Income from assets transferred to a trust for the benefit of the assessee's spouse or minor child is includible in the assessee's total income under Section 64(v) of the Income Tax Act, 1961.

( 1 ) THIS reference under Section 256 (1) of the I. T. Act, 1961, relates to the assessment years 1970-71 and 1971-72 and the relevant accounting years are the financial years ended on March 31, 1970, and March 31, 1971, respectively. The question involved before us is as follows: "whether, on the facts and circumstances of the case, the income from the trust property is includible in the total income of the assessee ?"

( 2 ) THE assessee is an individual. By a deed of indenture dated March 5, 1962, the assessee settled his property at 35a, Badan Roy Lane, in trust for the benefit of his wife and children. Under the said deed, the trustees were directed to pay the income of the said trust property to the assessee's wife during her lifetime and thereafter to his children after meeting the outgoings like rates, taxes, etc. The assessee continued to live in the said property. For the first time in the assessment years under reference the assessee claimed that the income from the said property should not be included in his total income. It was found by the ITO that all along in the past the income from the said property was included in the total income of the assessee and that the assessee, in fact, enjoyed the rent from the said property up to the assessment year 1966-67. In this view of the matter, he included "the value of the dwelling house" of Rs. 2,534 and Rs. 1,681, respectively, in the total income of the assessee for the two years under reference.

( 3 ) AN appeal was preferred before the AAC by the assessee. It was argued that it was of no importance whether the assessee had previously claimed deduction of the value of the dwelling house or not. It was contended that since the assessee had created an irrevocable trust in respect of the said property, the ITO was not justified in including the income from the said property in the total income of the assessee. Upholding the contentions of the appellant, the AAC, while deleting the aforesaid sums from the total income of the assessee observed as under:"first point of dispute is whether the appellant continued to be the owner of the said house. It was only in the case of an owner that a notional income from a house property can be applied. The Income-tax Officer has not held that the trust is revocable. Though he has hinted so, he has not come to a categorical finding that the claim of trust is bogus. In view of the registered deed duly executed, it was on the Income-tax Officer to disprove that there was a valid trust. The Income-tax Officer has not looked into the details and has not seriously challenged the validity of the trust. He has also not brought on record whether transfer of property to trust was disclosed for the purpose of gift-tax and in any other connection for his income-tax records. All that he has stated is that since the appellant continued to enjoy the benefit of his property, the claim of trust was not admissible. On the available facts I hold that the ownership relates to the trust and notwithstanding that the appellant resides in the same house income cannot be added to his own income without disproving the bogus nature of the trust. "

( 4 ) BEING aggrieved by the order of the AAC, the revenue came up in appeal before the Tribunal. According to the revenue, the AAC had clearly overlooked the provisions of Section 64 (v) of the Act which was invoked by the ITO. In view of that provision the ITO had not to establish the "bogus nature" of the trust. The provisions of that section, according to the department, were applicable to a trust which was valid and good in law. Under this provision a transfer should not only be for good consideration but should be for adequate consideration in order that the assessee's case may not fall within the mischief of that section. The decision in Tulsidas Kilachand was cited to show that natural love and affection cannot constitute adequate consideration.

( 5 ) ON behalf of the assessee, it was,