Law:

Section:

section 64 of the income-tax act, 1961-transfer of assets-for benefit of spouse or minor child-while seven partners in a firm were partners in individual capacity, two partners were representing their respective hufs-all nine partners of firm made cross-gifts by book entries of identical amounts either to minor child or wife of partner-while ito applied section 64 to cross-gifts made by partners in their individual capacity, he did not apply section 64 to gifts made by partners as representatives of their hufs but treated such gifts as invalid and treated income from gifted amount as that of families concerned-whether in view of fact that two of aforesaid gifts were held invalid thereby making said gifts not exhaustive, but leaving gaps, section 64 could not be applied at all to transactions of cross-gifts in instant case-held, on facts, no Facts There was a partnership consisting of nine partners. Some of them were partners in their own right while some of them were said to represent their respective joint family interests. In the relevant previous year, between 1-1-1970 and 5-1-1970, a number of entries were passed in the capital accounts of the partners, whereby cross-gifts of Rs. 10,000 each were made to either the minor child of a partner or the wife of a partner, which were immediately credited in their respective names in the books of the firm. On the basis of the said credits, which were regarded as deposits effected by the transferees concerned, the firm paid certain interest to them. It was claimed that the said interest credited by the firm to each of the transferees must be separately assessed as the individual income of the transferee concerned. The ITO, however, observed that the gifts in each case were found to have been made only to facilitate the father or the husband of the recipient, as the case may be, to make a similar gift to the minor child or the wife of another partner. He, accordingly, applied the provisions of section 64 holding that the interest income derived from the deposit of Rs. 10,000 in the case of each minor child of a partner or in the case of the wife of a partner was to be clubbed in the total income of the respective…

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