Law: Income Tax Act, 1961

Section: 64

Section 64 of the Income-tax Act, 1961 - Transfer of assets - For benefit of spouse etc., - Assessment year 1962-63 - Certain plot of land belonged to assessee's wife - She constructed a building thereon with help of funds furnished, in its entirety, by assessee - ITO applying section 64 brought entire rent income received by wife of assessee to hands of assessee - Whether since fact as to what part of rent was attributable to building was not clear, entire income could not be treated as income derived from assets directly or indirectly held by assessee - Held, yes FACTS The Tribunal held that the income of Rs. 4,457, derived by renting out the building which was constructed on a plot of land which belonged to the assessee's wife with funds furnished, in its entirety, by the assessee, was liable to be taxed in the hands of the assessee as income derived from an asset directly or indirectly transferred by the assessee to his spouse in terms of section 64(1)(vii). HELD The income in question was no doubt derived from renting out the building. One cannot conceive of a building in existence without lateral support from the land on which it is constructed. It may be stated that very often the land on which the building is situate has a more important role in determining the rent of the building constructed on it. That the rent varies with reference to the location of the building is a fact too well-known to be mentioned. A building constructed within the area of the Cochin Corporation for instance, will fetch much more rent than a similar building constructed in a village. The contribution of the land by its location or its situation by the side of a road or in an important commercial centre is, therefore, a contributory factor in determining the quantum of the rent that can be fetched by a building constructed on it. To ignore that would amount to assuming an unreal position for which there is no justification. It was difficult to accept the argument advanced by the department that the rent was for the building and nothing had been paid towards the land. The rent fetched is not only from the facilities the building provides but from the location of the land, its…

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