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Maharaj Kumar Kamal Singh v. Commissioner Of Income-Tax, Bihar And Orissa.

Patna High Court

Aug 9, 1966

Judgment

Subsequent
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Structured Summary of the Opinion (H. Mahapatka, J.)

Factual and Procedural Background

The assessee, holder of an impartible estate, by an indenture dated 23rd November 1950 granted to his wife two premises at Camac Street, Calcutta, for life as a supplementary khorposh (maintenance) grant. The income from those two house properties was included in the assessee's total income under section 16(3)(a)(iii) of the Indian Income-tax Act. The assessee challenged that inclusion mainly on two grounds: (1) that the statutory provision was ultra vires article 14 of the Constitution of India, and (2) that the provision did not apply to the present facts (i.e., that the transfer was not a transfer of the husband's assets within the meaning of the provision). The Income-tax Appellate Tribunal, Patna Bench, overruled these objections and, on the assessee's request, referred questions to this Court.

Separately, for the assessment years 1959-60 and 1960-61, the assessee challenged the computation of the net annual value of residential houses at 10% of total income under the first proviso to section 9(2), contending that the “total income” used for that computation should not have included income from the two house properties transferred to his wife. The Tribunal rejected that contention and referred an additional question on this point.

Legal Issues Presented

“Whether the provisions of section 16(3)(a)(iii) of the Indian Income-tax Act, 1922, are ultra vires the Constitution of India?”
“Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that the provisions of section 16(3)(a)(iii) applied to the income arising from a property transferred by the holder of an impartible estate to his wife for her maintenance?”
“Whether in the facts and circumstances the Tribunal was right in holding that the income under section 16(3)(a)(iii) was to be included in the total income for the purpose of computing the net annual value of the residential house at 10% of the total income under the 1st proviso to section 9(2)?”

Arguments of the Parties

Assessee's Arguments

The assessee challenged section 16(3)(a)(iii) as being ultra vires article 14 of the Constitution (equality clause).
The assessee contended that section 16(3)(a)(iii) did not apply to the present case because the two house properties formed part of an impartible estate, which, under custom and precedent, belonged to the joint family rather than to the holder personally; therefore the transfer to the wife could not be treated as a transfer by the husband of his assets to his wife within the meaning of section 16(3)(a)(iii).
The assessee also challenged the inclusion of the income from those two house properties in total income for the purpose of computing the 10% net annual value under section 9(2) (first proviso) for assessment years 1959-60 and 1960-61.
Note: The opinion records that learned counsel for the assessee conceded that the statutory provision was not ultra vires, which led the Court to answer the constitutionality question negatively.

Revenue's Arguments

The revenue contended that, for the purposes of section 16(3)(a)(iii), it was not necessary that the husband (transferor) be the owner of the assets before transfer; merely that the transferor was the husband and the transferee was his wife would suffice to attract the provision.
The revenue argued that the holder of an impartible estate should, for practical purposes, be treated as the owner of the properties comprised in the estate, and thus the deeming inclusion under section 16(3) should apply.
The revenue relied on authorities (including Sartaj Kuari v. Deoraj Kuari and other precedents) to support the proposition that impartibility and the incidents of impartible estate could affect questions of alienation and ownership insofar as they relate to control and rights of the holder.
The revenue argued that construing section 16(3) otherwise would defeat the statutory purpose of preventing evasion of income-tax by sham transfers to wife and minor children.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Balaji v. Income-tax Officer, Special Investigation Circle, Akola	Cited in support of the proposition that the statutory provision is not ultra vires (i.e., supports constitutionality).	The Court referred to it (in para 4) alongside the assessee's concession to answer the question on constitutionality in the negative and against the assessee.
Commissioner of Income-tax v. Dewan Bahadur Dewan Krishna Kishore	Held that income from property which formed part of an impartible estate could not be assessed in the hands of the holder as owner; the joint family, not the holder, was the owner of that property.	The Court relied on this authority to establish that the impartible estate is joint family property and that the holder is not the owner for purposes beyond the incidents conferred by custom; this supported the conclusion that the transfer to the wife was not a transfer of the husband's assets within section 16(3).
Baijnath Prasad Singh v. Tej Bali Singh	Established that property though impartible may be ancestral and that succession is to be designated according to Mitakshara rules; the custom of impartibility does not negate operation of general law of succession.	The Court used the reasoning from this case (as cited in Dewan Krishna Kishore and subsequent authorities) to show that impartible estate retains character of joint family property; this assisted the Court in concluding the holder was not to be treated as owner for the purposes of section 16(3).
Shiba Prasad Singh v. Rani Prayag Kumari Debi (1932 L.R. 59 I.A. 331)	Observed that an impartible estate belongs to the joint family for limited purposes and although clothed with incidents of self-acquired property, it remains joint family property.	The Court cited this decision to reinforce the distinction between incidents of enjoyment/alienation conferred by custom and the underlying ownership by the joint family; this supported the conclusion that transfers by the holder could not be equated with transfers of his own assets for section 16(3) purposes.
Sartaj Kuari v. Deoraj Kuari	Considered questions of alienation by the holder of an impartible estate and observed that impartibility/primogeniture does not necessarily connote inalienability; used in context of the holder's alienation powers and the son's lack of partition rights.	The Court observed that this case dealt with alienation and was not inconsistent with earlier holdings on ownership; it noted that the statements in Sartaj Kuari were made in a specific context and did not displace the principle that the estate remains joint family property for ownership purposes.
Commissioner Of Income-Tax v. Maharani Gyankuari [1945] 13 I.T.R. 55	Concluded that the property of an impartible estate is joint family property, though the holder may have absolute rights over its income; distinguished between ownership of the estate and rights in income.	The Court relied on this later decision to conclude that a transfer of part of an impartible estate by the holder cannot be treated as a transfer of his own assets for the purposes of section 16(3)(a)(iii); this was pivotal to answering the applicability question in favour of the assessee.

