1989 (4) TMI 1 - SC - Income Tax

Whether, the share of profit of the assessee s wife was includible in the total income of the assessee under section 64(1)(iii) of the Income-tax Act, 1961

Summary

Issues:
Whether the share of profit of the assessee's wife was includible in the total income of the assessee under section 64(1)(iii) of the Income-tax Act, 1961?

Analysis:
The Supreme Court heard an appeal against the High Court at Calcutta's judgment regarding the inclusion of the share of profit of the assessee's wife in the total income of the assessee under section 64(1)(iii) of the Income-tax Act, 1961. The assessee, a partner in a firm, made gifts to his wife, who later became a partner in a newly constituted firm with contributions from those gifts. The Income-tax Officer included the wife's profits in the assessment of the assessee under section 64(1)(iii), leading to appeals and subsequent dismissals. The High Court opined that the wife's share of profits did not arise directly from the gifts and that her admission to the partnership was not solely due to the gifts. The Supreme Court analyzed previous case law, emphasizing the need for a proximate connection between the income and assets transferred. The court held that the wife became a partner due to her capital contribution and the agreement of other partners, not solely because of the gifts. Citing relevant case law, the court concluded that the High Court's decision was correct, ruling in favor of the assessee and against the Revenue.

In conclusion, the Supreme Court upheld the High Court's decision, dismissing the appeal and affirming that the share of profit of the assessee's wife was not includible in the total income of the assessee under section 64(1)(iii) of the Income-tax Act, 1961.