1983 (3) TMI 115 - AT - Income Tax

Summary

Issues:
1. Application of section 64(1)(vi) of the Income-tax Act in a case involving cash gifts to a prospective daughter-in-law.
2. Justification of a protective assessment made by the Income Tax Officer (ITO) based on the provisions of section 64.
3. Interpretation of legal basis for making a protective assessment in light of Supreme Court precedent.

Analysis:

Issue 1: Application of section 64(1)(vi) of the Income-tax Act

The case involved the assessment of share income from a partnership firm where the assessee, a prospective daughter-in-law, received cash gifts from her future mother-in-law and father-in-law. The Income Tax Officer (ITO) applied section 64(1)(vi) to include a portion of the share income in the hands of the parents of the prospective husband. However, the Appellate Tribunal found that at the time of the cash gifts, the relationship of father-in-law and mother-in-law did not exist, as the marriage had not taken place. Therefore, the Tribunal held that section 64(1)(vi) was not applicable in this case.

Issue 2: Justification of protective assessment by the ITO

The ITO had made a protective assessment based on the provisions of section 64 of the Income-tax Act, considering the cash gifts received by the assessee from her future in-laws. The Assessing Officer (AO) assessed a portion of the share income in the hands of the parents of the prospective husband. The Appellate Tribunal noted that while the ITO had the right to make a protective assessment, the basis for such assessment was found to be legally unsound. The Tribunal emphasized that the gifts were made before the marriage, and therefore, the application of section 64(1)(vi) was incorrect.

Issue 3: Interpretation of legal basis for protective assessment

The Appellate Tribunal considered the arguments presented by the appellant's representative, who cited the Supreme Court precedent in the case of Philip John Plasket Thomas. The representative contended that the basis for the protective assessment, as stated by the ITO, was not in accordance with the law established by the Supreme Court. The Tribunal agreed with this contention and held that the ITO's observations regarding the application of section 64(1)(vi) lacked legal basis. Consequently, the Tribunal deemed the appeal allowed for statistical purposes, indicating that the assessment of the share income should be in the name of the assessee alone, without involving her future in-laws.

Overall, the judgment clarified the legal position regarding the application of section 64(1)(vi) in cases involving cash gifts to a prospective daughter-in-law and emphasized the importance of a valid legal basis for making protective assessments in income tax matters.