Law:

Section:

Section 64 of the Income-tax Act, 1961 (Corresponding to section 16(3) of Indian Income-tax Act, 1922) - Transfer of assets - For benefit of spouse etc. - Assessment year 1961-62 - Assessee transferred certain shares to his wife from total shares to which he was entitled under partition of joint family property - Whether interest or dividend received by assessee's wife on said shares was includible in income of assessee - Held, yes FACTS In 1959, the assessee and his brother were the two coparceners, who were entitled to receive shares in the property worth Rs. 2, 20,000. Each of the two brothers was entitled to a share worth Rs. 1,10,000. But the two brothers decided to allot certain shares to other members of the family. According to that plan, a sum of Rs. 1,00,000 was allotted to the assessee's wife from the total share of Rs. 1, 10,000 to which the assessee was entitled under the partition. At the time of assessment for the relevant assessment years, the ITO noticed certain income received by the assessee's wife towards interest or dividend on Rs. 1,00,000 and included that income in the assessment of the assessee, under section 16(3)(a) of the 1922 Act. This decision was upheld in appeal by the AAC and by the Tribunal. On reference : HELD The assessee was fully competent to allot a share worth Rs. 1,00,000 to his wife from the total share of Rs. 1,10,000 to which he was entitled. There was, therefore, no difficulty in bringing the instant case within the four corners of sub-clause (iii) of clause (a) of sub-section (3) of section 16 of the 1922 Act. Against the share of Rs. 1,00,000 allotted to the assessee's wife in the partition, there was a note that this sum was the capitalised consideration for her maintenance finally. If the sum of Rs. 1,00,000 represented a genuine consideration towards the assessee's wife's claim for maintenance, it could probably be said that the consideration was inadequate. But there was no indication on the record that relations between 'R' and his wife were strained in 1959. There was no suggestion that she had filed any suit for maintenance against her husband. It was impossible to accept the suggestion that this was a…

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