P L D 1967 Karachi 527 (PLP)

WAHIDUDDIN AHMED, J This is a Reference under section 66 (1) of the Income-tax Act, 1922 made at the instance of the applicant Commissioner of Income-tax, Central Karachi. The Respondent is practising lawyer in Thatta and while his assessment for the charge year 1958-59 was being completed a sum of Rs. 8,293 was added to his income. This amount accrued to the wife of the assessee as her share of income in the partnership business carried on under the name and style of Messrs Shaft Noor Bricks Co. on an investment of Rs. 15,000 standing in her name in the said firm. The Department's contention is that this amount on which the aforesaid income accrued to the lady was in fact money earned by the assessee from his legal profession and therefore was rightly included in the total income of the assessee. The Respondent challenged this assertion on the ground that the amount of investment was the savings of his wife out of the money which had been given to her for household expenses and pin-money off and on during the 40 years of their married life. The Appellate Assistant Commissioner on appeal confirmed the order of the Income-tax Officer by order dated 31st December, 1959. He held that the said amount of Rs. 15,000 represented amount transferred by the appellant to his wife from time to time out of natural love and affection and also represented savings of the amount of Rs. 350 per month given to her for household expenses.

2. The respondent challenged this order before the Income-tax Appellate Tribunal who remanded the case to the Income-tax Officer to report whether the appellant's wife had an independent source of income in the form of agricultural lands ; and, if so, the accumulated amount of income from such lands during the period of her possession. They further asked him to hold an enquiry for finding out whether the story that the appellant used to give Rs. 350 p. m. to his wife for household expenses is true ; and, if so, whether it was possible for the wife to save a sum of Rs. 8;293 during the period of her management. The Income-tax Officer, after examining the assessee and taking into consideration all other facts relevant to the issue, found that the lady had no agricultural property for the period of assessment under consideration, and as such there could be no income to her, from this source, he also disbelieved the story of monthly payments off and on and pin-money to the lady as there was no proof to support it except the assessee's own solitary statement.

3. After the report of the Income-tax Officer was received the Income-tax Appellate Tribunal considered it and came to the conclusion that half of the sum of Rs. 15,000 was the lady's savings from the monthly payments made to her by the assessee and the same did not come within the mischief of section 16(3)(a)(iii) of the Income-tax Act. Thereupon the Department called upon the Income-tax Appellate Tribunal to refer the following two questions for the determination of this Court :- (1) Whether there was evidence before the Income-tax Appellate Tribunal to hold that Rs. 7,500 represented savings from household expenses given by the assessee to his wife ? (2) Whether the alleged savings out of the money given by the assessee for household expenses to his wife came within the mischief of section 16 (3) (a) (iii) of the Income-tax Act ?

4. In support of the Reference Mr. S. A. Nusrat, the learned counsel for the Department, has contended that the learned Income-tax Appellate Tribunal's finding that Rs. 7,500 represented savings from household expenses given by the assessee to his wife was not based on any evidence whatsoever. The learned counsel however had to admit that there was the solitary statement of the assessee on this aspect of the question which was believed by the Department as good. In fact even the Appellate Assistant Commissioner's finding is that the amount of Rs. 15,000 invested by the wife of the assessee represents saving from the amount of Rs.350 given to her for household expenses. In these circumstances the learned Tribunal -was fully justified to come to the conclusion that the amount of Rs. 7,500 represents saving from household expenses given by the assessee to his wife. This finding being based on the evidence produced before the Income tax Authorities cannot be reopened in these proceedings.

5. The next question is whether the alleged savings out of the money given by the assessee for household expenses to his wife comes within the mischief of section 16 (3) (a) (iii) of the Income-tax Act. In ibis connection Mr. Nusrat, the learned counsel for the Department, contended that the amount so given by the assessee to his wife was out of love and affection and, therefore, falls within the mischief of the above-mentioned provisions of law. In order to appreciate the contention of the learned counsel it will be useful to reproduce the provision of section 16 (a) (iii) of the Income-tax Act which reads as under.- "In computing the total income to any individual for purposes of assessment there shall be included- (iii) from assets transferred directly or indirectly to the spouce otherwise than for adequate consideration or in connection with an agreement to-live apart." It will be noticed that under the above provision three condition must be satisfied before it may be applied : (i) assets must be transferred by the husband to the wife ; (ii) assets must be transferred directly or indirectly to the wife ; and (iii) they must have been transferred otherwise than fur adequate consideration or in connection with an agreement to live apart. In our opinion, the contention of the Department that the said amount falls within the mischief of this provision of law cannot be accepted as good argument. In the first place, it will be noticed that the finding of the Income tax Appellate Tribunal is that this amount represents the saving from household expenses 'given by the assessee to his wife from time to time. Thus the admitted position is that the respondent assessee used to pay Rs. 350 p. m. to his deceased wife towards his household expenses. In law the responsibility to maintain the children and provide for the household expenses of a family is on the husband or the head of the family. Whatever amount is paid for this purpose cannot be considered to be given out of love and affection. It is the legal responsibility of the husband or the head of the family to maintain his wife and children. Therefore any amount paid for this purpose will be for adequate consideration.

6. Moreover, strictly speaking, the payment of any such amount to the wife cannot be considered to be transfer of assets within the meaning of the above provision of law. The word 'transfer' of assets referred to in the above provision of law has been used in a technical sense. If the intention of the Legislature was to used in a popular sense it would have been open to them to use much wider words than the term 'transfer'. This being a taxing statute, according to the well recognised principle of the interpretation of statutes, it must be construed strictly in favour of the assessee. It, therefore, seems to us that the word 'transfer' has been used in the above provision of law in the strict sense and. not in a general sense under which every payment of money or passing of property from one to another can be considered as transfer. In this connection the learned Income-tai Tribunal has referred to the answers and questions in the Council of State on this very topic when Mr. S. P. Chambers on behalf of the Government answered this very point. It will be useful to repro duce them in this order also. "Q.-The Honourable the President : What will happen if the wife buys an estate out of pin-money allowed by her husband ? "' A.-Mr. S. P. Chambers : I do not know whether one would regard the giving of pin-money day by day or week by week or month by mouth as assets transferred. I have not heard of any legal opinion on it but the obvious intention is; I should 'say, that if a wife had over a period of years saved some money out of the daily allowance, the Income-tax Officer would not be in a position to prove as a condition precedent to applying this section, that on a specific date there was a transfer by the husband to the wife of assets. Q.-The Honourable the President : You would say that it would be difficult for the Income-tax Officer to interpret the section ? ' A.-Mr. S. P. Chambers : In those circumstances it would be so difficult that he would be compelled to take what I would regard as commonsense view of the matter and to treat the income of the wife as the income of the wife." In the light of the above discussion it is perfectly clear to us that if a husband gives pin money to his wife or he pays certain amounts to his wife for household expenses they are for adequate consideration. In any case the payment of such amounts cannot be considered to be transfer of assets within the meaning of the above provision of law.

7. On the view that we have taken of the above questions we would answer the first question in the affirmative, and the second question in the negative. Accordingly, the reference, is answered. The Department will bear the costs of this reference. S.Q. Reference answered accordingly.