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PETITIONER: COL.  H. H. SIR HARINDER SINGH

       Vs.

RESPONDENT: C.I.T. PUNJAB, HARYANA, J.& K. & HIMACHAL PRADESH

DATE OF JUDGMENT15/10/1971

BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. REDDY, P. JAGANMOHAN MATHEW, KUTTYIL KURIEN

CITATION:  1972 AIR    7            1972 SCR  (2)   1  1972 SCC  (4) 536

ACT: Income-tax   Act,  1922,  ss.  9(2)  and   16(3)(b)--Whether allowance under s. 9(2) can be given in respect of more than one residential house--Applicability of s. 16(3)(b)--Whether applies only to cases when corpus of property is transferred or  is  ultimately  to  be  transferred  to  wife  or  minor child--Whether  income  of  trust or of minor  child  to  be assessed in father’s hands.

HEADNOTE: The  appellant  created  a trust  in  1955  by  transferring certain securities held by him to a bank as trustee.  One of the  beneficiaries  of the trust was the  appellant’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 for 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  Officer  had also to deal with  the  appellant’s claim  for the allowance under s. 9(2) off the said  Act  in respect  of two separate houses owned by the  appellant  and maintained  by  him for residential purposes in  New  Delhi. The Income tax Officer allowed the claim only in respect  of one  of  the houses.  The appellant’s  appeals.  before  the authorities  under the Act failed.  The High  Court  decided the  questions  referred to it against  the  appellant.   In appeals before this Court on certificate the contentions  of the  appellant which fell for consideration were :  (i)  (a) that  s. 16(3) (b) must be strictly construed; (b) that  the assets covered by the trust deed not having been transferred to  the wife or minor daughter but to a bank as trustee,  s. 16(3)  (b)  of the Act had no application; (c)  even  if  s. 16(3)  (b)  of the Act applied, what was to be  included  in computing the total income of the appellant was not the  in- come that had been received by the minor daughter under  the trust deed but only so much of the income of the trustee  as arose  from  the assets transferred to the trustee  for  the benefit of the minor child; (ii) that a reading of the first and  second  provisos to s. 9(2) of the Act  clearly  showed that  the allowance to an assessee is not confined  only  to

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one residential house HELD  :  (i)  (a) it is true that s. 16(3)  (b)  creates  an artificial   liability  and  must  therefore   be   strictly construed.   But  in construing s.  16(3)(b)  Courts  cannot ignore  the  clear  and  unambiguous  expressions  contained therein  and  all those expressions must  receive  a  proper interpretation.[9 C-D] C.I.T.  Bombay  v.  Manual Dhanji,  [1962]  44  I.T.R.  876, C.I.T.,.  Gujarat  v. Keshavlal Lallubhai Patel,  [1965]  55 I.T.R. 637 and; C.I.T., West Bengal II  v. Prem Bhai  Parekh JUDGMENT: (b)  The contention that s. 16(3) (b) applies only to  those cases  where ultimately the corpus of the trust property  is also  transferred  to the wife or the minor child,  must  be rejected.   The  provisions of s. 16(3)(b) are  very  clear, and, the only requirement so far as this aspect is concerned is  that the assets Must be transferred. to, any  person  or association  of persons and that transfer of assets must  be for the benefit of the wife or the 2 minor child or both.  In this connection it is pertinent  to note  the  wordings of s. 16(3) (a) (iii) and s.  16(3)  (a) (iv).   The  former  provision  clearly  refers  to   assets transferred  directly  or  indirectly to  the  wife  by  the husband   and   the  latter  provision  refers   to   assets transferred  directly or indirectly to the minor  child  not being  a married daughter.  But in cl. (b) of s.  16(3)  the transfer of assets is not to the wife or the minor child  or both but to any person or association of persons.  Therefore it  is clear that when the legislature intended  to  provide for a direct transfer of assets either to the wife or to the minor child, it has used the expressions as are found in  s. 16(3)  (a)  (iii)  and s. 16(3)  (a)  (iv).   The  different phraseology used in cl. (b) of s. 16(3) makes it clear  that the transfer of assets need not be to the wife or the  minor child.  Nor does the said clause require that the corpus  of the property so transferred to any person or association  of persons  should  ultimately vest in the wife  or  the  minor child [9G-1OB] C.I.T. Bombay v. Sir Mahomed Yusuf Ismail, [1944] 12  I.T.R. 8 approved. (c)  From a plain reading of s. 16(3) (b) it is  clear  that what is to be included in computing the total income of  the assessee  is that part of the income of the trust  which  is received for the benefit in this case of the minor daughter. It  is  the share income which has accrued to  or  has  been received  by the minor daughter under the trust deed in  the relevant  accounting  year, that has to be included  in  the total  income of the father, the assessee.   The  expression "so much of the income" occurring in this clause also  makes it clear that the said provision relates to the share income of  the  minor daughter, in this case, and not that  of  the trustee bank. [11 B-C] Tulsidas Kilachand and ors. v. C.I.T. Bombay City 1,  [1961] 42  I.T.R. 1 and C.I.T. Bombay v. Manilal Dhanji, [1962]  44 I.T.R. 876 applied. (ii)A reading of the second proviso to sub-section (2) of s. 9 clearly indicates that the first proviso will take in more than  one  residential  house, if the assessee  is  able  to establish  that  all  the houses are  occupied  by  him  for purposes of his own residence. [15A-B]

