V.S. Desai, J.
1. The question referred to this court by the Tribunal on this reference under section 66(1) of the India Income-tax Act at the instance of the department is :
'Whether, on the facts and in the circumstances of that case, the two gifts of Rs. 1 lakh and Rs. 50,000 made by the assessee were hit by the provisions of section 16(3) (a) (iii) of the Indian Income-tax Act, 1922 ?'
2. The facts which give rise to this question may be briefly stated as follows :
The assessee, Shri Wadilal Chunilal, is a partner along with his son, Kanchanlal, and three in the firm of M/s. Kanchanlal Wadilal & Co. The assessee has a wife, Vasantibai, by whom he has no issue and who is the step-mother of his son, Kanchanlal. The son, Kanchanlal, has his wife, Padma, and a minor son, Pradeep. On the 26th of October, 1954, the assessee made a gift of Rs. 1 lakh to his daughter-in-law, Padma, wife of Kanchanlal. On the same day he also made a gift of Rs. 50,000 to his minor grandson, Pradeep, son of Kanchanlal. Thus on the said date the assessee made gifts aggregating to Rs. 1,50,000 to the wife and minor child of Kanchanlal. Nearly five months later on the 25th of March, 1955, the assessee's son, Kanchanlal, made a gift of Rs. 1,50,000 to Vasantibai, wife of the assessee. The gifts were effected by passing the necessary transfer entities in the books of the firm of M/s. Kanchanlal Wadilal & Co., in which the assessee and his son were partners. In the assessment of the income of the assessee in the assessment year 1956-57 for which the relevant previous year was the Samvat Year 2,011 the Income-tax Officer took the view that the gift of Rs. 1,50,000 made by the assessee amounted to an indirect transfer of his assets of his own wife within the meaning of section 16(3) (a) (iii) of the Act and, therefore, included the interest earned by Bai Vasantibai in the assessment of Wadilal. The assessee appealed to the Appellate Assistant Commissioner, but his appeal was dismissed. He then appealed to the Income-tax Tribunal. The Tribunal reversed the finding of the departmental authorities holding that there was no evidence to show that there was mutuality of gifts by the assessee and his son and that the later gift by the son was out of consideration already agreed upon by the assessee in making the first gift. It also pointed out that in view of the interval of time between the two gifts, the gifts were independent of each other and the gift by the father, i.e., the assessee, could not be regarded as an indirect gift to his own wife. At the instance of the department the Tribunal drew up a statement and raised the question of law, which we have already stated, and referred it to this court.
3. Now, in order that the gifts made by the assessee may come within the mischief of section 16(3) (a) (iii) of the Indian Income-tax Act, they must relate to assets transferred by the assessee directly or indirectly to his wife otherwise than for adequate consideration or in connection with an agreement to live apart. Now, the gifts made by the assessee in the present case were in favour of his daughter-in-law and his grandson and were, therefore, at any rate, not transfers directly in favour of his wife. It was, however, contended that they could be regarded as being indirectly in favour of the wife in view of the facts and circumstances of the case. Now, the only basis for this connection is that an amount equal to the aggregate amount of the two gifts made by the assessee in favour of his daughter-in-law and grandson was gifted by the son of the assessee to the wife of the assessee some five months later. In our opinion, this circumstance would not be sufficient to show that the re was a mutuality of the gifts by the assessee and his son and that the gift by the son in favour of his step-mother was in consideration of the gifts made by the father in favour of the son's wife and son. The gifts by the assessee and his son were not made simultaneously and, as to the genuineness or the validity of the gifts, there was no dispute. It was urged by Mr. Joshi, learned counsel for the revenue, that there appears to be no provocation whatsoever for making the gifts in this fashion : a gift by the father in favour of the son's wife and child and a gift of an identical amount by the son in favour of his step-mother, and, therefore, according to him, these two transactions in substance meant only one disposition resulting in a indirect transfer of his assets by the assessee in favour of his wife. In support of this submission, Mr. Joshi has relied on the case of Commissioners of Inland Revenue v. Clarkson-Webb. In that case two brothers by simultaneous execution of deeds for the protection of their respective infant children against the bankruptcy of their respective fathers covenanted to pay to other as trustee an annual sum upon trust for the other's infant son. It was admitted that the execution of the deeds was a result of mutual agreement between them; that the object of the arrangement was to protect their respective infant children against the bankruptcy of their respective fathers and that there was a mutuality of consideration inasmuch as the execution of one deed was consideration for the execution of the two deeds was a part of a single arrangement and, looking upon the arrangement as a whole, it constituted one disposition. It will be seen that this case is easily distinguishable from the facts of the present case. There is no finding in the present case that there was any mutuality between the gifts of the father and the son or that they were the parts of one arrangement amounting to one disposition. This case, therefore, will not be of help to the department.
