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H.H. Raja Sir Harindar Singh Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 20 of 1964
Judge
Reported in[1969]73ITR236(P& H)
ActsIncome Tax Act, 1922 - Sections 9(2), 16(1) and 16(3)
AppellantH.H. Raja Sir Harindar Singh
RespondentCommissioner of Income-tax
Appellant Advocate K.C. Puri, Adv.
Respondent Advocate B.S. Gupta, Adv.
Cases ReferredBaidya Nath De v. Commissioner of Income
Excerpt:
.....bench 'c '), but with no success. in short, the question raised by the assessee's counsel is whether section 16(1)(c) of the act is exhaustive in respect of settlement or whether section 16(3)(b) can still apply to settlements where the conditions set out therein are satisfied. in the present case, the minor child was not entitled to the corpus of the trust property and hence the provisions of section 16(3)(b) of the act were clearly inapplicable. 9. it was next contended by the learned counsel that, for the application of section 16(3)(b) of the act, it was necessary that the transfer should be for the benefit of the wife or minor children only, and that as, in the present case, the transfer was for the benefit of the minor child as well as others, viz......terms and conditions set out therein. by clause 2 thereof, the trustee is directed to divide the trust property into two equal parts. by clause 3, the trustee is required to pay the income arising from one such part during the period of distribution, and after meeting all outstanding and contingent liabilities -payable out of such income to all or any of the children or child of the settlor living at respective dates for payment (other than the eldest son of the settlor) in equal shares. by clause 4, the trustee is directed to pay the income arising from the second part, during the period of distribution and after meeting all outstanding and contingent liabilities payable out of such income to his eldest son, tikka harmohinder singh of faridkot, during his life. clauses 3(b) and 4(c).....
Judgment:

P.C. Jain, J.

1. At the instance of the assessee, the Income-tax Appellate Tribunal (Delhi Bench ' C ') has referred the following question of law for our opinion:

' (i) Whether, on the facts and in the circumstances of the case, the amounts of Rs. 15,570,Rs. 15,570, Rs. 12,446 and Rs. 10,310 received by the assessee's minor daughter, Rajkumari Maheepindar Kuar, in the assessment years 1957-58, 1958-59, 1959-60 and 1960-61 have, under the terms of the trust deed dated the 1st April, 1955, been rightly included in the hands of the assessee under Section 16(3)(b) of the Indian Income-tax Act, 1922 ?

(ii) Whether, on the facts and in the circumstances 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 Income-tax Act, 1922, notwithstanding the fact that the annual letting value of the Faridkot House situated at Lytton Road, New Delhi, is already reduced by Rs. 1,800.

2. In order to appreciate the contentions that have been advanced before us, it will be proper to set out the relevant portions of the statement of the case, wherein the facts are stated as under:

' The facts of the case are that the assessee executed a registered trust deed dated the 1st April, 1955, whereunder he transferred U.K.Government securities of the face value of 1,80,000 to the Grindlays Bank Ltd., London,, as trustee, to be held in trust on the terms and conditions set out therein. By clause 2 thereof, the trustee is directed to divide the trust property into two equal parts. By clause 3, the trustee is required to pay the income arising from one such part during the period of distribution, and after meeting all outstanding and contingent liabilities -payable out of such income to all or any of the children or child of the settlor living at respective dates for payment (other than the eldest son of the settlor) in equal shares. By Clause 4, the trustee is directed to pay the income arising from the second part, during the period of distribution and after meeting all outstanding and contingent liabilities payable out of such income to his eldest son, Tikka Harmohinder Singh of Faridkot, during his life. Clauses 3(b) and 4(c) provide that at the termination of the period of distribution the bank shall stand possessed of the capital and income of both the 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 settlor's dynasty absolutely. Clause 5 defines 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 survivors and survivor of them and the period of twenty-one years after the death of such survivor.

The assessee owns the house known as the Faridkot House situated at Lytton Road, New Delhi, which was treated as the property in the occupation of the assessee for the purposes of his residence in the assessment year 1960-61. The assessee owned a second property known as Faridkot House situated in Diplomatic Enclave, New Delhi, in the said year which also was in his occupation for the purposes of his own residence. '

3. The assessee is His Highness Raja Sir Harinder Singh of Faridkot who is assessed in the status of an individual. The statement of the case relates to the assessment years 1957-58, 1958-59, 1959-60 and 1960-61. The assessee contended before the Income-tax Officer that income of Rs. 15,570, Rs. 15,570, Rs. 12,446 and Rs. 10,310 received by his minor daughter, Rajkumari Maheepinder Kaur, under the trust deed in the assessment years 1957-58, 1958-59, 1959-60 and 1960-61, respectively, could not be added to his income. The Income-tax Officer rejected the said contention and added these incomes in the assessee's case in the respective years under Section 16(3)(b) of the Income-tax Act, 1922 (hereinafter referred to as the Act). The assessee had also contended before the Income-tax Officer that separate deduction of Rs. 1,800 should be allowed in respect of both his properties in New Delhi under the first proviso to Section 9(2) of the Act. The Income-tax Officer reduced the annual letting value of the Faridkot Housesituated at Lytton Road by Rs. 1,800 under that provision but rejected the assessee's claim to a similar reduction in respect of the letting value of Faridkot House situated in Diplomatic Enclave, New Delhi.

