Skip to content


Commissioner of Income-tax Vs. P.M. Paily Pillai - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Referred Case No. 32 of 1969
Judge
Reported in[1972]86ITR516(Ker)
ActsIncome Tax Act, 1961 - Sections 64
AppellantCommissioner of Income-tax
RespondentP.M. Paily Pillai
Appellant Advocate P.A. Francis and; P.K. Ravindranatha Menon, Advs.
Respondent Advocate K. Velayudhan Nair,; V.S. Moothathu,; K.J. Joseph an
Cases ReferredViswasom v. Commissioner of Income
Excerpt:
.....assessee to minor son - whether department justified in holding transaction invalid due to want of adequate consideration - expression 'adequate consideration' to be understood in the sense it is used in contract law - document executed for love and affection - son being minor at time of transaction cannot validly give up right to seek maintenance available under family law so as to form consideration - held, department justified in their stand. - - 1 volume 40 at pages 310 to 314 of muvattupuzha registry office by me and my elder brother, chacko pillai, and is being enjoyed by us with full proprietary right over it and that my share of the rent of the building in the property was being utilised solely for your education from first chingam 1138 onwards. the income from the property..........the tribunal was right in holding that the deed does not evidence a transfer otherwise than for adequate consideration within the meaning of section 64(iv) of the income-tax act ?'2. the year of assessment is 1964-65 relating to the accounting period that ended on march 31, 1964. on the 22nd of march, 1963, the assessee executed a document in favour of his minor son. this document is in malayalam, which is annexure 'a' to the statement of the case. the agreed translation of this document is given in paragraph 2 of the order of the tribunal and it reads as follows:'this deed of gift is executed on the twenty second day of march, 1963, in favour of baby, son of paily, aged 14, residing at parumpillil in elamkulam kara in aikkaranad south village by his father, paily, aged 42, son of.....
Judgment:

Govindan Nair, J.

1. This is a reference under Section 256(1) of the Income-tax Act, 1961. The question referred is in these terms :

'Whether, on the facts and in the circumstances of the case, and on a true construction of the deed dated March 22, 1963, the Tribunal was right in holding that the deed does not evidence a transfer otherwise than for adequate consideration within the meaning of Section 64(iv) of the Income-tax Act ?'

2. The year of assessment is 1964-65 relating to the accounting period that ended on March 31, 1964. On the 22nd of March, 1963, the assessee executed a document in favour of his minor son. This document is in Malayalam, which is annexure 'A' to the statement of the case. The agreed translation of this document is given in paragraph 2 of the order of the Tribunal and it reads as follows:

'This deed of gift is executed on the twenty second day of March, 1963, in favour of Baby, son of Paily, aged 14, residing at Parumpillil in Elamkulam Kara in Aikkaranad South village by his father, Paily, aged 42, son of Mathew, in the above village. The property mentioned in the schedule below was purchased jointly from Thuruvakkal Kutty as per registered document No. 1588 of 1955 of book No. 1 volume 40 at pages 310 to 314 of Muvattupuzha Registry office by me and my elder brother, Chacko Pillai, and is being enjoyed by us with full proprietary right over it and that my share of the rent of the building in the property was being utilised solely for your education from first Chingam 1138 onwards. The income from the property shall hereafter also be utilised for the purpose of the education of yourself who is at present studying in King George's School, Bangalore, and since I wish to give you higher education and since I wish that there should not be any difficulty to meet the monthly requirement of your educational and other expenses, I hereby gift the property and building described below in consideration of my love and affection to you for freely meeting your educational expenses. Since my elder brother, Chacko Pillai, is entitled to one-half of the total rent of the building, my portion of the rent shall be collected by me by issuing receipt till you attain majority and the same shall be entrusted to you for your education. On your attaining majority you shall pass receipts directly for the rent and whenever found necessary you may evict the tenants and hold the propertywith full proprietary rights over it. You shall also get your name entered in the Sirkar Revenue records and pay the Sirkar tax. Whenever, before you attain majority, if I feel that any of the tenants have to be evicted, I am entitled to evict the tenants and take possession. The value of the property is approximately rupees fifteen thousand.'

