1994 (3) TMI 128 - AT - Income Tax

Summary

Issues:
1. Whether the gifts made by family members were crossed gifts.
2. Whether the share income of the wife from a firm should be included in the assessee's hands.

Analysis:

1. The Revenue contended that the gifts made by family members were crossed gifts, leading to the indirect transfer of funds to the assessee's wife. The Income Tax Officer (ITO) added the share income of the wife from the firm to the assessee's income under section 64(1)(iv) of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition based on a judgment of the Bombay High Court in a similar case.

2. The Departmental Representative argued that the assessee used a circuitous method to evade tax implications, citing a judgment of the Madhya Pradesh High Court. The assessee relied on the Bombay High Court's decision in a different case. The Appellate Tribunal found that the gifts were part of the same transaction, indicating an attempt to avoid tax implications. Referring to Supreme Court precedents, the Tribunal concluded that the assessee's actions fell under section 64(1)(iv) of the Act.

3. The Tribunal distinguished the case from the Bombay High Court's judgment cited by the assessee. In that case, the court found no nexus between the gifts and the profits received. However, in the present case, identical gifts were made on the same day, and the funds were invested in a new firm simultaneously. The Tribunal held that the assessee's intention was to circumvent tax provisions, reversing the CIT(A)'s decision and upholding the ITO's finding. Consequently, the appeal was allowed.