Law:

Section:

Section 64 of the Income-tax Act, 1961 – Transfer of assets – For benefit of spouse etc. – Assessment year 1966-67 – Assessee gifted certain land to his wife who constructed building thereon with money borrowed from bank on mortgage of said land and advance rent received for buildings – Wife had no independent or other source of income for construction – Whether rental income derived from building was includible in income of assessee under section 64(iii) – Held, yes FACTS The ITO found that the assessee had gifted a plot of land to his wife and a building was constructed on the said plot of land during the year under consideration. The building stood in the name of the lady. The assessee claimed that the building was constructed by his wife by her own efforts with moneys borrowed by her own initiative from the Bank, who occupied two floors in the building at a monthly rent. The ITO, however, held that since the land on which the property was built was transferred by the assessee to his wife, without adequate consideration the income from the property was assessable in his hands under section 64(iii). The AAC found that the building was constructed on the land gifted by the husband with money borrowed by mortgage of the said land from the bank. He, therefore, dismissed the assessee's appeal. The Tribunal affirmed the view taken by the AAC. On reference: HELD The Tribunal after proper appreciation of the legal principles involved had correctly applied the same to the facts of the instant case and had correctly concluded that the income derived from the building was rightly included in the income of the assessee under section 64(iii) of the Act. The reasons stated by the Tribunal in its order were sound. It had to be noted that the building was constructed with a loan borrowed from the bank on the mortgage of the land which was gifted by the assessee. The amount borrowed on the mortgage of the land was utilised for the purpose of construction of the building and the wife had no independent or other source of income for construction. The construction cost had also been met out of the advance rent realised by the wife. The income derived by way of rent from the…

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