| 21/8/2008 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 10 |
Decided on 17th May 1954 |
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Gratuitous Transfers To Children. Transfers Made Prior To Commencement Of The Ita. Continued Application Of Provisions For Subsequent Years.
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A father made a donation to his children on the 30th December 1948, transferring property and giving up his usufruct over certain other property. Appellant contended that the provisions whereby the relative income was still to be charged in the hands of the father should only apply where the transfer was fictitious, that the transaction having been carried out before the coming into force of the I.T.A. could not be affected by its provisions and that, in any case, the provision should only apply for the year in which the transaction was carried out. The appellant also argued that the provision applied only where income was donated, but not where property was donated.
The Court rejected all the appellant's arguments:
(a) The law did not distinguish between capital and income in this case: once income became payable to the children "by virtue of or in consequence of any disposition" made by the parent, it did not matter that capital had been donated. The word "disposition" was of very wide meaning, and the only thing that mattered was that there consequently arose income to the children.
(b) The Act did not distinguish between fictitious and actual dispositions: it applied only to the fact that a disposition had been made.
(c) The Court had already held that transactions carried out during 1948 fell within the ambit of the Income Tax Act, notwithstanding that the I.T.A. had come into force on 1st January 1949.
(d) The aggregation of the relative income with the father's own income could not be limited to the year in which the transaction was carried out. Aggregation was a continuous effect and was not limited to the year of assessment in whose basis year the disposition had been made.
BSC Case No: 22/53
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