Law:

Section:

Section 64 of the Income-tax Act, 1961 [Corresponding to section 16(3) of the Indian Income-tax Act, 1922] - Transfer of assets - For benefit of espouse etc. - Assessment years 1957-58 to 1960-61 - Assessee sold immovable property to his wife at consideration of Rupees one lac - Consulting engineer assessed value of property at Rs. 1,50,000 as on valuation date - Assessee also gifted certain shares to his sister and maternal uncle and after time lag of 4 months and 14 days these donees transferred same shares in favour of two minor sons of assessee - Whether income from transferred assets which can be included in income of husband and/or father would only be to extent and/or in proportion consideration is found to be inadequate - Held, yes - Whether, therefore, only 1/3rd income from sold property was includible in income of assessee - Held, yes - Whether merely subject matter of gifts being same, it could not be said that transactions of gift between assessee and his sister and maternal uncle and gift made by these two parties were inter connected transactions and/or parts of same transaction - Held, yes - Whether, therefore, dividend income earned on shares gifted to minor sons could not be included in assessee's income - Held, yes FACTS The assessee was a member of the former ruling family of Miraj. The assessee had acquired by way of gift an immovable property from father. The assessee had expended on the development of the property. The assessee sold the property to wife in consideration of price of Rs. one lac. The consulting engineer had valued the property at Rs. 1,50,000 on the valuation date. The assessee had also gifted 55 shares to sister and 60 shares to maternal uncle. The donees had gifted the same shares after gap of 4 months and 14 days to the two minor sons of the assessee. The ITO included the income from the immovable property and the dividend earned on the gifted shares in the income of the assessee. On appeal, the AAC confirmed the order of the ITO. On second appeal, the Tribunal held that the assessee was entitled to the exclusion of the 2/3rds of the income from the immovable property transferred to his wife, in view of the fact that he…

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