Law:

Section:

Section 64(iii) [as it stood before 1-4-1976], read with section 23(2), of the income-tax act, 1961-Transfer of assets-For benefit of spouse or minor child-Assessee gifted Rs. 50,000 to his wife which she utilised for meeting part of cost of constructing house owned by her and used by assessee for residential purposes-ITO assessed entire income from said house property in assessee's hands but tribunal held only proportionate income relatable to gifted amount was so assessable-Whether tribunal correctly held that provisions of section 23(2) would be applicable while applying provisions of section 64(iii) and that if assessee's wife had no other source of income, then nothing could be added under section 64(iii) in the hands of assessee-Held, on facts, yes Proviso to section 23(2) of the Income-tax Act, 1961-Income from house property-Annual value-Assesses gifted certain amount to his wife which she utilised to meet part of cost of construction of house owned by her and used by assessee for residential purposes-Whether, while calculating income from said house property, limit of 10 per cent prescribed in proviso to section 23(2) had to be applied to other income of assessee's wife and not to other income of assessee-Held, on facts, yes Facts The assessee's wife, K, constructed a house at the cost of Rs. 1,40,000, which included a gift of Rs. 50,000 and a loan of Rs. 61,000 from the assessee. The house was being used for residential purposes by the assessee. For the assessment year 1969-70, the ITO rejected the assessee's claim of giving the abovementioned loan to K and by invoking the provisions of section 64(iii), as it stood at the relevant time [now section 64(1)(iv)], added the annual value of the house property, as worked out under section 23(2), to the income of the assessee. On appeal, the AAC limited the addition to 4/5th of such value as the assessee had given only Rs. 1,11,000 out of the total cost of the house. On further appeal, the Tribunal accepted the assessee's claim of having loaned Rs. 61,000 to his spouse and held that the proportionate income from the house would have to be reworked with reference to the gift of Rs. 50,000. The Tribunal also…

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