Law:

Section:

Section 64(iii) [as it stood before 1-4-1976], read with section 27(i), of the Income-tax Act, 1961 - Transfer of assets for benefit of spouse or minor child - Assessee gifted in 1954 a house to his wife who enjoyed income from the same to complete exclusion of assessee - Whether rent from that house for relevant previous year Includible in assessee's income for assessment year 1969-70 - Held, on facts, yes Facts For the assessment year 1969-70, the ITO added Rs. 675 to the total income of assessee being the rent received in respect of a certain house property, without giving any reasons for this addition. On appeal before the AAC, the assessee submitted (i) that he had gifted the said house to his wife in 1954 and that, since then, the income therefrom was being enjoyed by his wife to his complete exclusion ; and ( ii) that this income had not been included in his assessments for preceding assessment years and the action of ITO was not justified. The AAC accepted the assessee's contentions and excluded the house rent from his income. On further appeal, the revenue contended before the Tribunal that the ITO's action was correct as per section 27(i). The assessee countered this with the argument that section 27(i) was inapplicable since the transfer of house property had taken place before the 1961 Act came into force. The Tribunal, however, upheld the applicability of section 27(i) on the ground that the assessment proceedings related to the assessment year 1969-70 when that section was very much in force and upheld the ITO's action in view of section 64(iii) [as it stood at the relevant time] read with section 27(i). On reference, the assessee argued that neither section 27(i ) nor section 64 was retrospective and that his wife's title to the said property having become absolute by virtue of the transfer made in 1954, the assessee could not be deemed to be the owner of that property under section 27(i), nor could the gift be deemed to be a transfer without adequate consideration for the purpose of section 64(iii) or section 27(i). Held 1. A statute is retrospective when it takes away or impairs any vested right acquired under the existing laws, or creates a…

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