Judgment :- 1. These are references made by the Income-tax Appellate Tribunal, Madras 'A' Branch under clauses (2) and (1) respectively of S.66 of the Indian Income-tax Act. They arise out of the assessment to income-tax of the same individual M. K. Makkar Pillai, Alwaye, for the assessment years 1123 and 1124 M. E. As the question referred is more or less the same they were heard together and are being disposed of by this single order. 2. The assessee by his first wife, deceased, had 8 children who were all adults. By second wife he had 3 daughters who are all minors. In October 1941 he floated a private limited company to take over his lucrative business in cashew nuts, lemon grass oil, etc. Out of the 300 shares, the assessee retained for himself 180 shares and caused the allotment of 10 shares each to his second wife and 11 children We are concerned with the dividends, which accrued on the 40 shares appertaining to the second wife and her 3 minor children. The Income-tax Officer in the first instance and later, the Appellate Assistant Commissioner and the Appellate Tribunal in successive appeals held that these dividends should be included in the income of the assessee for the assessment years 1123 and 1124 by virtue of the operation of S.20 (3) (a) clauses (iii) and (iv) of the Travancore Income Tax Act, XXIII of 1121 corresponding to the similar sub-clauses in S.16 of the Indian Act. It was contended on behalf of the assessee, that the clauses (iii) and (iv) above will not hit the transfers in favour of the second wife and the minor children effected long previously particularly in view to S.37 of the Travancore Act, to which there is no corresponding section in the Indian Act, which specially provided against evasion of liability to assessment as a result of settlement etc., but effected only after the 1st January 1945. The, question was therefore formulated in the Reference Case No. 6 of 1955 herein: "The concerned transfer being admittedly before January 1945, whether it is saved from the operation of S.20 of the Act on account of the 37th Section". And similarly in Reference Case No. 7. The, question was therefore formulated in the Reference Case No. 6 of 1955 herein: "The concerned transfer being admittedly before January 1945, whether it is saved from the operation of S.20 of the Act on account of the 37th Section". And similarly in Reference Case No. 7. "Whether on account of the operation of 37th Section, transfers by the assessee in favour of wife and minor children before January 1945, are saved by the operation of the Act". 3. Before proceeding to discuss the question, it will be useful to extract the relevant provisions of the Act. S.20 (3) runs as follows: "(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 - from assets transferred directly or indirectly to the wife by the husband, other wise 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". Section 37 to which there is no corresponding section in the Indian Act. says; "Where any settlement, partition, sale, gift or other transaction which has been effected after the first day of January 1945 in respect of all or any of the properties belonging to, or in the possession whether jointly or in common, of any individual, family or association has, in the opinion of the Income Tax Officer, been effected for the purpose of evading liability to assessment he may assess the income from all such properties to income-tax as if no such settlement partition, sale, gift of other transaction had taken place in respect thereof. Provided that no such order shall be made until notice has been given to the individual, or the members of the family or association concerned and an opportunity given to them to be heard in support of their contention" 4. Mr. Provided that no such order shall be made until notice has been given to the individual, or the members of the family or association concerned and an opportunity given to them to be heard in support of their contention" 4. Mr. T. N. Subramonia Iyer, learned counsel for the assessee, urged before us, that the settlement of the shares in the instant case being in October 1941 was long previous to the enactment of the Travancore Income Tax Act, XXIII of 1121 on 9th July 1946 and that during all this interval the departmental authorities had accepted the settlement as genuine and assessed the donees themselves direct on the dividends arising from the shares. Even now it was not contended that the settlement regarding the corpus of the shares was to any extent void If so, it was not open to the department to treat the dividend which was only an incident, as having affinity different from the corpus its. If, clauses (iii) and (iv) of S.20 (3)(a) cannot therefore be so interpreted as not to rope in the income of the wife or minor child arising from the past settlement. That is to say, the sub-clauses should not be given any retrospective effect at any rate beyond 1st January 1945, and this, according to learned Counsel, was made specifically clear by the provision in S.37 for such limited retrospectivity only. 5. The argument of learned Counsel as above assumes, to begin with, that the sub-clauses (iii) and (iv) of S.20 (3) (a) are intended to subserve the same purpose as S.37. But is the assumption well-founded? S.37 deals with settlement, etc., which in the opinion of the Income Tax Officer, have been effected for the purpose of evading liability to assessment. Sub-clauses (Hi) and (iv), on the other hand, deal with transfer of assets otherwise than for adequate consideration. As observed in Sampathi Iyengar's Commentaries, 4th edition, volume 2, page 631, with reference to S.16 of the Indian Act corresponding to S.20 here, "it is not correct to represent sub-section 1 (c) and sub-section (3) as intended to prevent evasion of tax. On the contrary, they are intended to widen the area of taxable income by including in that category certain forms of income, which but for the said provisions would not have been taxable at all" and reference is made to Gillies v. C.I.R. 14 Tax Cases 329. On the contrary, they are intended to widen the area of taxable income by including in that category certain forms of income, which but for the said provisions would not have been taxable at all" and reference is made to Gillies v. C.I.R. 14 Tax Cases 329. At page 660 of the learned author observes further "The raison detre of this fasciculus of clauses is that the husband or present is bound to maintain his wife or child, and any settlement that he makes upon them, would be to provide maintenance for them which in any case he is bound to do. The transfer of assets is at best, only an arrangement for providing maintenance to these dependent relations. If expenditure is incurred directly by the assessee for such purpose out of his income, he could not claim any allowance. The same should be the result even if instead of the assessee incurring the expenditure recurrently for such purpose he should transfer his assets to the wife or child." The legislative history of these provisions is also instructive. S.37 of the Act XXIII of 1121 corresponds to S.24-A of the Agricultural Income Tax Act, I of 1119 enacted on 17th August 1943. This S.24-A was itself inserted on 10th July 1945 by the Amendment Act, XXVII of 1120, with a view to provide against the tendency which was manifested by agriculturists in Travancore, to alienate agricultural lands with intent to evade liability to agricultural income-tax. When the Income Tax Act, XXIII of 1121 was enacted, the S.24-A was reproduced as S.37 of the Act. S.20 (3) had no parallel in the previous Travancore Act, VIII of 1096 and was modelled on the lines of S.16 (3) of the Indian Act which itself had been inserted thereby way of amendment in 1937. It is difficult in the context to view S.20 (3) and S.37 as intended to fulfil the same function 6. Nor is the argument based on the retrospectivity of the provision in S.20 (3) any more sustainable. For, the transactions themselves between the husband and wife or parent & child are in no way invalidated. The transfer is assumed to be valid but in certain circumstances the income of the wife or child has to be added to the husband's income in computing the income of the latter. For, the transactions themselves between the husband and wife or parent & child are in no way invalidated. The transfer is assumed to be valid but in certain circumstances the income of the wife or child has to be added to the husband's income in computing the income of the latter. As observed by Braund, J. in Pandit Gaya Prasad Tewari v. Commissioner of Income Tax (1942) 10 I. T. R.308 at 320. "It is true that the transfer which entitled, the wife to receive this income took place long ago, but that, to my mind, is wholly immaterial. I am inclined to think that the argument is based upon the material misconception that there is some sort of common law right that, if at any time the ownership of property bearing income does not attract income-tax, it is for ever entitled to be immune from tax. That, of course is wholly untrue." 7. See also H. P. Banerji v. Commissioner of Income Tax (3) 1941 (9) I. T. R.137. and Rai Banadur H. P. Banarji v. Commissioner of Income Tax, Bihar and Orissa I. L. R.20 Pat. 202, Our answer to the question referred is, therefore as follows. The transfers by the assessee in favour of the wife and minor children before January 1945 are not saved from the operation of the Act on account of the 37th Section. 8. The assessee will pay the costs of these references, including Counsel's fee Rs. 150 (one set only).