Law:

Section:

Sections 61 and 63 of the income-tax act, 1961-Revocable transfer of assets-Credit balance of assessee, managing director of a company-Shown as transferred, by mere book entries, to firm consisting of his three adult children-Sale of shares and its proceeds advanced to wife who deposited the same in company-Entire interest accrued on such transferred amounts remained with company-ITO taxed as assessee's income as loans advanced not genuine-Tribunal deleted same holding that no interest received by assessee and transaction could not be construed as benami-Whether tribunal's decision was right in law-Held, no-Further held that said transaction fell within the ambit of section 61 Facts The assessee, a managing director of the company, had a credit balance of Rs. 1,74,639 in its books of account. Under his instructions, the same was shown as transferred, by mere book entries on 3-4-1962, to his debit and to the credit of a partnership firm comprising three adult partners-two sons and one daughter-having one-third share each in the firm's profit and loss. The amount was similarly shown in equal shares to the credit of these partners in the books of account of the firm. The assessee did not receive any interest from the company during the relevant assessment years 1963-64 and 1964-65 on this amount. In the assessment year 1963-64, the assessee had shown Rs. 19,000 as interest income in his estimate of advance tax filed on 4-9-1962. In his first income-tax return filed on 16-8-1963, he had shown the interest income of Rs. 15,717 (interest actually paid by company for Rs. 15,814) but subsequently deleted the same from the "revised return. The ITO taxed this amount of interest in the hands of the assessee on the ground that no genuine loans have been advanced and only book entries had been made to reduce the tax liability and that not a single pie was withdrawn for use of the business. The ITO also observed that, if the assessee had really advanced this loan, there was no occasion for showing this amount in the advance tax estimate as also in the original return of income. The assessee's appeal before the AAC and the Tribunal failed. For the assessment year 1964-65, the…

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