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Judgment
Menon, J.—The question directed to be referred to this Court by the order dated 31-3-1953 and which arises for decision in this case is:
Whether under the facts of this case the income of Rs. 14,000 received by the ladies can be included in the assessable income of the family of which the petitioner is the Kartha.
The assessee is a Hindu undivided family consisting of three major and some minor coparceners and the assessment year in question is 1123. The facts of the case necessary for the disposal of this reference a summarised in the order mentioned above are as follows:
The family was a share-holder in a private limited company called ''Lakshmi Prasad Bank Ltd., Trichur'' and had 17 shares in that company. 14 out of these 17 shares were transferred in the names of the wives of two i.e. of the elder co-parceners. In respect of these shares there was a bonus given by the company at Rs. 1,000 per share. The question is as regards the liability of the amount to income tax as income of the family?
The income tax Officer found against the assessee and the appeal filed before the Commissioner and disposed of by the Appellate Assistant Commissioner yielded no better result. The application of the assessee to the Commissioner for stating a case and referring the matter to this Court as also his application to the Commissioner to review the order of the Appellate Assistant Commissioner were dismissed. The assessee then moved this Court for a direction to the Commissioner under S. 109, Cochin income tax Act, 6 of 1117, to make a reference and on that petition the order of 31-3-1953 was passed.
The shares were sold to Mrs. Parameswara Iyer and Mrs. Gopalakrishna Iyer, 10 shares to the former and 4 to the latter, for the face value of those shares and it is not contended before us that the said transferees did not make good to the family the face value of the shares, namely, Rs. 500/- per share. The case, in other words, was not that the transfer was unsupported by consideration but that the consideration fixed and paid was not an adequate consideration in the circumstances of the case.
The Appellate Assistant Commissioner in his order dated 18-7-1930 said that the parties must have been aware at the time of the transfer that those who were holding the original shares would soon be getting not only four new shares without premium but also a bonus of Rs. 1,000 per share and:
I have therefore not the slightest doubt that the transfer of shares to Mrs. Parameswara Iyer and Mrs. Gopalakrishna Iyer was without adequate consideration.
This case of an inadequate consideration as distinct from a case of "no consideration" was also the basis of the arguments advanced before us on behalf of the respondent.
So long as the transaction is supported by consideration any inadequacy in the quantum of that consideration cannot avail the department. Such a transaction is neither bogus nor benami. Section 19(3) , Cochin income tax Act, 6 of 1117, provides that in computing the total income of an individual for the purpose of assessment there shall be included so much of the income of a wife as arises out of the assets transferred to the wife by the husband "otherwise than for adequate consideration". It was perhaps thought that the sub-section will support the assessment. We are not however, dealing with a case of a transfer by a husband to his wife but of a transfer of assets by a Hindu joint family. That one of the transferees is the wife of the kartha of the joint family and the other of another member of the coparcenary do not affect the question.
Inadequacy of consideration by itself will not make the shares transferred those of anybody other than of the transferees themselves and in view of this the petitioner is entitled to succeed and the question referred has to be answered in the negative.
We answer the reference accordingly. The petitioner will have his costs from the respondent, the advocate''s fee we fix being Rs. 100/-.