&

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CIVIL  APPELLATE, JURISDICTION: Civil Appeals Nos.  1488  to 1491 of 1969. Appeals from the judgment and order dated August 1, 1968  of the  Punjab and Haryana High Court in  Income-tax  reference No. 20 of 1964. K.  C. Puri, S. K. Mehta and K. L. Mehta, for the  appellant (in all the appeals). B. Sen, P. L. Juneja and R. N. Sachthey, for the  respondent (in all the appeals). The Judgment of the Court was delivered by Vaidialingam,  J.  These four appeals, on  certificate,  are directed  by  the assessee against the  judgment  and  order dated August 1, 1968 of the High Court of Punjab and Haryana at Chandigarh in Income-tax Reference No. 20 of 1964. Two  questions  of  law  were  referred  bY  the  Income-tax Appellate Tribunal, Delhi Bench ’C’ to the high Court., Both 3 the  questions  were answered in favour of the  Revenue  and against the assessee. The appellant-assessee was the Ruler of Faridkot and he  was assessed  in the status of an individual for the  assessment years  1957-58 to 1960-61, corresponding to  the  accounting years  being the period ending 12-4-1957,  12-4-1958,  12-4- 1959 and 12-4-1960 respectively.  The assessee had  executed a registered trust deed dated April 1, 1955 marked  Annexure "A"  whereunder  he  had  transferred  the  United   Kingdom Government’s Securities of the face value of pound  1,80,000 to  the  Grindlays Bank, London, as trustee, to be  held  in trust  in accordance with the terms and conditions  set  out therein.   As  there  is no dispute  that  these  Government securities  were transferred to the Bank and also  regarding the  provisions  contained therein for distribution  of  the income accruing from the securities, it is not necessary for us  to  set out the various clauses in the trust  deed.   By clause  (2)  the trustee was directed to  divide  the  trust property  into two equal parts.  By clause (3) the  trustee, after  meeting all outstanding and  contingent  liabilities, was required to pay the balance income to all or any of  the children of the Settlor other than his eldest son, living at the respective dates of payment in equal shares.  Similarly, under  clause (4) the trustee after meeting all  outstanding and contingent liabilities, was directed to pay the  balance income  to the eldest son of the Settlor  Tikka  Harmohinder Singh  of Faridkot, during his life.  Clauses 3(b) and  4(c) provided   that  at  the  termination  of  the   period   of distribution, the Bank shall stand possessed of the  capital and  income of both parts upon trust for the person who,  at the date of such termination, shall be the successor of  the Settlor according to the Rule of Primogeniture applicable to the  dynasty of the Settlor absolutely.  Clause (5)  defined the period of distribution to be the life of the Settlor and the  children of the Settlor living at the date thereof  and the lives and life of the survivors and survivor of them and the period of 21 years after the death of such survivor. The assessee owned a house known as Faridkot House  situated at Lytton Road, New Delhi, during the assessment year  1960- 61.   During  the  same period, the assessee  also  owned  a second  property  known  as  Faridkot  House,  situated   in Diplomatic Enclave, New Delhi. Rajkumari  Maheepinder Kaur, minor daughter of the  assessee received from the trustee as per the provisions of the trust deed  dated April 1, 1955, Rs. 15,570/-, Rs. 15,570/-.   Rs. 12,446/-and  Rs.  10,310/- during  the  relevant  accounting years,  corresponding  to the assessment  years  1957-58  to 1960-61.  In the assessment of the assessee as an individual