3. Section 64(iv) of the Income-tax Act, 1961, runs thus :

'64. Income of individual to include income of spouse, minor child, etc.--In computing the total income of any individual, there shall be included all such income as arises directly or indirectly-- ... (iv) subject to the provisions of Clause (i) of Section 27, to a minor child, not being a married daughter of such individual, from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration . . .''

4. The short question is whether the document was for adequate consideration. The Tribunal relying on the ruling of this court in S. Viswasom v. Commissioner of Income-tax, [1963] 50 I.T.R. 503 (Ker.) held that the document is for adequate consideration. The relevant part of this judgment reads thus:

'Section 25(1) of the Indian Contract Act, 1872, provides that an agreement made without consideration is void, unless it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other'. We are not dealing with an agreement made without consideration but saved by this provision.

The contention of the department is not that the document is devoid of consideration but that the consideration is not adequate. In other words, we are dealing with a document clothed with consideration, the only. question raised for determination being whether the consideration recited and accepted was adequate or not.'

5. It is clear from this passage that there was no contention raised in the case that the document was not supported, by consideration at all and so the question was not dealt with. No doubt, by referring to one of the terms in the document reading as follows :

'The settlement is executed in consideration of and in fulfilment of the duty and obligation of the settlor and is irrevocable',

it was observed:

'The document makes it quite clear that it was executed in pursuance of the legal duty and obligation cast upon the assessee to maintain and educate his minor children and in fulfilment of that duty and obligation, It should follow that such a transaction has to be considered as one supported by consideration.'

6. There has not been any discussion in the case as to whether a father has any obligation enforceable in the civil courts to maintain his minor child. It is contended on behalf of the department that there is no such obligation on the part of a Christian father. This submission seems to be supported by the decision of the Travancore-Cochin High Court in Chakko Daniel v. Daniel Joshua, A.I.R. 1953 Trav.-Coch. 61. References have been made in that decision to Trevelyn's Law Relating to Minors, fifth edition, Simpson on the Law of Infants, fourth edition, Halsbury's Laws of England and to the decisions in V.J. Walter v. M.J. Walter, A.I.R. 1928 Cal. 600 and Philomena Mendoza v. Dam Nusserwanji, A.I.R. 1943 Bom. 338, all of which go to show that there is no legal obligation on the part of a Christian father to maintain his minor child. We are in respectful agreement with this view expressed in Chakko Daniel v. Daniel Joshua. If this be so the transfer can only be in the nature of a gift, for the son has not conferred any benefit on the father in return and what is more important, has not suffered any detriment. With due respect we consider that the assumption made in Viswasom v. Commissioner of Income-tax that there is a legal obligation on the part of a Christian father to support his minor son is wrong.

7. The document dated 22nd March, 1963, executed by the assessee in favour of his minor son is 'devoid of consideration' in the sense in which that term has to be understood when we speak of a contract. The expression 'adequate consideration' in Section 64(iv) of the Income-tax Act, 1961, uses the word 'consideration' in the sense in which it is understood in agreements enforceable at law. So the document must be for a consideration other than love and affection. However, the document itself shows that it was executed for love and affection; such a document cannot be said to be for adequate consideration.

8. Reference was made to the obligation of the father under Section 488 of the Code of Criminal Procedure and it was suggested that the son had given up or must be taken to have given up or must be taken to have impliedly promised not to enforce the obligation of the father under Section 488 of the Code of Criminal Procedure. Even such a thing we are unable to visualise in this case because the son had no contracting capacity and he could not have made a valid promise to give up his right to seek maintenance under Section 488 of the Code of Criminal Procedure. Even if he had that capacity, we do not think that any such agreement will be a bar to action being taken by him under Section 488 of the Code of Criminal Procedure if the terms of the section are satisfied. Such an agreement also cannot, therefore, be said to be for adequate consideration.

9. We hold that the income accruing from the property transferred by the document in question is income which has to be included in the income of the assessee and assessed as such.

10. The question referred is answered in the negative, that is, in favour of the department and against the assessee; We make no order as to costs.

11. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Appellate Tribunal, Cochin.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //