Violability of income tax liability.

The only point that arises for consideration in this appeal against the decree of the Subordinate Judge of Salem in O.S. No. 21 of 1958, is whether the deed of gift, Exhibit A-9, executed by the second respondent in favour of the appellants, his children by the second wife, is one intended to defeat and delay creditors and as such voidable at the instance of his creditors.

The facts which have given rise to this appeal are these. Abu Bucker Sait, the second respondent, is a resident of Yercaud in Salem District. He was running a business in cloth at Madurai since June 20, 1945 under the name of A.B.H. Hussain and Company. Besides that, he possessed about 290 acres of coffee plantation in Yercaud. On August, 9, 1945 he purchased for a sum of Rs. 35,500 an extent of 9 acres of land in Kichilipalayam village, adjoining Salem Town. Besides, he had substantial balances in his bank accounts during the period material to the present case. There was also a terraced house owned by him in Guthianna in the State of Kutch. Abu Bucker had two wives and children by them. The senior wife was living at ‘Guthianna, while the junior wife and children born of her were with him (the second respondent) at Yercaud. The objects of his affection were only his wives and children, as is evident from the fact that under a registered will dated November 29, 1945 he disposed of his entire properties in their favour. It is claimed on behalf of the appellants that soon after the execution of the will, the second respondent realised that under the Mohammadan Law its provisions could not stand to the extent of two-thirds of the properties disposed of and that, therefore, he wanted to execute a deed of gift in favour of his minor children by his second wife, namely, the appellants. In pursuance of that object he is said to have executed Exhibit A-9 settling the Grange Coffee Estate or. the appellants. The reason given for the execution of this gift deed does not, however, appear to be correct. For, if that were so, one would have expected the second respondent to have executed a similar document in favour of his first wife and the children through her. But, no such document ever came into existence.

The second respondent declared in the deed of gift that possession of the Coffee Estate settled thereunder had been given over to the donees. Subsequent to the gift, the patta for the property was changed in favour of the donees and they have also been registered as the owners of the Coffee Estate with the Coffee Marketing Board.

On 30th April, 1947, the second respondent sold the Kichilipalayam lands for an amount which later on was found, in proceedings relating to assessment of income to have brought him a net profit of Rs. 66,640. This amount was included in his income for the purpose of assessment to income-tax for the year 1948-49. As a result, the total amount of tax payable by the second respondent for that year came to Rs. 47,110-10-0. Although this assessment was confirmed on appeal by the Appellate Assistant Commissioner, and on further appeal by the Appellate Tribunal, this Court, by its judgment dated 19th July, 1961 in R.C. No. 1 of 1957, held that the profit earned by the second respondent in the sale of Kichilipalayam lands could not be brought to tax, as it was not proved to be one obtained by an adventure in the nature of trade. But this judgment of this Court was not rendered when the proceedings leading up to the present suit for the realisation of income-tax were initiated.

There was another assessment to tax to the extent of Rs. 44,096-14-0 for the year 1950-51 on the second respondent. It is said that the validity of this assessment, is the subject-matter of a Reference to this Court, which is now pending.

As the assessee did not pay the two sums referred to above, the Income-tax. Officer issued certificates under section 46 (2) of the Indian Income-tax Act. In pursuance of these certificates the Collector of Salem passe