Court's Reasoning and Analysis

The Court's analysis proceeded through the following steps, based exclusively on the material contained in the opinion:

Constitutionality: The Court noted that learned counsel for the assessee conceded that the statutory provision (section 16(3)(a)(iii) as recorded) was not ultra vires article 14. On that basis and with reference to Balaji v. Income-tax Officer, the Court answered the constitutionality question in the negative (i.e., the provision is not ultra vires) and against the assessee.
Nature and operation of section 16(3)(a)(iii): The Court explained that section 16(3) is a deeming provision used to include, for computation of an individual's total income, so much of the income of a wife or minor child as arises directly or indirectly from assets transferred by the husband without adequate consideration or in connection with an agreement to live apart. Ordinarily, income arising from transferred assets is assessable in the hands of the transferee, but section 16(3) deems such income to be the income of the transferor-husband for tax purposes when the specified conditions are met.
Meaning of “owner” and ownership of impartible estate: The Court undertook an examination of the legal nature of an impartible estate, relying on established custom and judicial authorities. It emphasized that while the holder of an impartible estate has wide powers of enjoyment and disposal (often described loosely as akin to absolute ownership), the estate in fact belongs to the Hindu joint family and the holder's powers arise from custom. The right of survivorship and the Mitakshara succession rule remain applicable; thus, the underlying ownership is with the joint family even if the holder has practical authority over enjoyment and disposal.
Application to the facts (life grant to wife): The Court observed that when the holder transfers a property to another person, the transferee becomes the owner of that property and, under section 9, income from such property cannot be assessed in the hands of the transferor as owner after the transfer. In the present case the Income-tax Officer had not attempted to include the income under the deeming provision of section 9(4)(a); and the revenue did not contend that the life grant left the properties comprised in the impartible estate such that the holder remained the owner for section 9 purposes. Thus, the Court focused on whether section 16(3)(a)(iii) could be applied treating the transfer as one by the husband of his own assets.
Interpretation of section 16(3): The Court rejected the revenue's contention that the husband need not have been owner of the assets before transfer for section 16(3) to apply. The Court held that the inclusion of a wife's income in the husband's total income under subsection (3) presupposes that the income arose from assets that were the husband's (i.e., assets belonging to the transferor) prior to transfer—because section 16 operates by deeming income which would otherwise have been assessed as the husband's income to continue to be treated as such after transfer when the transferee is the wife and the transfer lacks adequate consideration.
Precedents on impartible estate ownership: The Court reviewed authorities (including Dewan Krishna Kishore, Baijnath Prasad Singh, Shiba Prasad Singh and Maharani Gyankuari) and concluded consistently with those authorities that an impartible estate remains joint family property; the holder's incidents of enjoyment and disposal do not convert the estate into his absolute owned assets for all legal purposes. The Court emphasized the distinction between the estate (joint ownership) and income (where the holder may have present exclusive rights to income).
Conclusion on applicability: Applying those principles, the Court held that the transfer of the two house properties by the holder of the impartible estate to his wife could not be treated as a transfer by the husband of his assets within the meaning of section 16(3)(a)(iii). Hence the deeming provision of section 16(3)(a)(iii) did not apply.
Consideration of evasion argument and statutory construction: The Court addressed the revenue's concern that a narrow reading would permit evasion through transfers to wife/minor children. The Court observed that the statutory purpose behind the deeming provision was to treat transfers where the husband retained control of income in sham transactions, but noted that taxing statutes must be strictly construed and any doubt should be resolved in favour of the taxpayer. The Court found the revenue's policy argument insufficient to broaden the statutory scope beyond its text.
Comparison with later legislation: The Court noted that the Income-tax Act, 1961, contains more explicit provisions (sections 22–27 and section 27(i)/(ii), and section 64 corresponding to old section 16(3)) that create a distinct rule treating the holder of an impartible estate as the individual owner for house property purposes and separately deeming transfers to spouse/minor child to be treated as transfers by the transferor-owner for house property assessment. The Court observed that the new Act makes a distinction and that, under the old Act, no analogous provision existed to bring the present transfer within the scope of section 9; thus the revenue's attempt to rely on section 16 of the old Act could not be sustained.