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during the’ said 4 assessment years, the Income-tax Officer District ’A’  Ward, Bhatinda,  notwithstanding  the  objections  raised  by  the assessee,  included  the  amounts  received  by  the   minor daughter in the total assessable income of the appellant for each  of  the assessment years under S. 16 (3)  (b)  of  the Indian  Income-tax Act, 1922 (hereinafter to be referred  to as  the  Act).  The order of assessment for  the  assessment year 1957-58 was passed on April 27, 1959 and for the  other three assessment years on March 23, 1961. On  appeal by the assessee, the Appellate Assistant  Commis- sioner of Income-tax, Rohtak Range, confirmed the orders  of the   Income-tax  Officer.   The  order  of  the   Appellate Assistant  Commissioner for the assessment year  1957-58  is dated July 25, 1961 and for the remaining years, the  orders were  passed on November 4, 1961.  The  Appellate  Assistant Commissioner  accepted the contention of the appellant  that s.  16(1)(c) of the Act has no application, but agreed  with the view of the Income-tax Officer that the income  received by the minor daughter is to be included in the total taxable income of the assessee under S. 16(3) (b). The assessee carried the matter in further appeal before the Income-tax  Appellate Tribunal, Delhi Bench ’C’, in  Income- tax  Appeals  Nos.  6075, and  8423-8425,  all  of  1961-62, regarding   the   assessment  years   1957-58   to   1960-61 respectively.   The Appellate Tribunal agreed with the  view of  the  lncome-tax  Officer  and  the  Appellate  Assistant Commissioner  that  the inclusion of  the  minor  daughter’s income  under  s. 16(3)(b) was correct.  The  order  of  the Appellate  Tribunal  for all the assessment years  is  dated August  7, 1962, though a separate order has been passed  in respect of the assessment year 1960-61. From the narration of the above facts, it will be seen  that the Income-tax Officer, the Appellate Assistant Commissioner and  the  Appellate Tribunal have all held that  the  income received  by  the minor daughter of the assessee  under  the trust deed has to be included under s. 16(3) (b) of the  Act in ’the total taxable income of the assessee for each of the assessment years. We  have  earlier referred to the fact  that  the  appellant owned two houses in New Delhi, both known as Faridkot House, one  at  Lytton Road and the other  in  Diplomatic  Enrlave, during  the  accounting  year ending April  12,  1960.   The assessee  claimed reduction of the annual letting  value  in respect  of both these houses on the ground that they  were, used  as  his residence.  This claim  regarding  the  houses arises  only in the assessment year 1960-61, The  Income-tax Officer  allowed the reduction in the, annual letting  value only in respect of one house at Lytton Road. 5 There is no discussion in the order as to, why the claim for the  second house at Diplomatic Enclave was  rejected.   The Appellate Assistant Commissioner held that as deduction  has already  been given by the Income-tax Officer in respect  of the  Faridkot  House  in Lytton Road, the  assessee  is  not entitled  to a further allowance in respect of the house  at Diplomatic Enclave.  It is the further view of the Appellate Assistant  Commissioner that under s. 9 (2) of the Act,  the assessee  is not entitled to a further allowance in  respect of  the second house and that both the houses  occupied  for residential  purposes  have to be treated as one  unit.   On this ground he rejected the claim of the assessee  regarding the allowance in respect of the Faridkot House in Diplomatic Enclave.   The  Appellate Tribunal, when dealing  with  ’the

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appeal  relating to the assessment year 1960-61  dealt  with this claim of the assessee a little more elaborately.  After a  reference to the provisions of S. 9 (2) of the  Act,  the Appellate  Tribunal held that there is nothing in  the  said provision  which entitles the assessee to claim  benefit  in respect  of  more  residential houses  than  one.   But  the Appellate Tribunal was prepared to accept the position  that the  second proviso to S. 9(2) indicates that  the  property referred  to in the first proviso may consist of  more  than one residential houses, but that by itself does not lead  to the conclusion that the benefit under the first proviso  can be  claimed in respect of more than one property.   In  this view, the Appellate Tribunal also agreed with the rejection, by  the two officers, of the claim made by the appellant  in respect of the house situated in Diplomatic Enclave. The  assessee filed four applications before  the  Appellate Tribunal  praying  to  refer  to  the  High  Court,  with  a statement of case, two questions of law-one relating to  the inclusion  in  the  four  assessment  years  of  the  income received  by the minor daughter in the total income  of  the assessee;  and  the other relating to the rejection  by  the Revenue,  of  the  assessee’s claim for  allowance  for  the assessment year 1960-61 in respect of the Faridkot House  in Diplomatic  Enclave.   The Income-tax Appellate  Tribunal  ’ accordingly, referred, for the opinion of the High Court the following two questions of law :               "(1) Whether on the facts and in the  circums-               tances of the case, the amounts of Rs. 15,570,               15,570,  12,446  and 10,310  received  by  the               assessee’s     minor    daughter     Rajkumari               Maheepinder Kaur in the assessment years 1957-               58,  1958-59,  1959-60 and 1960-61  under  the               terms  of the Trust Deed dated the 1st  April,               1955  have been rightly included in the  hands               of  the assessee under Section 16 (3)  (b)  of               the Indian Income-tax Act, 1922 ? 6               (2)  Whether on the facts and in the  circums-               tances of the case the assessee is entitled to               the  reduction of the annual letting value  of               the  Faridkot House in Diplomatic Enclave  New               Delhi,  by Rs. 1,800/-under the first  proviso               to  Section 9(2) of the Income-tax  Act,  1922               notwithstanding  the  fact  that  the   annual               letting  value of the Faridkot House  situated               at Lytton Road, New Delhi, is already  reduced               by Rs. 1,800/-?" The High Court, by its judgment and order under attack,  has answered  the  first  question in the  affirmative  and  the second in the negative.  The answers in respect of both  the questions given by the High Court are against the assessee. Before  the High Court, the appellant appears to have  urged that  S. 16 (1 ) (c) of the Act is the only  provision  that could  apply in the present case of settlement and that,  as such,  the  amounts received by the minor  daughter  of  the assessee  under  the trust deed could not be  added  to  the income of the assessee under S. 16 (3) (b) of the Act.   The High  Court rejected this contention of the  assessee.   The assessee further contended before the High Court that s.  16 (3)  (b)will apply only if assets had been  transferred  for the benefit of the wife or minor child and that as the  wife or  minor child was not entitled to the corpus of the  trust property,  that provision does not apply.   This  contention was also rejected by the High Court.  The further contention of  the  assessee was that to attract S. 1 6 ( 3 )  (b)  the