4. Feeling aggrieved from the decision of the Income-tax Officer, the assessee preferred appeals against the assessment orders before the Appellate Assistant Commissioner. As regards the question of adding income received by the assessee's minor daughter, Rajkumari Maheepinder Kaur, the Appellate Assistant Commissioner held that the provisions of Section 16(1)(c) of the Act did not apply as the assets in question did not remain the property of the assessee on the execution of the trust deed. He held that the case was fully covered by the provisions of Section 16(3)(b) of the Act and that the disputed incomes were rightly added in the case of the assessee.

5. As regards the assessee's contention for reduction of the annual letting value of Faridkot House by Rs. 1,800 the Appellate Assistant Commissioner held that the houses kept for residential purposes have to be considered as one unit for computation of the annual letting value and in this view of the matter, reduction of Rs. 1,800 can be allowed only once.

6. Feeling dissatisfied with the orders of the Appellate Assistant Commissioner, the assessee preferred appeals before the Income-tax Appellate Tribunal (Delhi Bench ' C '), but with no success.

7. Mr. K. C. Puri, the learned counsel appearing on behalf of the assessee, contended that Section 16(1)(c) of the Act is the only provision which could apply in the case of the settlement and the income in question could not be added to the assessee's income under Section 16(3)(b) of the Act. In short, the question raised by the assessee's counsel is whether Section 16(1)(c) of the Act is exhaustive in respect of settlement or whether Section 16(3)(b) can still apply to settlements where the conditions set out therein are satisfied. This contention of the learned counsel is amply met by the decision of the Supreme Court in Tulsidas Kilachand v. Commissioner of Income-tax, [1961] 42 I.T.R. 1 (S.C.). The case before the Supreme Court was a case where the assessee had executed a deed of trust for the benefit of his wife. In that case, it was held by their Lordships of the Supreme Court that Clause (c) of Section 16(1) of the Act and the third proviso to that section could not be invoked by the assessee and that the income arising from the property was liable to be included under Section 16(3)(b) of the Act. The decision in In re Dr. T. M. A. Pai, [1954] 25 I.T.R. 75 is also fully applicable to the facts of the present case. Hence there is no force in this contention of the learned counsel.

8. It was next contended by the learned counsel for the assessee that Section 16(3)(b) of the Act would only apply if the assets had been transferredfor the benefit of the wife or minor child. In the present case, the minor child was not entitled to the corpus of the trust property and hence the provisions of Section 16(3)(b) of the Act were clearly inapplicable. According to the learned counsel, this section would be applicable only in those cases where ultimately the corpus of the trust property was also transferred to the wife or the minor child as the case may be. In my opinion, this contention too of the learned counsel has no force. A similar argument was turned down by the Bombay High Court in the case of Commissioner of Income-tax v. Mahomed Yusuf Ismail, [1944] 12 I.T.R. 8. No contrary authority was cited before us by the learned counsel and no distinguishable feature was pointed out by the learned counsel for not following the decision in Mahomed Yusuf Ismail's case.

9. It was next contended by the learned counsel that, for the application of Section 16(3)(b) of the Act, it was necessary that the transfer should be for the benefit of the wife or minor children only, and that as, in the present case, the transfer was for the benefit of the minor child as well as others, viz., major children, the provision was not attracted. Again, it is very difficult to accept this contention of the learned counsel as there is nothing in the language or context of the section to suggest that the transfer should be only for the benefit of the wife or minor children and that the provisions would be inapplicable if somebody else was also the beneficiary. In the case of Mahomed Yusuf Ismail a portion of the income of the property was to be used for other purposes and the learned judges, notwithstanding the same, held that Section 16(3)(b) of the Act was applicable to the extent of the income derived by the wife therefrom. The decision of the Calcutta High Court in Baidya Nath De v. Commissioner of Income-tax, [1960] 40 I.T.R. 175 also negatived a similar contention as is raised in the present case by the learned counsel. Accordingly this contention is repelled,

10. It was next contended by the learned counsel for the assessee that under Section 16(3)(b) of the Act, it was only so much of the income of any person or association of persons to whom the property had been transferred for the benefit of the wife or minor child which could be included for assessment and not the income received by the minor child. According to the assessee, the distinction was being drawn between the income of the bank as distinct from the income of the minor child. The argument of the learned counsel was that it was only the income of the bank under Section 16(3)(b) of the Act which could be included in the income of the assessee for assessment. There seems to be no force in this argument. From the plain reading of Section 16(3)(b) of the Act, it is clear that it relates to the income of the trust which is received for the benefit of the wife or minor child and it is this income which is to be included in thetotal income of the assessee. The use of the expression ' so much of the income ' also makes it clear that this provision relates to the income of the minor child and not that of the bank.

11. The last contention of the learned counsel was that, under the provisions of Section 9(2) of the Act, the assessee was entitled to the benefit under the first proviso of that section in respect of both the properties. According to the learned counsel, from the reading of the second proviso to Section 9(2) of the Act, it was clear that the property in the occupation of the assessee for the purposes of his own residence referred to in the first proviso could consist of more than one residential house and that there was nothing to preclude the claim or benefit of the first proviso in respect : of more than one property. This contention of the learned counsel, too, has no force. There is nothing in the first proviso to suggest that the assessee was entitled to the benefit of that proviso with respect to more than one residential house occupied by him.

12. For the aforesaid reasons, we find no force in the contentions of the learned counsel and answer question No. 1 in the affirmative and question No. 2 in the negative. The assessee shall pay Rs. 250 as costs.

D.K. Mahajan, J.

13. I agree.


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