1960 PLP 480 (PTD)
EXECUTORS OF THE WILL OF T. V. KRISHNAIYER Versus COMMISSIONER OF INCOME-TAX, KERALA
| Citation | 1960 PLP 480 (PTD) |
| Forum / Court | Kerala (India) |
| Bench Members | M. A. Ansari and Velu Pillai, JJ |
| Parties | EXECUTORS OF THE WILL OF T. V. KRISHNAIYER Versus COMMISSIONER OF INCOME-TAX, KERALA |
| Primary Law | STATEMENT OF CASE |
Q1: What are the key laws and sections cited in 1960 PLP 480 (PTD)?
This judgment primarily cites: STATEMENT OF CASE as referenced in Pakistani case law index.
Q2: Which judicial bench decided the case 1960 PLP 480 (PTD)?
The case was heard and decided by the Kerala (India) bench comprising: M. A. Ansari and Velu Pillai, JJ.
Q3: What is the official citation format for this judgment on Pakistan Law Portal?
Cite this legal precedent as: 1960 PLP 480 (PTD) (EXECUTORS OF THE WILL OF T. V. KRISHNAIYER Versus COMMISSIONER OF INCOME-TAX, KERALA). Read the full summary and cross-referenced laws free on Pakistan Law Portal.
Laws Cited
Representation
- The claim put forward before the Income-tax Officer was that the amounts cannot be included, because the lady was not the married wife nor the children the legitimate issues of the assessee ; but this objection was rejected. The Appellate Assistant Com missioner has dismissed the appeal on the ground that the Nair lady and her children were the wife and the legitimate children of the assessee under the Hindu Marriage Validation Act. This ground has, however, not been pressed before us by the counsel for the Department. The Appellate Tribunal also found the reasons for excluding the amounts from the assessment inadequate and dismissed the appeal. Thereupon an application under section 66 (1) of the Income-tax Act was filed and the first question before us was stated to this Court. Thereafter a Division Bench of this Court by an order of July 10, 1958, further directed the Tribunal to state the second question, which concerns the children.
Headnotes / Summary
Income-tax Act (XI of 1922), S. 16(3)-Transfer of assets to not legally wedded wife and illegitimate children-Income from assets whether can be included in total income of transferor. The assessee, who was a Brahmin residing in South Travancore, while his marriage to a lady of his own caste was still subsisting, lived with a Nair lady G, and had through her three sons and a daughter. By a deed of settlement the assessee settled certain amounts of money to G and each of the four children through her. The trustees of the settlement invested those amounts in shares in companies floated by the assessee. The question was whether the dividend income in respect of those shares could be included in the total income of the assessee under section 16 (3) of the Income- tax Act Held, (i) that as the local statutes prohibited the performance of marriage during the continuance of a prior marriage, G was not the lawful wedded wife of the assessee and their children were not legitimate ; (ii) that "wife" in section 16(3) (a) (iii) meant legal wife ; and "child" in section 16 (3) (a) (iv) meant legitimate child ; (iii) that, therefore, the income derived by G and her children from the assets transferred by the assessee were not covered by section 16 (3) (a) (iii) and (iv) and could not be included in the assessee's total income. Commissioner of Income-tax v. Rajasundaram (1950) 18 I T R 145 and Maker: v. Makein (1955) 1 All E R 57 ref. By this application, the assessee requires the Appellate Tribunal to refer to the High Court certain questions of law, which are said to arise out of the order of the Tribunal dated 11th December, 1956, in I. T. A. No. 4672 of 1955-56. Inasmuch as, in our opinion, a question of law does arise out of the aforesaid order of the Tribunal, we hereby draw up a statement of the case, agreed to, by the parties, and refer it to the High Court of Kerala at Ernakulam under section 66 (1) of the Indian Income-tax Act.
2. The assessee was a salt manufacturer in South Travancore producing and selling salt from pans and factories owned by him and taken on lease from others. He married K. Lakshmi Ammal, a Brahmin lady, several years before 1103 and through her had one son and one daughter. Ever since the year 1103 he lived with T. K. Gourikutty Amma, a Nair lady, and through her had three sons and one daughter. In the year 1118 he married S. Lekshmi Ammal, a Brahmin lady, and through her had three sons during the relevant period. The assessee had purchased a bungalow in Vazhuthacaud in his own name but gifted it to T. K. Gourikutty Amma, towards the, end of the account year 1124 (year ending 16th August, 1949) being the previous year for the assessment of 1950-51. He had also purchased a bungalow called Krishnamangalam Bungalow in which he lived with his wife S. Lekshmi Ammal. The annual rental value of each of these bungalows was Rs. 900.
