Law: Income Tax Act, 1961

Section: 64

Section 64 of the Income-tax Act, 1961 - Transfer of assets - For benefit of spouse etc. , - On 31-3-1963, assessee transferred certain shares as held by her to minor son of 'B' - On same day, 'B' transferred her shares to minor son of 'R' and 'R' also transferred certain shares to minor son of assessee - ITO found that transfer of shares was not for adequate consideration and thus, included dividend income of shares transferred by assessee to her income holding that transfer of shares were cross-transfers hit by section 64(iv) - Whether even though transfer of shares was not for adequate consideration, found that transfer of shares was not for adequate consideration, and thus, however only part of dividend income referable to transfer for inadequate consideration was assessable in hands of assessee - Held, yes FACTS On 31-3-1963, the assessee transferred 110 shares held by her in certain company to minor son of 'B' and on same day 'B' transferred certain shares to minor son of 'R' and 'R' also transferred certain shares to minor son of assessee. The ITO took the view that the transfers in question were cross-transfers hit by the provisions of section 64(iv); that the transfers were not for adequate consideration and he, therefore, included the entire dividend income in respect of the shares transferred by the assessee, as income derived by her minor son from out of the shares transferred indirectly by her to him. The AAC, on appeal, confirmed the assessment. The Tribunal also upheld the assessment holding that transfer of shares was cross-gifts. HELD The first contention taken on behalf of the assessee, that the shares having been transferred at their face value, there was no transfer otherwise than for adequate consideration, had absolutely no force, as it was evident from the records that on the basis that the shares transferred were of the market value of Rs. 44,000, the assessee herself filed a gift-tax return with reference to the extent of the difference between Rs. 44,000 and Rs. 11,000 and was assessed thereon. It was also evident from the records that by applying section 52, the capital gains tax was levied on the footing that the full value for the…

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