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transfer  should be one exclusively for the benefit  of  the wife or minor child and that the said provision will have no application when the benefit that is sought to be conferred, takes  in  as in the case of the present  trust  deed  other persons like the major children.  This contention again  was rejected  by  the High Court.  The last contention  on  this aspect  that  was urged appears to have been  that,  in  any event, under s. 16 (3) (b) what could be included is only so much  of the income of any person or association of  persons to whom the property had been transferred for the benefit of the  wife or the minor child and not the income received  by the minor child.  This contention again was not accepted  by the  High  Court.  The High Court ultimately held  that  the amounts received by the minor daughter of the assessee under the  trust deed have been rightly included under S.  16  (3) (b)  of  the  Act  in the total  assessable  income  of  the appellant in all the four assessment years. Regarding  the deduction claimed during the assessment  year 1960-61  in  respect  of the house  situated  at  Diplomatic Enclave, the High Court is of the view that the assessee can claim such a benefit by way of allowance under S. 9 (2) only in  respect of one house.  Such allowance having been  given by the Revenue in 7 respect of the residential house at Lytton Road, New  Delhi, it is the view of the High Court that the appellant’s  claim with  regard  to the house at Diplomatic  Enclave  has  been rightly rejected by the Revenue. Before  we refer to the contentions of the counsel  for  the assessee  and the Revenue, it is necessary to refer  to  the relevant provisions of the Act in respect of the two  points arising  for  consideration,  one relating  to  the  amounts received by the minor daughter and the other relating to  an allowance in respect of a second residential house.   Though the relevant provision in respect of the 1st aspect is  only clause  (b)  of s. 16(3), it is desirable to quote  all  the provisions of s. 16(3) which run as follows :               S.  16. (3) 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               (i) from the membership of the wife in a  firm               of which her husband is a partner;               (ii)  from the admission of the minor  to  the               benefits  of partnership in ’a firm  of  which               such individual is a partner;               (iii) from assets transferred directly or  in-               directly 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 otherwise               than for adequate consideration; and               (b)  so much of the income, of any  person  or               association  of persons as arises from  assets               transferred   otherwise  than   for   adequate               consideration to the person or association  by               such individual for the benefit of his wife or               a minor child or both." 8 The  relevant provisions bearing on the claim in respect  of the  house in Diplomatic Enclave, are the to provisos in  S.

