Law:

Section:

Section 64(1)(iii) of the Income-tax Act, 1961 - Transfer of assets - For benefit of spouse or minor child - Whether what is includible in assessee's income, in the case of assets transferred directly or indirectly to his spouse otherwise than for adequate consideration, is only such portion of the income derived from such assets as was in proportion to the inadequacy of the consideration - Held, no FACTS During the years relevant to the assessment years 1972-73 to 1974-75, the ITO included in the total income of the assessee, the income derived from house property which had been transferred by him to his wife for inadequate consideration, rejecting the assessee's contention that what was includible in the assessee's income, in the case of assets transferred directly or indirectly to his spouse otherwise than for adequate consideration, was only such portion of the income derived from such assets as was in proportion to the inadequacy of the consideration. The Tribunal accepted the assessee's contention. On reference : HELD Where the circumstances described in sub-clause (iii )of section 64(1) are warranted, the transfer of the assets, though valid in the law relating to transfer of property, should be disregarded for the purpose of computation of the income of the transferor and the entirety of the income arising from such property is included in the income of the transferor as if, for the purpose of assessment, no transfer had taken place. The section does not postulate the principle of proportionality determined by the inadequacy of consideration. Therefore, the Tribunal was not justified in accepting the assessee's contention. CASE REVIEW Ashutosh Banik v. CIT [1981] 132 ITR 544 (Gauhati) ans B.K. Guha v. CIT [1972] 84 ITR 592 (Cal.)followed and relied upon. H.N. Patwardhan v. CIT [1970] 76 ITR 279 (Bom.) and Smt. V. Amirtham Ammal v. CIT [1976] 102 ITR 350 (Mad.) dissented from. CASES REFERRED TO H.N. Patwardhan v. CIT [1970] 76 ITR 279 (Bom.), Smt. V. Amirtham Ammal v. CIT [1976] 102 ITR 350 (Mad.), Ashutosh Banik v. CIT [1981] 132 ITR 544 (Gauhati) and B.K.Guha v. CIT [1972] 84 ITR 592 (Cal.). P.K.R. Menon for the Applicant. P. Balachandran for the…

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