COL. H. H. SIR HARINDER SINGH vs. C.I.T. PUNJAB, HARYANA, J.&K. & HIMACHAL PRADESH

CIVIL APPEAL No. 1488/1969Supreme Court[1972] 2 S.C.R. 115 October 1971Bench: 3 JudgesAuthor: C.A. VAIDYIALINGAM, P. JAGANMOHAN REDDY, KUTTYIL KURIEN MATHEW15 pages
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What were the facts?

The appellant, Col. H. H. Sir Harinder Singh, created a trust in 1955, transferring securities to a bank as trustee. His minor daughter was a beneficiary. The income accruing to the daughter from the trust for assessment years 1957-58 to 1960-61 was included in the appellant's assessment under Section 16(3)(b) of the Indian Income Tax Act, 1922. For the assessment year 1960-61, the appellant claimed an allowance under Section 9(2) for two residential houses he owned in New Delhi. The Income Tax Officer allowed the claim for only one house. Appeals before lower authorities and a reference to the High Court failed. The appellant appealed to the Supreme Court.

What did the Supreme Court hold?

1. (a) While Section 16(3)(b) creates an artificial liability and must be strictly construed, its clear and unambiguous expressions must be properly interpreted. (b) The contention that Section 16(3)(b) applies only to direct transfers of corpus to the wife or minor child is rejected. The provision applies when assets are transferred to any person or association of persons for the benefit of the wife or minor child. The different phraseology in Section 16(3)(b) compared to Section 16(3)(a)(iii) and (iv) clarifies that the transfer need not be directly to the wife or minor child, nor does the corpus need to ultimately vest in them. (c) What is to be included in the assessee's total income is that part of the trust's income received for the benefit of the minor daughter, i.e., her share income. The phrase "so much of the income" refers to the minor's share income, not the trustee's income. 2. A reading of the second proviso to Section 9(2) indicates that the first proviso can encompass more than one residential house if the assessee can establish that all such houses are occupied for his own residence. The finding that both houses were used for residential purposes by the assessee was not disturbed by the lower authorities. Therefore, the Revenue's and High Court's view that the assessee can claim allowance only for one residential house is erroneous.

What were the issues?

1. Whether Section 16(3)(b) of the Indian Income Tax Act, 1922, applies only when the corpus of the property is transferred to the wife or minor child, or if it applies when assets are transferred to a trustee for their benefit. This question turns on the interpretation of Section 16(3)(b). Assessee's contentions: (a) Section 16(3)(b) should be strictly construed. (b) Since assets were transferred to a bank as trustee, not directly to the minor daughter, Section 16(3)(b) is inapplicable. (c) Even if Section 16(3)(b) applied, only the income arising from the transferred assets for the benefit of the minor should be included, not the entire income received by the minor. Revenue's contentions: Not recorded in the judgment. 2. Whether the allowance under Section 9(2) of the Indian Income Tax Act, 1922, is confined to only one residential house, or if it can be claimed for multiple houses occupied by the assessee for residential purposes. This question turns on the interpretation of the provisos to Section 9(2). Assessee's contentions: Reading the first and second provisos to Section 9(2) clearly shows the allowance is not confined to one residential house. Revenue's contentions: Argued that the assessee is entitled to allowance for only one residential house.

Which sections of the Income-tax Act were involved?

Section 9(2),Section 16(3)(b)

AI-generated summary — verify with the full judgment below

• " ~ , • A B c D E F G H 1 COL. H. H. SIR HARINDER SINGH v. C.I.T. PUNJAB, HARYANA, J.&K. & HIMACHAL PRADESH October 15, 1971 [C. A. VAIDIALINGAM, P. JAGANMOHAN REDDY A~D K. K. MATHEW, JJ.] lncom-tax Act, 1922, ss. 9(2) and 16(3) (b)-Whether allowance under s. 9(2) can be Riven in respect of more than one residential house-Applicability of s. l6(3)(b)-Whether applies only to cases when corpus of propertry is transferred or is ultimately to be tr?n_sferred to wife or minor child-Whether income of trust or of ,ninor child to be assessed in father's hands.

The appellant created a trust in 1955 by transferring cortain securities held by him to a bank as trustee.

One of the beneficiaries of the trust was the appeliant's minor daughter M. The income accruing to M under the trust during the previous years relevant to the assessment years 1957- 58, 1958-59, 1959-60 and 1960-61 was included in the assessments made on the appellant as an individual far those years by applying the provisions of s. 16(3)(b) of the Indian Income Tax Act 1922. In the assessment for the year 1960-61 the Income-tax Ofl\cer had also to deal with the· appellant's claim for the all

The order continues below.

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