1. The Income-tax Appellate Tribunal, Madras Bench, under Section 256(1) of the Income-tax Act, 1961 (hereinafter called 'the Act'), referred the following question for the opinion of this court;
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in excluding the income from the property bearing Door No. 189/191, Ramnad Road, Madurai, from the total income of the assessee for the assessment years 1964-65 and 1965-66 ?'
2. The assessee was the owner of property bearing Door No. 189/191, Ramnad Road, Madurai. On March 6, 1961, he executed a will, the relevant portion of which dealing with this property, reads as follows :
'As regards the house property bearing Door No. 189/191, Ramnad Road, Madurai, it is my desire that the property should belong to the Hindu undivided family of which I am the karta, the other coparceners being my sons. I have no separate interest over the property except as that of a Hindu undivided family. On my death my wife shall have the right of occupation of the property during her lifetime as a member of my family and after her death my interest in the property shall devolve on my sons in equal shares.'
3. In respect of the assessment of the assessee for the purpose of wealth-tax for the assessment years 1962-63 and 1963-64 and in respect of assessment to income-tax for the assessment year 1962-63, the assessee claimed that the said property and the income arising therefrom ought not to be included in the wealth and the income of the assessee since they belong to the joint Hindu family by virtue of his unilateral act of impressing the property with the character of joint family property under the will referred to above. The department took the view that the will operates only from the date of the death of the assessee and during his lifetime the property will continue to be the property of the assessee; consequently, the claim of the assessee was untenable. The matter was ultimately disposed of by the Tribunal in favour of the assessee. That matter was brought up to this court and this court in Commissioner of Income-tax v. A.R. Sahasranamam : 97ITR511(Mad) held that though the document was styled as a will, as far as the declaration in respect of the property in question was concerned, it took effect immediately and, therefore, the property became impressed with the character of joint family property and, consequently, its value could not be included in the wealth of the assessee for wealth-tax purposes and the income therefrom could not be included in the income of the assessee. When the question came before the Income-tax Appellate Tribunal in respect of the assessment year 1964-65 the Tribunal simply followed its earlier order. It is the correctness of this conclusion of the Tribunal that is challenged in the present reference.
4. Since the conclusion of the Tribunal has been upheld by this court in the decision referred to above, following that decision it must be held that the conclusion of the Tribunal is correct in respect of the assessment year .1964-65 also, which is the subject-matter of the present reference.
5. As would be seen from the question extracted already, it involves the assessment for the year 1965-66 also. In respect of this assessment year another contention was put forward on behalf of the department. That contention was that under Section 63(b) of the Act, the unilateral act of the assessee impressing the property in question with the character of joint family property will come within the scope of 'transfer' as defined in Section 63(b) and consequently the income arising from the property has to be assessed in the hands of the assessee. The Tribunal rejected this contention and the correctness of this conclusion of the Tribunal also is the subject-matter of the reference.
6. Section 63 of the Act makes certain provisions in Clauses (a) and (b) thereof and that section reads as follows :
'63. 'Transfer' and 'revocable transfer' defined.--For the purposes of Sections 60, 61 and 62 and of this section,--
(a) a transfer shall be deemed to be revocable if-
(i) it contains any provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor ; or
(ii) it, in any way, gives the transferor a right to reassume power directly or indirectly over the whole or any part of the income or assets;
(b) 'transfer' includes any settlement, trust, covenant, agreement or arrangement.'
7. The contention of the department is that the unilateral act of the assessee impressing the property in question with the character of joint family property will be an 'arrangement' as contemplated by Section 63(b) and that arrangement is a revocable 'transfer' as contemplated by Section 63(a) and, therefore, the income arising from the property in question has to be included in the income of the assessee for assessment to income-tax. The Tribunal rejected this contention on two grounds. The first ground was that since the expression 'arrangement' occurs in Section 63(b) along with the words 'settlement, trust, covenant, agreement', that must also be bilateral and the unilateral act of the assessee, therefore, cannot come within the scope of the arrangement occurring in Section 63(b). The Tribunal also held that even if the said unilateral act of the assessee can be considered to be an arrangement still there is no question of the arrangement being revocable because the power to demand partition on the part of the assessee does not emanate from the arrangement, ,but it is a power given to him by Hindu law. We are of the opinion that the conclusion of the Tribunal is correct. Even assuming, for the sake of argument, that the unilateral act of the assessee in impressing the property in question with the character of joint family property can be characterised as an 'arrangement' and, therefore, is a 'transfer' as contemplated by Section 63(b), still it cannot be said to be revocable under Section 63(a) because under that section for the purpose of a transfer being revocable, the transfer itself must contain a provision for transfer directly or indirectly of the whole or any part of the income or assets to the transferor or the transfer should itself in any way give the transferor the right to reassume power directly or indirectly over the whole or any part of the income or assets,
8. The argument that appears to have been advanced before the Tribunal on behalf of the department is that after this unilateral act of the assessee it is open to the assessee to demand a partition of the properties of the family including the property in question in which case he will obtain a share in the property in question and, therefore, his unilateral action would itself amount to revocable transfer. We are unable to sustain this contention for the simple reason that once the assessee has by his unilateral act impressed the property in question with the character of joint family property that action itself did not reserve in him or confer on him a power to reassume any portion of the property. The power to demand a partition of the joint family property is a power given to him by the Hindu law as a member of the coparcenary and that power does not spring from his earlier unilateral act of impressing the property with the character of joint family property. On the other hand, Section 63(a) makes it absolutely clear that a transfer is revocable only if the very transfer or arrangement or agreement or covenant or trust or settlement reserves such a power for the benefit of the transferor. That not being the position in the case of a member of the Hindu coparcenary impressing his separate property with the character of joint family property and subsequently demanding a partition of the properties of the joint family, this argument will have no substance with reference to the case in hand. Under these circumstances, we answer the question referred to this court in the affirmative and against the department. The assessee is entitled to his costs. Counsel's fee Rs. 500.