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9(2).   Section  9(2) with the relevant two provisos  is  as follows               "9(2)  For the purposes of this  section,  the               annual  value of any property shall be  deemed               to  be  the sum for which the  property  might               reasonably  be excepted to, let from  year  to               year.               Provided  that, where the property is  in  the               occupation  of the owner for the  purposes  of               his  own residence, the annual  value  thereof               shall  first be determined in the same  manner               as  if the property had been let to  a  tenant               and the amount so determined shall be  reduced               by one-half of it or eighteen hundred  rupees,               whichever  is less, so however that where  the               sum  so  reduced exceeds ten per cent  of  the               total income of the owner the annual value  of               the  property  shall be deemed to be  ten  per               cent of such total income.               Provided  further  that  where  the   property               referred to in the preceding proviso  consists               of  one residential house only and  it  cannot               actually be occupied by the owner by reason of               the   fact  that  owing  to  his   employment,               business, profession or vocation carried on at               any  other.  place, he has to reside  at  that               other place in a building not belonging to him               and the residential house is not actually  let               and  no other benefit therefrom is derived  by               the  owner, the income of such property  under               this  section shall, if the property  was  not               occupied during the whole of the previous year               be taken to be nil and if it was occupied  for               a  part  of  the  previous  year  be  computed               proportionately, so however that the income in               respect of such property shall in no case be a               loss." We will first deal with the point covered by question No.  1 regarding the inclusion in the relevant assessment years  in the taxable income of the appellant, the amounts received by his minor daughter under the trust deed dated April 1, 1955. Though several contentions have been raised before the  High Court  and the Appellate Tribunal, Mr. K. C.  Puri,  learned counsel  for  the appellant, has raised before us  only  two contentions,  namely,  (1)  the  assets  of  pound  1,80,000 covered by the trust deed not having been transferred to the wife  or  minor daughter in question, but to  the  Grindlays Bank,   as  trustee,  s.  16(3)  (b)  of  the  Act  has   no application;  and (2) even if section 16(3) (b) of  the  Act applies,  what  is  to be included in  computing  the  total income  of  the  assessee is not the income  that  has  been received by the minor 9 daughter  under  the  trust deed, but only so  much  of  the income of any person or association of persons (in this case the  trustee) to whom the assets have been  transferred  for the  benefit  of the wife or the minor child.   The  counsel referred  to the decisions of this Court in Commissioner  of Income-tax,  Bombay  v. Manilal Dhanji(1);  Commissioner  of Income-tax,  Gujarat  v. Keshavlal  Lallubhai  Patel(2)  and Commissioner  of Income.-tax, West Bengal III v.  Prem  Bhai Parekh  and  others(3) and urged that S. 16(3)  of  the  Act created  an  artificial  income  and  had  to  be  construed strictly.   That is, according to the learned  counsel,  the wordings of S. 16 (3) (b) have to be construed strictly  and

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literally.   On  the  basis of such  a  strict  and  literal construction,  the counsel urged that the  two  propositions urged  by him earlier are ample borne out by s.  16(3)  (b). It  is no doubt true that the above decisions lay  down  the proposition that s. 16 (3) of the Act creates an  artificial income  and it must receive a strict construction.   We  may also  point out that the first decision, referred  to  above dealt  with a case under S. 16(3) (b) and  has  specifically laid down the proposition that the said provision creates an artificial liability to tax and must be strictly  construed. But  in construing s. 16(3)(b) the Courts cannot ignore  the clear and unambiguous expressions contained therein and  all those expressions must receive a proper interpretation. Taking  the first contention of Mr. Puri, according  to  him the  corpus  of the property covered by the trust  (in  this case the Government Securities) should have been transferred for  the benefit of the wife or the minor child.  The  minor daughter,  in this case, was not entitled to the  corpus  of the  trust property, namely, the securities.  We  understood Mr.  Puri to urge that s. 16 (3) (b) of the Act  will  apply only to those cases where ultimately the corpus of the trust property is also transferred to the wife or the minor child, as the case may be.  We have no hesitation in rejecting this contention  of Mr. Puri.  The provisions of S. 16(3)(b)  are very  clear and the only requirement, so far as this  aspect is concerned, is that the assets must be transferred to  any person or association of persons and that transfer of assets must  be for the benefit of the wife or the minor  child  or both.   In  this  connection it is  pertinent  to  note  the wordings of s. 16 (3) (b)(iii) and s. 16 (3) (a) (iv).   The former  provision  clearly  refers  to  assets   transferred directly  or indirectly to the wife by the husband  and  the latter  provision refers to assets transferred  directly  or indirectly to the minor child not being a married  daughter. But in cl. (b) of s. 16(3) the transfer of assets is not  to the wife or the minor child or both but to (1) [1962] 44 I.T.R. 876.     (2) [1965] 55 I.T.R. 637. (3) [1970] 77 I.T.R. 27 2-L256Sup CI/72 10 any  person  or association of persons.   Therefore,  it  is clear  that when the legislature intended to provide  for  a direct transfer of assets either to the wife or to the minor child, it has used the expressions as are found in S.  16(3) (a) (iii) and S. 16(3) (a) (iv).  The different  phraseology used in cl. (b) of S. 16(3) makes it clear that the transfer of  assets need not be to the wife or the minor child.   Nor does  the  said  clause  require  that  the  corpus  of  the property,  so  transferred to any person or  association  of persons,  should  ultimately vest in the wife or  the  minor child.   Mr.  Puri quite frankly admitted that there  is  no decision  to support his contention.  On the other hand,  we find  that there is a decision of the Bombay High  Court  in Commissioner  of  Income-tax, Bombay v.  Sir  Mahomed  Yusuf Ismail(1)  which is against the contention advanced  by  Mr. Puri.  In that decision one of the questions that arose  for consideration was whether the income received by the wife of the  assessee  under a deed of wakf can be included  in  the assessment of the husband under s. 16(3) (b).  The  assessee therein had executed a deed of wakf.  Under the terms of the said deed, the assessee’s wife was to get 21% of the  income accruing from the property which was the subject of the wakf deed.  It was contended that as no part of the assets or the corpus had been transferred to the wife, the income received by  the latter cannot be included in the taxable  income  of

