Law: Income Tax Act, 1961

Section: 16

Income tax----Gift Transfer of assets Assessee making gifts of money to wife Wife becoming partner in firm and contributing such monies towards capital Wife' share of profits from firm, held, was not includible in assessee's total income. C.I.T. v. Prem Bhai Parekh (1970) 77 I T R 27 (S C) fol. C.I.T. v. Gotla (J.H.) (1985) 156 1 T R 323 (S C); C.I.T. v. Jwalaprasad Agarwala (1967) 661 T R 154 (S C); C.I.T. v. Keshavlal Lallubhai Patel (1965) 55, I T R 637 (S C); Dhanwatey (V.D.) v. C.I.T. (1968) 68 1 T R 365 (S C); Mohini Thapar (Smt.) v. C.I.T. (1972) 83 1 T R 208 (S C) and Potti Veerayya Sresty v C.I.T. (1972) 851 T R 194 (A P) ref. JUDGMENT PATHAK C.J.I. --This appeal by special leave is directed against the judgment of the High Court at Calcutta answering the following question in favour of the assessee and against the Revenue: "Whether, on the facts and in the circumstances of the case, the share of profit of the assessee's wife was includible in the total income of the assessee under section 64(l) (iii) of the Income tax Act, 1961?" The assessee was assessed in the status of an individual for the assessment year 1962 63 corresponding to the previous year March 26, 1961, to April 13, 1962. At the material time, the assessee was a partner in a firm, Messrs Ramesh & Co., with a share of eight annas therein. The balance was shared by three other partners the assessee's father, Kunjilal Agarwala, the assessee's brother, Hariram Agarwala and a stranger, Jagdish Prasad. On November 10, 1960, and on November 28,1960, the assessee made two gifts of Rs. 21,000 and Rs. 30,000 respectively to his wife, Kaushalya Devi, from his account m the firm On November 28, 1960, he made another gift of Rs. 11,000 to his mother, Chili Bai, from that account. It may be observed that Chili Bai received another gift of Rs. 20,000 from her husband, Kunjilal, effected by similarly drawing from hi. account with the firm. The assessee's wife, Kaushalya Devi, as well .as his mother, Chili Bai became partners with three other persons in a newly constituted firm, Messrs Kunjilal Hariram & Co. The three other partners were the assessee's grandfather, Moharilal Agarwala, the…

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