3. There was an agreement with Gourikutty Amma aforesaid, executed in 1112, a translated copy whereof is annexed hereunto as annexure `A' and form part of the case. The assessee undertakes to produce the original deed before the High Court at the time of hearing of the reference application, as some portions of it are important for consideration by the High Court, especially the portion relating to the nature of Krishnier's relationship to Gourikutty Amma. Notwithstanding this document, the assessee married off his daughter by Gourikutty Amma sometime in early 1956.
4. On 4-4-1954 (M. E.) the assessee converted his salt business into a private limited company under the name and style of Sri Sankara Allom Ltd., and also floated another company under the name and style of T. V. Krishnier & Co. Ltd., to act as the managing agents of Sri Sankara Allom Ltd., mentioned supra.
5. By a deed of settlement dated November 30, 1948, the assessee settled a sum of Rs. 85,000 in favour of T. K. Gourikutty Amma and her minor children in the following sums; T. K. Gourikutty Amma Rs. 25,000 K. Yasodaran Nair Rs. 15,000 K. Gopalakrishnan Nair Rs. 15,000 K. Ramanujam Nair Rs. 15,000 G. Harikumari Rs. 15,000 Rs. 85,000 The assessee also appointed T. V. Krishna Iyer & Co. Ltd. as trustees of the aforesaid settlement. A copy of the settlement is annexed hereto as annexure B' and forms part of the case. The trustees utilised the amount of Rs. 85,000 for subscribing for the shares of Sri Sankara Allom Ltd. and T. V. Krishna Iyer & Co. Ltd. in the following manner: Name of beneficiary No. of shares in Sri Sankara Allom Ltd. No. of shares in T. V. Krishna Iyer & Co., Ltd. T K. Gourikutty Amma 201 51 K. Yesodaran Nair 100 50 K. Gopalakrishnan Nair 100 50 K. Ramanu jam Nair 100 50 G. Harikumari 100 50 The shares in both Sri Sankara Allom Ltd. and T. V. Krishna Iyer & Co. Ltd were of the face value of Rs. 100 and were fully paid up.
6. Sri Sankara Allom Ltd. declared on 1st August, 1949, an interim dividend and in 'respect of the shares held by T. V. Gourikutty Amma and her children, the following amounts of dividends were paid: T. K. Gourikutty Amma Rs. 4,020 Net. K. Yesodaran Nair Rs. 2,000 K. Gopalakrishnan Nair Rs. 2,000 K. Ramanujam Nair Rs. 2,000 G. Hatikumari Rs. 2,000 Rs. 12,020
7. It was the assessee's case before the Income-tax Officer in the assessment proceedings for assessment year 1950-51 aforesaid that he was a Brahmin governed by Hindu law and that he was married to one Lakshmi Ammal of his own caste ; Gouri kutty Amma was a Nair girl kept by him only as his concubine ; there was therefore, no question of the said Gourkutty Amma being treated as his legal wife arid the children being considered as his legitimate children, so that the dividend income relating to their shareholdings aforesaid, totalling Rs. 12,020 net, was not includible in his assessment under section 16(3). An affidavit by Gourikutty Amma was also filed before the Income-tax Officer' copy of which is annexed hereto as annexure `C' and forms part of the case. The Income-tax Officer rejected the plea and included the aforesaid dividend income as also the residential value of Vazhuthakad house referred to in paragraph 2 supra in the acceptance.
8. On appeal to the Appellate Assistant Commissioner similar contentions were raised against the inclusion of the said dividend and rental income, under section 16(3) (a) (iii). In the course of the hearing, however, the assessee did not press his objection with regard to the income of Vazhuthaked bungalow. The Appellate Assistant Commissioner concurred with the view taken by the Income-tax Officer and dismissed the objection for the following reasons set out in paragraph 4 of his order; "The third contention objects to the inclusion of dividends on shares allotted to Sri T. K. Gourikutty Amma and her minor children and included by the Income-tax Officer under S. 16 (3) (a) (iii). The Income-tax Officer held that the shares transferred to Gourikutty Amma and her minor children were not for adequate consideration or in connection with an agreement to live apart and that Gourikutty Amma being the appellant's second wife the income from the assets transferred to her and her minor children are includible in the assessee's income. It is significant that while the appellant objects to the inclusion of this income, he does not press the objection to the inclusion of the annual letting value of the Vazhuthakad bungalow which also stands in the name of Gourikutty Amma. If the income from that property is includible, the income from other assets are also includible. Apart from this aspect, facts also go to show that there was no adequate consideration for the transfer of the assets. The auditor attacked the Income-tax Officer's findings on different points. First he said that T. K. Gourikutty was only a concubine. But it is too late in the day to raise the plea of concubinage. In all documents and before the Income-tax Investigation Commission, it has been accepted that she was a legal wife. I reject the plea of concubinage. It was then urged that even if there was legal marriage, the marriage was void under the Nair Regulations, which among other things lays down that a subsequent marriage of a female or a male during the con tinuance of a prior marriage and performed after the commence ment of this Regulation is void. In this case, whatever may be the position originally the marriage with the first wife was terminated by a settlement executed in 1122. After the termina tion the status of Gourikutty Amma becomes that of a legal wife. I do not think the Nair Regulation is applicable so far as this assessment is concerned. Finally, it is urged that even if it be found that T. K. Gourikutty Amma was a legally wedded wife, she has been divorced by an agreement as early as 1113 and the properties were settled on her as consideration for the divorce. But then it has been accepted before the Investigation Com mission that the divorce was only a make-believe arrangement and not real and as a matter of fact also it is learnt that the appellant has interested himself in the marriage of the children of Gourikutty Amma. Considering all the aspects of the case, I am obliged to agree with the Income-tax Officer that the shares allotted in the name of Gourikutty Amma and children are assets transferred to the second wife and her children not for adequate consideration or an agreement to live apart. I confirm the inclusion of the income from these shares in the assessee's assessment."