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her  husband, the assessee.  A Division Bench of the  Bombay High Court rejected this contention and held that as  assets had  been transferred, under the wakf deed, to the  trustees and  as the transfer was beneficial to the wife and that  as she had, got 21 % of the income from the properties, section 16  (3) (b) of the Act was properly applied by the  Revenue. We  are in agreement with this decision of the  Bombay  High Court and as such the first contention of Mr. Puri will have to be rejected. Coming to the second contention, according to Mr. Puri under s. 16 (3) (b) of the Act, only so much of the income of  the person  or association of persons to whom the  property  has been  transferred for the benefit of the wife or  the  minor child  and not the income received by the minor that can  be included  in the taxable income of the assessee.   According to  the  counsel, what has been done by the  Revenue  is  to include  in  the assessment Of the  appellant’s  the  income received  by the minor daughter in the  relevant  accounting years.   That procedure is opposed to s. 16 (3) (b)  of  the Act.   Here  again, the contention of  the  learned  counsel cannot  be  accepted.  If this contention is  accepted,  the position  will be that the Revenue might have  included  the whole  of the income arising from the assets transferred  to the Grindlays Bank and not merely that portion of the income which  has  been  received by the minor  daughter.   Such  a construction (1) [1944] 12 I.T.R. 8. 11 in totally opposed to the clear provisions of the scheme  of S. 16 (3) and in particular the clear wording of cl. (b)  of S. 16(3) of the Act. From  a plain reading of S. 16(3) (b) it is clear that  what is  to  be included, in computing the total  income  of  the assessee,  is that part of the income of the trust which  is received for the benefit in this case of the minor daughter. It  is  the share income which has accrued to  or  has  been received by the minor daughter under the trust deed, in  the relevant  accounting  year, that has to be included  in  the total  income of her father, the assessee.   The  expression "so much of the income" occurring in this clause also  makes it clear that the said provision relates to the share income of  the  minor daughter, in this case, and not that  of  the Grindlays Bank, the trustee. Section  16 sub-s. (3) of the Act provides specifically  for assets  transferred  to the wife or the  minor  child.   The income  from assets transferred to the wife is still  to  be included  in the total income of the husband, if the  assets have been transferred directly or indirectly to the wife  by the  husband  other-wise than  ,for  adequate  consideration [vide  sub-section  (3) (a) (iii)].  Again so  much  of  the income  of any person or association of persons,  as  arises from  assets transferred, otherwise than for  adequate  con- sideration,  to the person or association, by  the  husband, for  the  benefit  of his wife has to  be  included  in  the husband’s taxable income. , [vide sub-section (3) (b)].  The same  sub-section (3) of S. 16 of the Act provides  for  the income, from the assets transferred by a father to his minor child, to be included in the total income of the father,  if the assets have been transferred, directly or indirectly  to the  minor  child, not being a married  daughter,  otherwise than  for adequate consideration [vide sub-section (3)  (a)] (iv)  1.  Again,  so much of the income  of  any  person  or association  of persons, as arises from assets  transferred, otherwise than for adequate consideration, to the person  or association  by  the father, for the benefit  of  his  minor