4. In C. M. Kothari v. Commissioner of Income-tax, which was also a case of cross-gifts and a case which was perhaps much stronger on facts than the present case, the High Court of Madras held that the cross-gifts did not amount to assets indirectly transferred by the husbands in favour of their wives. The facts of that case were as follows : K and his two sons, D and H, were three partners of a firm. The firm entered into an agreement for the purchase of a house and paid an advance of Rs. 5,000 out of the partnership funds, but the amount was debited to the personal accounts of the partners, K being debited with Rs. 1,800 and D and H, each being debited with Rs. 1,600. The sale of the house was in favour of Mrs. K., Mrs. D and H, each of whom paid to the vendors Rs. 28,333-5-4 to make up the purchase price of Rs. 90,000 less the advance of Rs. 5,000. To enable Mrs. K and Mrs. D to pay the purchase price, K made a gift of Rs. 30,000 to his daughter-in-law, Mrs. D, by cheque out of the partnership funds and D made a similar gift of Rs. 30,000 to his mother, Mrs. K, also by cheques out of the partnership funds. The amounts of the gifts were debited to the personal accounts of K and D. In order to reimburse their shares of the advance, Mrs. K paid to the firm by cheque Rs. 1,800 which was credited to the personal account of K and Mrs. D paid Rs. 1,600 which was credited to the personal account of D. It was held that the fact that there were cross-gifts by itself or taken with the fact that the gifts were simultaneous in point of time, did not establish that each transfer constituted the consideration for the other and that the transfers were mutual, and further that on the facts where was no material on the record to justify the conclusion that the transfer of assets effected by K, in favour of his daughter-in-law Mrs. D, constituted an indirect transfer by D of his assets to his wife or that the transfer of his assets effected by D in favour of his mother constituted an indirect transfer by K to his wife, so as to attract the application of the provisions of section 16(3) (a) (iii) of the Act. It will be seen that in this case not only there were cross-transfers of identical amounts, but they were also simultaneous. Moreover, the object of the transfers was to provide the ladies with funds and instead of the father transferring the asset in favour of the daughter-in-law and the son in favour of the mother, the transfers could have been easily effected by the father and son in favour of their respective wives. Even then the learned judges of the Madras High Court held that the facts that there were cross-transfers, which were also simultaneous, without anything more, could not be regarded as adequate proof of mutuality of transfer. Since there was no further evidence to show that the cross-transfers effected constituted consideration for each other the two transfers could not be taken to constitute a single transaction resulting in the indirect transfer of the asset by the husband in favour of the wife.
5. In the case before us the transfers are simultaneous. The gift by the son in favour of the step-mother is nearly five months after the gifts by the father in favour of the son's wife and child. There is no evidence whatsoever on the record to show that the later gift by the son was in consideration of the earlier gifts by the father. There is also nothing to show that these gifts were effected as a result of a part of one single arrangement thus constituting a single disposition. The mere circumstance that there is the identity of the amount of the gifts will, in our opinion, not be sufficient to constitute the cross-gifts as amounting to a single disposition, thus resulting in an indirect gift by the husband in favour of his wife.
6. The result, therefore, is that the view taken by the Tribunal is, in our opinion, correct and the question referred to us must be answered in the negative. We answer accordingly. The assessee to get his costs from the department.
7. Question answered in the negative.