9. When the matter came up before the Tribunal all the con tentions which were raised before the Appellate Assistant Commis sioner were once again put forward before the Tribunal. The Tribunal held that according to section 3 of the Hindu Marriage Validity Act, the difficulty of a marriage becoming void on account of difference in castes, sub-castes or sects, between the parties to the marriage has been removed and hence, there was no question of the marriage between the assessee and the said Gourikutty Amma becoming invalid by the Nair Regulation referred to above.
10. With reference to the question of divorce, the Tribunal held that there was no question of any divorce among Hindus according to Hindu law at the relevant time. As such, whatever might have been the agreement between the assessee and the said Gourikutty Amma, she continued to be the wife of the assessee, and hence as per provisions of section 16 (3) (a), the amount in question has been rightly taxed in the hands of the assessee. The copy of the order of the Tribunal is annexed hereunto as annexure `D' and forms part of the case.
11. From the facts stated above, the following question of law arises; "Whether T. K. Gourikutty Amma was the legally wedded wife of the assessee so as to attract the provisions of section 16 (3) of the Indian Income-tax Act ?" T. N. Subramania Iyer for Applicants. G. Rama Iyer for the Commissioner.
Judgment & Decree
M. A. ANSARI, J.-The two questions stated in this reference are; "(1) Whether Gourikutty Amma was the legally wedded wife of the assessee so as to attract the provisions of section 16 (3) of the Indian Income-tax Act ? and (2) Whether Gourikutty Amma's four children, Yasodaran Nair, Gopalakrishnan Nair, Ramanujam Nair, and Harikumari are the legitimate children of the assessee and the provisions of section 16 (3) of the Income-tax Act would be attracted to the income derived from the shares and properties in their names?" The facts leading to this reference may be shortly stated. The assessee, who has since died, was a Brahmin and a salt manu facturer in South Travancore, producing and selling salt from factories owned by him and also taken on lease. Before 1103 he had married a lady of his own caste, Lakshmi Ammal and they had a son and a daughter. After 1103 he was living with a Nair lady Gourikutty Amma. This relation appears to have continued for a number of years and the assessee bad, from this lady, three sons and a daughter. In 1118 the assessee married again a lady of his own caste, who is also called Lekshmi Ammal. After the last marriage he made a settlement in favour of the Nair lady and his issues from her, and the two questions relate to the income which the lady and the children derived out of the settlement. The deed of settlement is of November 30, 1949, and the assessee had thereby settled Rs. 85,000 in favour of the Nair lady, and his four children from her. Gourikutty Amma was given Rs. 25,000 and each of the four children Rs. 15,
000. The assessee had earlier converted his salt business into a private limited company under the name and style of Shri Sankara Allom Ltd., and had floated another company under the name of T. V. Krishna Iyer & Co. Ltd., to act as the managing agent of the private company. The trustee of the settlement in favour of the Nair lady and her children had invested the amounts allotted to them in the private company and the dividend incomes from these shares came to Rs. 12,020 for the assessment year 1950-51. They have been included in the total income of the assessee under section 16 (3) of the Income-tax Act. The claim put forward before the Income-tax Officer was that the amounts cannot be included, because the lady was not the married wife nor the children the legitimate issues of the assessee ; but this objection was rejected. The Appellate Assistant Com missioner has dismissed the appeal on the ground that the Nair lady and her children were the wife and the legitimate children of the assessee under the Hindu Marriage Validation Act. This ground has, however, not been pressed before us by the counsel for the Department. The Appellate Tribunal also found the reasons for excluding the amounts from the assessment inadequate and dismissed the appeal. Thereupon an application under section 66 (1) of the Income-tax Act was filed and the first question before us was stated to this Court. Thereafter a Division Bench of this Court by an order of July 10, 1958, further directed the Tribunal to state the second question, which concerns the children. It is not disputed that, because of his earlier marriage and the wife being alive, the assessee could not have legally married the Nair lady. It is not clear where the assessee first began to live with her ; but that is of no material importance. For so far as the Cochin area is concerned, section 4 of the Cochin Nair Act 13 of 1095, has enacted that the marriage during the continuance of a prior marriage and performance of such marriage after the coming