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child  has  to be included in the father’s  taxable  income. [vide sub-section (3) (b)].  The above is the scheme of s. 1 6 (3) of the Act.  It must also be noted that under S. 16(3) (a)  sub-clauses (iii) and (iv) and also clause (b) of  sub- section 3, the transfer contemplated thereunder should  have been "otherwise than for adequate consideration." The  words "adequate  consideration" denote consideration,  other  than mere  love and affection.  There is no controversy,  in  the case  before us, that the transfer, by way of trust, is  one "otherwise than for adequate consideration." It is true that when assets are transferred to the trustees, as in the  case before us, there was income in the hands of the trustees and the  latter were liable to pay tax thereon.  That,  however, is  not the question before us.  The question before  us  is whether the income, representing the share 12 of  the minor daughter, which has accrued in the,  hands  of the  trustee,  or was received by the said  minor  could  be included in the total income of the appellant under cl.  (b) of sub-s. (3) of s. 1 6. For  a  proper appreciation of cl. (b) of S. 16(3),  in  our opinion,  that  clause must be read in the  context  of  the scheme  of  s.16; and the two clauses (a) and  (b)  of  sub- section  (3) of s. 16, must be read together.  So read,  the reasonable interpretation to be placed on cl. (b) appears to be that the scheme of the section requires that an  assessee can only be taxed, on the income, from a trust fund  created for the benefit of his wife or minor child or both, provided that in the year of account, the wife or the minor child, or both, have derived some benefit under the trust deed.   That is,  the  wife or the minor child, either has  received  the income  or  the income has accrued to them or  they  have  a beneficial  interest, in the income in the relevant year  of account.  From this it follows, that if no income accrues or benefit is derived and there is no income at all, so far  as the  minor child, in the case before us, is concerned,  then it is not consistent with the scheme of section 16, that the income  or the benefit which is nonexistent, so far  as  the minor child is concerned, is to be included in the income of his  or  her  father.  In the case before us,  there  is  no controversy that the minor daughter has received the  income in all the relevant accounting years. Mr.  B. Sen, learned counsel for the Revenue, has drawn  our attention to the two decisions of this Court, wherein it has been held that S. 16 (3) (b) of the Act applies, to cases of trust,  like  the  one  before,  us,  and  that  under  such circumstances, what is to be included in the total income of the assessee is the share of the income that has accrued  to or has been received by the assessee’s wife or minor  child, or  both.   The  first decision is  Tulsidas  Kilachand  and others v. Commissioner of Income-tax, Bombay City I(1).   In this case A, the husband, had created a trust in respect  of certain  shares  owned by him in two companies.   Under  the said  trust the wife of A was to receive the income.  A  sum of  Rs.  30,404/-  was received by  the  wife,  as  dividend income,  in respect of the shares, regarding which  a  trust had  been  created.  This amount was added  to  the  taxable income of the husband under S. 16 (3) (b).  This Court  held that as the transfer of the shares by way of trust, had been effected  and  as there was a provision for payment  of  the income  accruing  from the shares to the wife,  and  as  the latter had received the dividend income, during the relevant accounting  year, that amount had been rightly  included  by the Revenue in the taxable income of the husband. (1) [1961] 42 I.T.R. 1.

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13 This  Court  further held that such a  case  falls  squarely within  the special rules concerning the wife and the  minor child as laid down in S. 16 (3) (b) of the Act. The  second decision referred to by Mr. Sen is  Commissioner ’Of  Income-tax,  Bombay  v.  Manilal  Dhanji(1).   In  that decision the assessee had created a trust in 1953 in respect of  a,  sum of Rs. 25,000/- and the trustees had  also  been nominated  for the purpose of administration of  the  trust. Under  the  trust deed, it was provided  that  the  interest accruing  on  the, trust amount of Rs. 25,000/-  was  to  be accumulated and added to the corpus Of the trust and that  a minor  daughter  of the assessee was to receive  the  income from  the  corpus increased by addition of  interest,  every year, on her attaining the age of 18 years.  It was  further provided  that  after  attaining the age of  18  years,  the daughter was to receive the income during her life time; and after  her  death  the corpus was to  go  to  certain  other persons.  The daughter, in that case, was to attain the  age of  18  years only on February 1, 1959.  In  the  accounting year  1953-54,  a sum of Rs. 410/-was received  as  interest income  on the trust fund and it was added by the  trustees, in accordance with the provisions of the trust deed, to  the corpus.  The Income-tax Authorities. however, included  this interest  income  of Rs. 410/- in the total  income  of  the father,  the assessee under S. 16 (3) (b) of the  Act.   The High Court held that on a true construction of cl. (b) of s. 16(3)  of  the Act, as no benefit has accrued to  the  minor daughter in the year of account, the sum of Rs. 410/-  could not  be included in the total income of the assessee.   This Court agreed with the view of the High Court. It  is clear from the above two decisions that when a  trust is  created,  though  the income is, in  the  hands  of  the trustees, the underlying principle of cl. (b) of S. 16(3) is that  so much of the income as represents the shares of  the wife  or  the  minor child, as the case may  be,  is  to  be included in computing the total income of the husband or the father.  This is consistent with the ,scheme of s. 16 and in particular  sub-section  (3) thereof, which is  intended  to foil  an individual’s attempt to avoid or reduce the  extent of  tax,  by transferring his assets to his  wife  or  minor child.   From  the  above discussion it  follows,  that  the second contention ,of Mr. Puri cannot also be accepted. Now  coming  to the second question, referred  to  the  High Court,  which  relates  to  the  reduction  claimed  by  the assessee  of the annual letting value of Faridkot  House  in Diplomatic  Enclave, New Delhi, we have already pointed  out that  the  said claim has been rejected by the  Revenue,  as well as by the High (1) [1962] 44 I.T.R. 876. 14 Court.   It  is  admitted  by the Revenue  as  well  as  the assessee  that the claim of the appellant in this regard  in respect of the residential house in Lytton Road, New  Delhi, has been allowed by the Revenue.  The question regarding the house  in Diplomatic Enclave arises only for the  assessment year  1960-61.   The Income-tax Officer has  not  given  any reason  for  rejecting  the  claim  of  the  assessee.   The Appellate  Assistant  Commissioner  has  held  that  as  the appellant has been granted the usual allowance in respect of Faridkot  House  in Lytton Road, he is not entitled  to  any further- allowance in respect of another house.  In fact the officer has said that both the houses have to be treated  as one unit for purposes of computing the annual letting value. But  there  is one finding, in the order  of  the  Appellate

