The main legal point established in the judgment is the interpretation and application of Section 64(l)(v) of the IT Act, 1961, regarding the taxation of rental income from assets transferred to a minor child by an individual.

1. An application under Section 256(1) of the IT Act, the Tribunal has referred the following question for the opinion of this Court:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the gift made by the assessee in favour of his three minor sons in the form of Hiba under the Mohammedan Law attracts the provisions of Section 64(l)(v) and Section 27(i) of the IT Act, 1961, and, therefore, the rental income of the three minors from the properties gifted to them by the assessee. was includible in the total income of the assessee for the three years under consideration ?“

2. Assessment years, in all, are 1983-84 to 1985-86, that assessee-respondent has made oral declarations on Nov., 1982 in favour of his minor sons Zahiruddin and Mohd. Zafar and similar declarations have been made on 31st Dec., 1982, in favour of his minor son Moinuddin. The assessee, by these oral declarations, claimed that he has gifted the properties to his minor sons. Such gifted properties were accepted and those properties are fetching rental income Rs. 11,400 in tne asst. Yr. 1983-84 and Rs. 13,500, in each of the two subsequent assessment years. Assessee claimed that after gift, rental income from gifted property should not be taxed in hands of assessee. The A0 has charged that income and assessed that income in the hands of assessee, invoking the provisions of Section 64(l)(v) of the IT Act, 1961.

3. In appeal, the Dy. CIT(A) has given the reason that the transfer was made under the Mohammedan law, therefore, no interference is called for to tax the income under the IT Act. In appeal before the Tribunal, the Tribunal found that it is a transfer by way of gift in favour of the minor sons and any income in the hands of their parents under Section 64(l)(v) of the IT Act.

4. Heard learned counsel for the parties. Learned counsel for the applicant-assessee submits that when the transfer was made by the assessee in favour of his sons to ensure their education, it is an adequate consideration and, therefore, any rental income arising out of that property which has been transferred, should not be taxed in the hands of the assessee. Learned counsel further submits that the transfer is not in dispute and transfer or no transfer, it is the obligatory on the parents to educate their children and once the transfer of property is made by the parents in favour of their children, any income arising out of the consequence of transfer of that property, income from that should not be taxed in the hands of the assessee-transferor.

5. TheTribunal has considered this aspect in detail in its order. The relevant paras 9 to 13 of the order of the Tribunal read as under

“9. A ‘Hiba’ or gift under Mohammedan law is a “transfer of property, made immediately, and without any exchange” by one person to another and accepted by or on behalf of the latter. For the purpose of taxability of the income from the gifted property the meaning of the term “Transfer” shall have to be known from the definition of the term as given in Section 2(47) of the Act. Once a transaction amounting to gift under Mohammedan law falls within the definition of the term “Transfer”, as given in Section 2(47) of the Act, the charging section under the Act would come into pay (and) exemption from charge of income-tax could be claimed with reference to the provisions of the Act only.

10. In the instant case, gifts of certain properties made by the assessee in favour of his three minor sons is an admitted position. It cannot be disputed that the gifts so made involved transfer of capital asset by the assessee to his sons within the meaning of the term defined in Section 2(47), There is no dispute on the point that during the years under consideration, the minors had derived income from the gifted properties. On these facts the express provisions of Section 64(l)(v), reproduced below, obviously come into operation and the incomes, as mentioned above, w