Law:

Section:

Section 64(iii) of the income-tax act, 1961 [now section 64(1)(iv)]-Transfer of assets-For benefit of spouse or minor children-Assessee and his brother made gifts of Rs. 17,000 and Rs. 15,000 to respective wives of each other-Assessee's wife deposited on interest gifted amount of Rs. 15,000 with firm 'A' in which her husband and donor were partners and wife of assessee's brother contributed gifted amount as part of her capital as partner in sister concern of 'A'-Whether interest income arising to assessee's wife includible in assessee's income under section 64(iii)-Held, on facts, yes Facts On 17-1-1966, the assessee made a gift of Rs. 17,000 to his brother's wife L, which she contributed as part of her capital as a partner in a sister concern of firm A. Similarly, the assessee's brother had also made a gift of Rs. 15,000 to S, the wife of the assessee, on 12-8-1965, which she deposited on interest in firm A, in which the assessee and his brother were partners. The ITO, before whom the assessee had admitted that the gifts made by the assessee and his brother to the respective wives of each other were cross gifts, held that making of a gift of Rs. 15,000 by the assessee's brother to the assessee's wife and the making of a gift of Rs. 17,000 by the assessee to his brother's wife constituted indirect transfers of assets by the assessee's brother and the assessee to their respective wives L and S for the purpose of section 64(iii ) and thus the interest income arising to S in respect of the amount of Rs. 15,000 was includible in the total income of the assessee for the relevant assessment years under section 64(iii). On reference : Held Having regard to the facts and findings recorded by the Tribunal, it was clear that the sum of Rs. 15,000 deposited by S with firm A was an asset transferred indirectly to her by her husband, the assessee, and as such the interest income arising there from to S was rightly included in the taxable income of the assessee under section 64(iii). Case review Smt. Mohini Thapar v. CIT [1972] 83 ITR 208 (SC), and Bhaichand Jivraj Muchhala v. CIT [1976] 102 ITR 385 (Bom.) followed . Cases referred to Smt. Mohini Thapar v. CIT [1972] 83 ITR…

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