into force of the Act was void. Though the aforesaid enactment has been superseded by the Cochin Act 19 of 1113, the prohibition against such marriage, has been continued under the latter enactment. The legal position of such marriages in the erstwhile Travancore State was similar ; for section 8 (1) of Travancore Regulation II of 1100 also prohibited them. It is clear therefore, that relation between the assessee and Gourikutty Amma was not that of husband and lawful wife and their children cannot therefore be legitimate. The question is how far the income from money donated to such persons could be held as covered by section 16 (3) of the Income-tax Act. At this stage it would be useful to state the relevant parts of the subsection under which they have been included in the assessee's income. Section 16 (3) (a) (iii) and (iv) reads as follows; "In computing the total income of any individual for the purpose of assessment, there shall be included- (a) So much of the income of 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 agreement to live apart ; or (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter; by such individual other wise than for adequate consideration." The case for the assessee is that the word "wife" in the pro vision means the person whom the assessee has legally wedded and "child" one who has been born of his legal wife. In other words the argument is that the income of a person, who is not assessee's lawful wife, and children, who are not legitimate, should not be held as covered by the provision. In this connection the counsel for the assessee has relied on Commissioner of Income-tax v. Rajasundaram ((1950) 18 I T R 145). There the assessee had two minor sons, one of whom was legitimate and the other illegitimate. Both were admitted to the benefits of a partnership and the partnership itself was registered. The taxing officer had included in the assessment Rs. 7,236 which was the share income of the minor illegitimate son of the assessee in the partnership under section 16 (2) (ii) of the Income-tax Act; but on reference to the Madras High Court, Satyanarayana Rao, J., found the inclusion to be incorrect. He held that the word "child" prima facie means a legitimate child and therefore the income of the other child alone could be included. Viswanatha Sastri, J., agreed with him and he also held that the word prima facie means legitimate child subject to different con struction having regard to the object of the statute. In doing so the learned Judges followed the well-established English rule for construing documents that where the word is used the ordinary intention is to include only legitimate child. Indeed the rule is so firmly established that it has been extended to construction of statutes also. In this connection the counsel for the assessee has drawn our attention to Makein v. Makein ((1955) 1 All E R 57), where an illegitimate infant was found not to be covered by the word "dependent" in section 1 (1) of the Inheritance (Family Provision) Act, 1938, as amended by the Intestates' Estate Act, 1952. We see no reason to depart from so well-established a rule of interpreting the statute. Therefore, the incomes derived by the Nair lady and her children would not be covered by section 16 (3) (a) (iii) and (iv) unless having regard to the object of the statute or the context the words should be construed as referring to such persons also. Obviously taxing statutes are not concerned with enforcing moral obligations and these words on this account cannot be widely interpreted. Nor the object of preventing income from escaping assessment can be treated as sufficient to give the word "wife" in clause (iii) as wide a meaning as the Department seeks to place on it. If we were to hold otherwise the aforesaid object would justify inclusion of the income from donation to a wife, who has been divorced, or income of a step-son from similar gift. It follows that there is nothing compelling in. the context to justify the word "wife" in the clause being interpreted as inclusive of one who is not wedded. The position is similar so far as the word "child" is concerned. Indeed the rule of interpreting the word as meaning only legitimate child has led to the legislative practice in England of defining child as including step-child, adopted child or illegitimate child, which practice can safely be recommended. Having regard to the aforesaid observations we are of the view that the answer to the first question in the statement should be in the negative, i.e., Gourikutty Amma is not the legally wedded wife of the assessee and, therefore, her income is not covered by section 16 (3) of the Income-tax Act. It further follows that her children are not legitimate and our answer to question No. 2 is that these incomes are not covered by the provisions of section 16 (3) and it would not affect them. Let the aforesaid answers be sent to the Tribunal. The assessee is entitled to costs which we fix at Rs.
100. Reference answered accordingly.