Holding and Implications

Holding: The Court answered the constitutionality question in the negative (the provision is not ultra vires) and answered the question on applicability in favour of the assessee: the provision of section 16(3)(a)(iii) of the old Act did not apply to the income arising from the two house properties transferred by the holder of an impartible estate to his wife by way of a life supplementary maintenance grant. Consequently, the related question regarding inclusion of that income for computing the net annual value under section 9(2) did not fall to be considered.

Implications:

Direct effect: The assessee succeeds on the central issue of applicability; income from the two house properties transferred to the wife by the holder of an impartible estate was not to be included in the husband's total income under section 16(3)(a)(iii) of the old Act for the facts of this case. The reference was disposed of accordingly.
Costs: There was no order as to costs against either party.
Broader precedent: The Court's decision rests on established authorities about the nature of an impartible estate and a strict textual construction of the taxing provision; the opinion does not purport to create any new, wide-ranging tax rule beyond its application to the statutory text and facts before the Court. The Court also noted that the position under the later (1961) Act is different because of explicit deeming provisions in that statute.

Show all summary ...

H. Mahapatka, J.:— All these four references are under section 66(1) of the Indian Income-tax Act in relation to the assessment years 1957-58, 1958-59, 1959-60 and 1960-61, respectively.

2. The assessee is the holder of an impartible estate, and, by an indenture dated the 23rd November, 1950, granted to his wife two premises at Camac Street, Calcutta, for life by way of supplementary khorposh (maintenance) grant. The income from those two house properties was included in the total income of the assessee under section 16(3)(a)(iii) of the Indian Income-tax Act. The assessee challenged that mainly on two grounds. He attacked that legal provision as ultra vires article 14 of the Constitution of India. His second objection was that that provision was not attracted to the present case. These objections were overruled by the Income-tax Appellate Tribunal, Patna Bench; and on the request of the assessee, the following questions have been referred by the Tribunal to this court.

“(1) Whether the provisions of section 16(3)(a)(iii) of the Indian Income-tax Act, 1922, are ultra vires the Constitution of India?

(2) Whether, in the facts and circumstances, of the case, the Tribunal was justified in holding that the provisions of section 16(3)(a)(iii) applied to the income arising from a property transferred by the holder of an impartible estate to his wife for her maintenance?”

3. In regard to the assessment years 1959-60 and 1960-61, the net annual value of the residental houses of the assessee at ten per cent, of the total income of the assessee under the first proviso to sub-section (2) of section 9 was challenged on the ground that the total income of the assessee to be considered in that respect should not have included the income from the two house properties transferred to his wife by way of the supplementary maintenance grant. As that contention was not accepted by the Tribunal, the following question has been referred at the instance of the assessee in respect of the last two assessment years involved:

“Whether in the facts and circumstances the Tribunal was right in holding that the income under section 16(3)(a)(iii) was to be included in the total income for the purpose of computing the net annual value of the residential house at 10% of the total income under the 1st proviso to section 9(2)?”

4. Learned counsel appearing for the assessee conceded that the provisions under section 10(3)(a)(iii) of the Indian Income-tax Act are not ultra vires the Constitution of India. In that view, the first question is answered in the negative and against the assessee (see also Balaji v. Income-tax Officer, Special Investigation Circle, Akola)1.

