D
E
F
G
H
I
HARINDER SINGH v. C.J.T. (Vaidialingam, J.)
11
in totally opposed to the clear provisions of the scheme of s.16'(3)
and in particular the clear wording of cl. (b) of s. 16(3) of the
Act.
·
From a plain reading of s. 16(3)(b) it is clear that what is
lo be included, in computinJl: the total income of the assessee, is
that part of the income of the trust which is received for the benefit in this case of the minor daughter.
It is the share income
which has accrued to or has been received by the minor daughter
under the trust deed, in the relevant accounting year, that has to
be included in the total income of her fath@r, the assessee.
The
expression "so much of the income" occurring in this clause also
makes it clear that the said provision relates to the share income
of the minor daughter, in this case, and not that of the Grindlays
Bank, the trustee.
Section 16 sub-s. (3) of the Act provides specifically for
assets transferred to the wife or the minor child.
The income
from assets transferred to the wife is still to be included in the
total income of the husband. if the assets have been transferred
directly or indirectly to the wife by the husband otherwise than
for adequate consideration [vide sub-section (3 )(a) (iii)]. Again
so much of the income of any person or association of persons, as
arise.s from assets transferred, otherwise than for adequate consideration, to the person or association, by the husband, for the
benefit of his wife has to be included in the husband's taxable
income.
[vide sub-section(3)(b)].
The same sub-section (3)
of s. I 6 of the Act provides for the income, from the assets transferred by a father to his minor child, to be included in the total
income of the father, if the assets. have been transferred, directly
or indirectly to the minor child, not being a married daughter,
otherwise than for adequate consideration
[vide
sub-section
(3) (a) (iv)]. Again, so much of the income of any person or
association of persons, as arises from assets transferred, otherwise
than for adequate consideration, to the person or associatio11 by
the father, for the benefit of his minor child has to be included in
the father's taxable income.
[vide sub-section (3)(b)]. The
above is the scheme of s. 16 ( 3) of the Act.
It must also be noted
that under s. 16(3)(a) sub-clauses (iii) and (iv) and also clause
."b) of sub-section 3, the transfer contemplated thereunder should
have been "otherwise than for
adequate
con~ideration." The
words "adequate consideration" denote consideration, other than
mere love and affection.
There is no controversy, in the case
before us, that the transfer, by way of trust, is one "otherwise than
for adequate consideration." It is true that when a'sets are transferred to the trustees, as in the case before us, there was income
in the hands of the trustees and the latter were liable to pay tax
thereon.
That, however, is not the question before us.
The
question before us is whether the income, representing 'the share
12
SUPREME COURT REPORTS
(1972] 2 S.C.R.
of the !ninor daughter, which has accrued in the hands of the
A
trustee, or was received by the said minor could be included in
the total income of the appellant under cl. (b) of sub-s. ( 3) of
s. 16.
For a proper appreciation of cl. (b) of s.
16(3), in our
opinion, that clause must be read in the context of the scheme of
B
s. 16; and the two clauses (a) and (b) of sub-sectio1n (3) of
s. 16, must be read together.
So read, the reasonable interpretation to be placed on cl. (b) appears to be that the scheme of the
section requires that an assessee can only be taxed, on the income, from a trust fund created for the benefit of his wife or
minor child or both, provided that in the year of account, the wife c
or the minor child, or both, have derived some benejit under the
trust deed.
That is, the wife or the minor child, either has
received the income or the inconre has accrued to them or they
have a beneficial interest, in the income in the relevant year of
account.
From this it follows, that if no income accrues or
benefit is derivt:d and there is no income at all, so far as the minor
D
child, in the case before us, is concerned, then it is not consistent
with the scheme of section 16, that the income or the benefit
which is non-existent, so far as the minor child is concerned, is
to be included in the income of his or her father.
In the case
before us, therfl is no controversy that the minor daughter has
received the income in all the relevant accounting years.
Mr. B. Sen, learned counsel for the Revenue, has drawn our
attention to the two decisions of this Court, wherein it has been
held that s. 16 ( 3) (b) of the Act applies, to cases of trust, like
the one before us, and that under such circumstances, what is to
E
be included in the total income of the assessee is the share of the
income that has accrued to or has been received by the assessee's
F
wife or minor child, or both. Th& first decision is T11/sidas Ki/a-
...
chand and others .v. Commissioner dj Income-tax, Bombay City
I('). In this case A, the husband, had created a trust tn respect
of certain shares owned by him in two companies.
Under the
said trust, the wife of A was to receive the incqme. A sum of
Rs. 30,404 /- was received by the wife, as dividend income, in
G
respect of the shares, rega_rding which a trust had been created.
This amount was iidded to the taxable income of the husband
under s. 16(3)(b). This Court held that as the transfer of the
shares by ·way of trust, had been effected and as there was a provision for payment of the income accruing from the shares to the
wife, and as the latter had received the dividend income. during
H
~he· relevant accounting year, that amount had been rightly included by the Revenue in the taxable incon1e of the husband.
(I) (1961] 42 I.T.R. I.
A
B
c
D
E
F
G
H
HARINDER SINGH v. C.l.T. (Vaidialingam, J.)
13
This Court further held that such a case falls squarely within the
special rules concerning the wife and the minor child as laid down
ins. 16(3)(b) of the Act.
