1. Two questions have been referred by the Income-tax Appellate Tribunal for the opinion of this court. They are as follows :
' 1. Whether, on the facts and in the circumstances of the case, it could be said that no valid transfer or gift of the amounts in question by the assessee to her daughters-in-law was made in March, 1953 ?
2. Whether, on the facts and in the circumstances of the case, it was necessary for the assessee to make a fresh gift in respect of the disputed amount after the coming into force of the Hindu Succession Act in 1956 and whether the mere fact that she did not do so would result in her not becoming entitled to the benefit accruing under the aforesaid Act
2. One Sri Bal Kishan was a partner in the firm, M/s. Moola Chand Ram Prasad. He died in December, 1947. The assessee, his widow, inherited an amount of Rs. 2,56,998 which at the death of Bal Kishan stood to his credit in the books of the partnership. The assessee was assessed to income-tax on the interest accruing on that sum up to the assessment year 1953-54. In March, 1953, she transferred a sum of Rs. 1,25,509 to each of the wives of her two sons. Consequently, she did not return any interest income for the assessment year 1954-55. In the assessment proceedings feethat year, she took the plea that on account of the transfers effected by her there was no income assessable in her hands. The Income-tax Officer made protective assessments on the wives of the two sons for the assessment year 1954-55 onwards in respect of the interest income and did not assess that income in the hands of the assessee. The amount of interest was also disallowed in the hands of the firm by the Income-tax Officer on the ground that the interest was received by the two sons, who were partners in the firm. Subsequently, in an appeal filed by the firm, the Tribunal held that the assessee continued to be interested in the money during her lifetime and the sons could not be said to have acquired any interest. The question of succession to the money, it was said, arose only upon her death. The appeal was allowed and the case was remanded. Thereafter, it seems, the Income-tax Officer took proceedings under Section 34 of the Indian Income-tax Act, 1922, against the assessee for the assessment years 1954-55, 1956-57 and 1958-59 and included the income from interest arising during the relevant previous years in the total income of the assessee. The assessee appealed, and the appeals were allowed by the Appellate Assistant Commissioner of Income-tax on the view that the transfers effected by the assessee in favour of her daughters-in-law could not be questioned during the relevant previous years, and as no interest was actually received by the assessee on the moneys so transferred, there was no reason for assessing any interest in the hands of the assessee. The Income-tax Officer appealed to the Tribunal, and the Tribunal has allowed the appeals holding that the assessee was not competent in law to alienate any property inherited by her from her husband and that the transfers mode in favour of her daughters-in-law were invalid in the absence of any legal necessity or consent by the reversioners. The Tribunal also held that the provisions of the Hindu Succession Act, 1956, could not be employed for validating the transfers so made by the assessee and, if at all, it would be necessary for the assessee to make fresh transfers after that Act had come into force. At the instance of the assessee, the Tribunal has referred the two questions set out above.
3. The law relating to alienations made by a Hindu widow inheriting from her husband was explained by the Supreme Court iri Brahdmdeo Singh v. Deomani Missir, Civil Appeal No. 130 of 1960 deceided on October 15, 1962 - Unreported . The Supreme Court observed :
' It is well-settled that an alienation made by a widow or other limited heir of property inherited by her, without legal necessity and without the consent of the next reversioners, though not binding on the reversioners, is, nevertheless, binding on her so as to pass her interest, (i.e., life-interest) to the alienee. '
4. Referring to this case recently in Mangal Singh v. Smt. Rattno, A.I.R. 1967 S.C. 1786, the Supreme Court pointed out:
' It was, thus, made clear in that case that the property was held not to be possessed by the widow, because, the alienation made by her being binding on her, she had no longer any legal right left in that property even in the sense of being in the state of owning it. The case, thus, explains why, in cases of alienation or a gift made by a widow, even though that alienation or gift may not be binding on a reversioner, the property will not be held to be possessed by the widow, because the alienation or the gift would be binding on her for her lifetime and she, at least, would not possess any such rights under which she could obtain actual or constructive possession from her transferee or donee. Having completely parted with her legal rights in the property, she could not be said to be possessed of that property any longer. ' (Emphasis ours).
5. It is, therefore, clear that the two transfers of Rs. 1,25,000 effected by the assessee in favour of her daughters-in-law were valid transactions binding on her, and, therefore, the interest accruing on those amounts after their transfer cannot be considered as her income. The Tribunal has erred in holding that the income accruing on those amounts can be included in the total income of the assessee.
6. We answer the first question referred in the negative and in favour of the assessee. In the circumstances, the second question does not arise. The assessee is entitled to her costs which we assess at Rs. 200. Counsel's fee is assessed in the same figure.