5. The second question was argued at length by both, the sides. Section 16 is about exemptions and exclusions in determining the total income of an assessee and indicates how such total income is to be computed. In sub-section (3) it is provided:

“In computing the total income of any individual for the purpose of assessment, there shall be included—

(a) so much of the income of a wife or minor child of such individual as arises directly or indirectly—………

(iii) from assets transferred directly or indirectly to the wife by the husband otherwise, than for adequate consideration or in connection with an ageeement to live apart.”

6. The transfer envisaged in this provision is a valid transfer and income sought to be included in the total income of the husband (or parent) is accepted as the income of the wife (or the minor child). If the transferred assets are taken to be assets belonging to the wife by virtue of transfer, the transferor would necessarily be the owner of such assets before the transfer is made. In other words, both the transferor and the transferee, at the relevant time, before or after the transfer, are owners of those assets. Ordinarily, the income arising directly or indirectly from such transferred assets would be assessable to income-tax in the hands of the transferee wife; but by the special provision made under section 16, they are deemed to be the assessable income in the hands of the transferor-husband. This deeming provision does not cover all the transfers of assets by the husband to the wife. Only those transfers, which are made not for adequate con-deration or are not in connection with an agreement to live apart, are brought under this deeming provision. Though the language employed in sub-section (3) of section 16 is in directive form giving the manner of computation, the provision is, in fact and in effect, a deeming provision. The charging section 3 of the Indian Income-tax Act, 1922, is in respect of the total income of a previous year of every individual, where an individual is the assessee. The income of the wife from the assets transferred to her by her husband is taken to be the income of the husband, the individual assessee, under the deeming provision laid under section 16(3) and, in that view, becomes assessable in the hands of the husband.

7. In the instant case, the assessee is an individual. He is the holder of an impartible estate. Incidents of impartible estate are well denned and settled by custom and by judicial precedents. The bolder has uncontrolled powers of enjoyment and disposal over the impartible estate and income arising therefrom; but all the same, the estate belongs to the Hindu joint family of which the holder, at a particular time, is a member. According to the custom giving rise to succession by primogeniture, the eldest male issue of the holder of the impartible estate succeeds to possession and enjoyment of the estate after the death of the last holder; but the right of survivorship, which is the quintessence of law of succession in the Mitakshara school of Hindu law, is not inconsistent with that custom. The rule of primogeniture and the incidence of an impartible estate are matters of custom and usage; and they override the general law of succession only in matters covered by such custom and not otherwise. As far as belonging of the estate is concerned, it belongs to the joint family. But the right of partition and joint possession of the coparceners of the joint family other than the holder of the estate are abrogated by the custom of impartibility. No doubt,. unrestricted powers of possession, enjoyment and disposal of the holder of, the impartible estate are like those of an absolute owner of a self-acquired property. It is on this analogy that, sometimes or rather very often, the holder of sueh an estate is referred as the absolute owner of that estate. That, if I can say so with great, respect, is a loose way of description. The holder of the estate is endowed, by custom, with those powers of enjoyment and disposal, and, to that extent, the rights of the members of the joint family remain customarily curtailed. The estate belongs to the joint family who is the owner; but the holder of the estate has powers to dispose it of according to his wish. This customary power of disposal does not deprive the joint family of the ownership of the estate. If it were so, then succession to the estate by survivorship, according to the Hindu law of succession, could not be brought into play in any circumstance; that operates not by any custom but only by the force of law.

8. In the case of Commissioner of Income-tax v. Dewan Bahadur Dewan Krishna Kishore, the Judicial Committee, while dealing with the provision f under section 9 of the Indian Income-tax Act, 1922, as it was then, considered whether the income from property, which formed part of an impartible estate, could be assessed in the hands of the holder of that impartible estate as owner of that property and held that it was not he who was the owner but the joint family was the owner of that property. The Judicial Committee observed:

“Since the decision of the Board in Baijnath Prasad Singh v. Tej Bali Singh,2 it has been settled law that property though impartible may be the ancestral property of a joint family and that in such cases the successor falls to be designated according to the ordinary rule of the Mitakshara. The concluding words of the judgment delivered on behalf of the Board by Lord Dunedin in Baijnath Prasad Singh v. Tej Bali Singh are to that effect, and in that case as well as in Shiba Prasad Singh v. Rani Prayag Kumari Debi 1932 L.R 59 I.A 331 at page 345, which followed it, ‘the keynote of the position’ is not that property which is not joint property devolves by virtue of custom as though it had been joint—but that the general law regulates all beyond the custom, that the custom of impartibility does not touch the succession since the right of survivorship is not inconsistent with the custom; hence the estate retains its character of joint family property and devolves by the general law upon that person who being in fact and in law joint in respect of the estate is also the senior member in the senior line.