The second decision referred to by Mr. Sen is Commissioner
of Income-tax, Bombay v. Manila/ Dhanji ('). In that decision
the assessee had created a trust in 1953 in respect of a sum of
Rs. 25,000/- and the trustees had also been nominated for the
purpose of administration of the trust.
Under the trust deed, it
was provided that the interest accruing on the trust amount of
Rs. 25,000/- was to be accumulated and added to the corpus of
the trust and that a Mit, . daughter of the assessee was to receive
the income from the corpus, increased by addition of interest,
every year, on her attaining the age of 18 years.
It was further
provided that after attaining the age of 18 years, the daughter
was to receive the income during her life titne and after her death
the corpus was to go to certain other persons.
The daughter, in
that case, was to attain the age of 18 years only on February 1,
1959.
In the accounting year 1953-54, a sum of Rs. 410/-
was received as interest income on the trust fund and it was
added by the trustees, in accordance with the provisions of the
trust deed, to the corpus.
The Income-tax Authorities, however, included this interest income of Rs. 410/-
in the total
income of the father, the assessee under s. 16 ( 3) (b) of the Act.
The High Court held that on a true construction of cl. (b) of
s. 16(3) of the Act, as no benefit has accrued to the minor
daughter in the year of account, the sum of Rs. 410/- could not
be included in the total income of the assessee.
This Court
agreed with the view of the High O?urt.
'
It is clear from the above two decisions that when a trust is
created, though the income is in the hands of the trustees, the
underlying principle of cl. (b) of s. 16(3) is that so much of the
income as represents the shares of the wife· or the ainor child,
as the case may be, is to be included in computing the total
income of the husband or .the father.
This is consistent with the
scheme of s. 16 and in particular, sub-section (3) thereof, which
is intended to foil an individual's attempt to avoid or reduce the
extent of tax, by transferring his assets to his wife or minor child.
From the above discussion it follows, that the second contention
of Mr. Puri cannot also be accepted.
Now coming to the second question, referred to the High
Court, which relates to the reduction claimed by the assessee of
the annual letting value
of Faridkot House in Diplomatic
Enclave, New Delhi, we have already pointed out that the s:Ud
claim has been rejected by the Revenue, as well as by the High
(I) [1962] 44 T.T.R. 876.
...;•
14
SUPREME COURT REPORTS
[1972] 2 S.C.R.
Court. It is admitted by the Revenue as well as the assessee,
A
that the claim of the appellant in this regard in respect of the
residential house in Lytton Road, New Delhi, has been allowed
by the Revenue.
The question regarding the house in Diplomatic Enclave arise,s only for the assessment year 1960-61. The
Income-tax Officer has not given any reason for rejecting the
claim of the $lSSessee.
The Appellate Assistant
Commissioner
B
has held that as the appellant has been granted the usual allowance in respect -0f Faridkot House in Lytton Road, he
is
not
entitled to any further allowance in respect of another house. In
fact the officer has said that both the houses have to be treated as
one unit for purposes of computing the annual letting value. But
there is one finding, in the order of the Appellate Assistant ComC
missioner, which is to be noted, namely, that the houses in
Lytton Road and Diplomatic Enclave are used and occupied by
the assessee for residential purposes.
The Income-tax Appellate
Tribunal has not differed from the finding of the Appellate Assistant Commissioner that both the houses are used and .occupied
for residential purposes by the assessee.
But the Appellate Tribunal has .also taken the view that the assessee is entitled to the
D
necessary allowance only in respect of one residential house,
under the first proviso to s. 9 ( 2) ·and that the second proviso
thereto does n'ot help the assessee.
According to the Appellate
Tribunal, the second proviso to s. 9(2) of the Act will take in
cases where the property, in the occupation of ··an assessee for
purposes of residence, consists of more than one residential
E
house, but so .situated as to form one property.
The Appellate
Tribunal has given an illustration of a palace or a bungalow with
various out houses.
In such a caie, according to the Appellate
Tribunal all the buildings situated in one compound are to be
treated dollectively, as one property, for the purpose of the first
proviso.
In this view, the Appellate Tribunal also rejected the F
claim of the assessee in respe.ct of the
house
in Diplomatic
Enclave.
The High Court has very summarily rejected the claim of the
appellant in this regard.
After referring to the contention of
the assessee that the second proviso to s. 9(2) clearly indicates
that the first proviso contemplates an assessee having more than
G
one residential houses, it has held that the· said contention cannot be accepted.
Mr. K. C. Puri, learned counsel for the appellant has urged
that the finding of the Appellate Assistant Commissioner that the
two houses in Lytton Road and Diplomatic Enclave are used for
residential purposes by the assessee, has not been departed from
by either the Appellate Tribunal or the High Court.
On this
basis, Mr. !'uri urged that a reading of the first and second provisos
HI
..
,.
HARINDER SINGH v. C.I.T. ( Vaidialingam, J.)
I 5
A to section 9 ( 2) . of the Act clearly shows that the allowance,
!O an assessee, 1s not confined only to one residential house, as
held by the Revenue and the High Court.
A reading of the
second proviso to sub-section (2) clearly, in our opinion, indirntes that the first proviso will take in more than one residential
houses, if the assessee is able to establish that all the houses are
B occupied by him for purposes of his own residence.
So far as
this is concerned, we have already pointed out that the finding is
in favour of the assessee.
Mr. B.