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Assistant  Commissioner, which is to be noted, namely,  that the  houses in Lytton Road and Diplomatic Enclave  are  used and occupied by the assessee for residential purposes.   The Income-tax  Appellate  Tribunal has not  differed  from  the finding  of the Appellate Assistant Commissioner  that  both the houses are used and occupied for residential purposes by the  assessee.  But the Appellate Tribunal has  also’  taken the  view  that the assessee is entitled  to  the  necessary allowance  only in respect of one residential  house,  under the  first  proviso to s. 9(2) and that the  second  proviso thereto  does  not  help the  assessee.   According  to  the Appellate  Tribunal, the second proviso to S. 9 (2)  of  the Act will take in cases where the property, in the occupation of  an assessee for purposes of residence, consists of  more than  one residential house, but so situated as to form  one property.  The Appellate Tribunal has given an  illustration of a palace or a bungalow with various out houses.  In  such a  case,  according  to  the  Appellate  Tribunal,  all  the buildings  situated  in  one  compound  are  to  be  treated ’Collectively, as one property, for the purpose of the first proviso.  In this view, the Appellate Tribunal also rejected the  claim  of  the  assessee in respect  of  the  house  in Diplomatic Enclave. The High Court has very summarily rejected the claim of  the appellant in this regard.  After referring to the contention of the assessee that the second proviso to s. 9 (2)  clearly indicates  that the first proviso contemplates  an  assessee having  more than one residential houses, it has  held  that the said contention cannot be accepted. Mr. K. C. Puri, learned counsel for ’the appellant has urged that  the  finding of the Appellate  Assistant  Commissioner that  the two houses in Lytton Road and  Diplomatic  Enclave are  used for residential purposes by the assessee, has  not been  departed from by either the Appellate Tribunal or  the High Court.  On this basis, Mr. Puri urged that a reading of the first and second provisos, 15 to  section  9  (2)  of  the  Act  clearly  shows  that  the allowance,  to  an  assessee, is not confined  only  to  one residential  house,  as  held by the Revenue  and  the  High Court.   A reading of the second proviso to sub-section  (2) clearly,  in our opinion, indicates that the  first  proviso will  take  in  more than one  residential  houses,  if  the assessee  is  able  to establish that  all  the  houses  are occupied  by him for purposes of his own residence.  So  far as  this is concerned, we have already pointed out that  the finding is in favour of the assessee. Mr. B. Sen, learned counsel for the Revenue, found  conside- rable difficulty in supporting the order of the High  Court, answering  question  No. 2 in the negative and  against  the appellant.   But  he attempted to argue that  the  question, whether  the  assessee is actually occupying  the  house  in Diplomatic Enclave also for, purposes of his own  residence, has  not been investigated.  We are not inclined  to  accept this contention of Mr. Sen. We have already referred to  the finding  of  the Appellate, Assistant  Commissioner  to  the effect that both the houses-one in Lytton Road and the other in Diplomatic Enclave are used and occupied by the appellant for  purposes  of his own residence.  This finding  has  not been  disturbed either by the Appellate Tribunal or  by  the High  Court.  If so, on a proper construction of  the  first proviso  to  sub-section (2) read with  its  second  proviso clearly supports the contention of Mr. Puri that the view of the Revenue and ’the High Court that the assessee can  claim allowance only for one residential house, is erroneous.

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To  conclude, we are in agreement with the view of the  High Court when it answered the question No. 1 in the affirmative and against the assessee.  But we answer the question No.  2 in the affirmative in favour of the assessee.  Our answer to question  No.  2 will be substituted, in the place  of  that given by the High Court.  The judgment and order of the High Court  are modified to the extent indicated above,  and  the appeals  are, allowed in part.  The parties will bear  their own costs. G.C.                  Appeals partly. allowed. 16