9. The birth-right of the senior member to take by survivorship still remains. Nor is this right a mere spes successionis similar to that of a reversioner succeeding on the death of a Hindu widow to her husband's estate. It is a right which is capable of being renounced and surrendered.

10. The later cases are to the same effect. Though the co-ownership of the junior member may be ‘in a sense’ only, carrying no present right to joint possession, if the question be whether the Hindu undivided family or the present holder is owner of the estate the answer of the Hindu law is that it is joint family property.”

11. This led to the amendment of section 9 in 1948, by substituting subsection (4) of that section so as to include a provision to the effect that the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in that estate. But that amendment was restricted only for the purpose of section 9, that is, for assessment on income from house property. So, the decision of the Judicial Committee about the legal position in regard to ownership of an impartible estate remained where it was and only a deeming provision was made by that amendment so as to bring the income from house property in that impartible estate to be assessed in the hands of the holder of the estate. The legislature took particular care to restrict this deeming provision and said:

“9.(4) For the purposes of this section—

(a) the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate.”

12. When the holder transfers a property to another person the transferee becomes the owner of that property, and within the meaning of section 9 of the Indian Income-tax Act, there can be no question of assessing the income of that property in the hands of the transferor as owner after the transfer. In the instant case, the Income-tax Officer did not include the income of the two house properties in question in the total income of the assessee deeming him to be the owner of those properties as provided under sub-section (4)(a) of section 9 of the Act. It was also not contended before us on behalf of the revenue that, though a life grant was made of the two properties to the wife of the holder, the assessee still continued to be the ower thereof in the sense that those properties were still comprised in the impartible estate. Whatever scope, if any, could be for such a contention, since that was not the basis of the action taken against the assessee, we need not pursue or examine it here. Learned counsel for the revenue contended that to construe the proper meaning of section 16(3)(a)(iii), it is not necessary to assume that the transferor-husband must be the owner of the assets before they are transferred to his wife. The mere fact that the transferor happens to be the husband and the transferee, the wife, would be sufficient to attract that provision. Sub-section (3) opens with the words:

“In computing the total income of any individual for the purpose of assessment, there shall be included…”

13. The income of an individual necessarily means the income belonging to and owned by an individual. Although the income of a wife or a minor child does not belong to that individual assessee, it is to be included in his total income under the provisions of sub-section (3). When the income from the assets transferred to the wife is sought to come within that inclusion, it would necessarily mean that the transferor-husband was himself the owner of the assets before they were transferred. In other words, the income of such assets, which would have been assessed as the income of that individual before the transfer, is brought to same assessability after the transfer of those assets if the transferee happens to be the wife and the consideration for that transfer is inadequate or the transfer is not in connection with an agreement to live apart. I cannot, therefore, accept the contention raised for the revenue that whether the husband was the owner or not of the assets in question is immaterial.

14. Next, it was urged that, for all practical purposes, the transferor-husband holding an impartible estate must be taken to be owner of that estate, and in that view, sub-section (3) of section 16 will be attracted. I have already partly dealt with this aspect of the question and shown that the impartible estate does not cease to be the estate of the joint family consisting of, among others, the holder of the estate only because such holder has unrestricted powers of enjoyment and disposal of the estate. To propound the opposite view, learned counsel for the revenue referred to the case of Sartaj Kuari v. Deoraj Kuari. In that case, the son of the holder of an impartible estate challenged the alienation made by the holder as invalid and not binding on him. In that context, it was observed that, in regard to an impartible estate, the son's right at birth did not exist where there was no right on his part to partition. In regard to the son's claim of inalienability of that estate, it was held that impartibility of the estate or the rule of primogeniture did not connote necessarily inalienability of that property; it was necessary for the plaintiff (son) to show that there was some custom which would prevent the operation of the general law empowering alienation, and that proof of a custom that the estate descended to the eldest son to the exclusion of the other sons was not sufficient. At one place in that decision, the Judicial Committee observed, and learned counsel stressed upon that very much:

“The property in the paternal or ancestral estate acquired by birth under the Mitakshara law is, in their Lordships' opinion, so connected with the right to a partition that it does not exist where there is no right to it…. By the custom or usage the eldest son succeeds to the whole estate on the death of the father, as he would if the property were held in severalty. It is difficult to reconcile this mode of succession with the rights of a joint family, and to hold that there is a joint ownership, which is a restraint upon alienation. It is not so difficult where the holder of the estate has no son, and it is necessary to decide who is to succeed.”

15. It would appear that this statement was in the context of the question of alienation by the holder unconcerned with the other members of the joint family. “Joint ownership” was used, as it appears to me, in the sense of a restraint upon alienation of the estate. What was specifically decided in regard to the ownership of the impartible estate in Baijnath's case and reiterated in the case of Commissioner of Income-tax v. Dewan Bahadur Dewan Krishna Kishore,, as already referred to, was not gone into in this case, which was decided in 1888.

16. Another case relied upon by the revenue was Shiba Prasad Singh v. Rani Prayag Kumari Debi, where it was observed that an impartible estate belongs to the joint family for a limited purpose and though it is ancestral, it is clothed with the incidents of self-acquired property. This decision does not dispute that the joint family is the owner of the impartible estate. The incidents of custom related thereto override some of the features of joint family estate; but that does not mean that the joint family ceases completely to be the owner of an estate only because it is impartible in nature. A later decision of this court, in the case of Commissioner Of Income-Tax v. Maharani Gyankuari* [1945] 13 I.T.R 55., dealt with this question elaborately and referred to all the important and relevant cases and concluded that the property of an impartible estate is joint family property, though the holder of the estate for the time being may have absolute rights over its income. A distinction between the income and the estate is clear. In the former, there is no joint ownership; in the latter there is, though it does not carry the present right to joint possession. The authority to transfer a part of the impartible estate is with the holder but the ownership thereof is with the joint family. In that view, the transfer of the two house properties in Calcutta in the instant case by the holder of the impartible estate to his wife cannot be taken as a transfer by the husband of his assets to his wife. The provision under section 16(3)(a)(iii) cannot, therefore, be attracted.

17. Learned counsel further contended that, on the aforesaid view, the purpose of this deeming provision, which was to prevent evasion of income-tax, will be defeated. He argued that an impartible estate holder with impunity can avoid legitimate tax on the assessable income derived from the assets comprised in the impartible estate by effecting sham transfers in favour of his wife and minor children for inadequate or no consideration. This has hardly any force. If he brings about such transfers in favour of persons other than wife and minor children, section 16 cannot prevent that To me it appears that the mere purpose behind the deeming legal provision is to create an artificial liability to tax against the husband, who really holds control of the income in his hands, through effecting transfer of the income-yielding assets in favour of his own wife and minor children. If the transfer is in favour of major children or other relations, the transferees may assert their own rights against the transferor and the chances of keeping control of the income in the hands of the transferor become much less. In our country, benami transactions in the name of wife and minor children are abundant and they are brought about, not unoften, for keeping away the creditors and tax collectors. Whatever purpose behind the legislation under consideration may be, since it is a taxing statute, it has to be construed strictly; and the citizen's liability thereunder cannot be extended, if he does not come within the scope of the legal provision. Where there is a room for any doubt, the benefit must go to the subject.

18. The present law (Income-tax Act, 1961) has brought about a different position. Sections 22 to 27 deal with income from house property. In section 27(ii) it is provided that, for the purposes of sections 22 to 26, the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate. Under section 27(i), an individual, who transfers otherwise than for adequate consideration any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, is to be deemed to be the owner of the house property Sb transferred. An owner of a house property is liable to assessment (section 22). The above two provisions of section 27 taken together bring the husband-transferor of house property comprised in an impartible estate to the wife under the liability of assessment on the income from that house property. Section 64 of the new Act corresponds to section 16(3) of the old Act. A distinction has thus been made in the new Act in regard to the income from house property comprised in an impartible estate where the house property is with the holder or the transfer is to his wife or minor children otherwise than for adequate consideration. Transfer of other assets of the impartible estate will, therefore, be not subject to such artificial liability in the hands of the holder of the estate. In the instant case before us, the transfer was in regard to house properties; but, in the absence of any provision similar to section 27 of the new Act, that could not be brought within the scope of section 9 of the old Act. The income-tax authorities sought to bring that under artificial liability created under section 16 of the old Act, which, as I have shown above, cannot be defended. On this conclusion, question No. (2) under reference has to be answered in the negative and in favour of the assessee.

19. In view of the above answer, question No. (3) does not fall to be considered.

20. The reference is thus disposed of But, in the circumstances of the case, there will be no order for costs against either party.

A.B.N Sinha, J.:— I agree.