1985 (10) TMI 137 - AT - Income Tax

Issues Involved:
1. Applicability of Section 64(1)(v) of the Income-tax Act, 1961, for inclusion of the wife's income from lorry in the assessment of the assessee.
2. Deletion of Rs. 23,561 relating to unexplained investment by the assessee's wife.

Detailed Analysis:

1. Applicability of Section 64(1)(v) of the Income-tax Act, 1961:

Facts and Arguments:
- The assessee transferred lorry No. 3054 to his wife without consideration on 16-1-1970, and its income was included in the assessee's total income under section 64 for the assessment years 1970-71 and 1971-72.
- The lorry was sold, and the proceeds were used to purchase subsequent lorries, continuing a chain of sales and purchases until the assessment year in question.
- The Income Tax Officer (ITO) held that all the lorries purchased by the wife had a direct nexus to the original lorry transferred by the assessee, thus invoking section 64.
- The Commissioner (Appeals) upheld the ITO's decision but excluded Rs. 23,561 related to unexplained investment by the wife.

Assessee's Arguments:
- The assessee contended that there was no proximity or nexus between the original lorry transferred in 1970 and the income from the lorry held by the wife in the current year due to a significant time lag.
- Cited cases: CIT v. Smt. Pelleti Sridevamma [1976] 105 ITR 887 (AP) and CIT v. T. Saraswathi Achi [1982] 133 ITR 315 (Mad.), arguing that the original transfer had disappeared upon the sale of the lorry in 1970.

Revenue's Arguments:
- The departmental representative argued that the purchase of the current lorry could be traced back to the sale proceeds of the original lorry, maintaining a direct proximity between the asset transferred and the income earned.

Tribunal's Analysis:
- The Tribunal considered the rival submissions and the facts of the case, noting that the original lorry was sold, and its proceeds were reinvested in subsequent lorries.
- Citing the Andhra Pradesh High Court decision in Potti Veerayya Sresty v. CIT [1972] 85 ITR 194, the Tribunal held that the gift to the wife was not for adequate consideration.
- The Tribunal concluded that there is a direct nexus and proximity between the original transfer and the income earned from the lorry held by the wife, but only to the extent of Rs. 37,000, the sale proceeds of the original lorry.
- The income attributable to Rs. 37,000 out of the investment of Rs. 1,10,000 in the lorry purchased in the current year is includible in the total income of the assessee under section 64, but not the income attributable to the remaining amount.

Supporting Case Laws:
- Sevantilal Maneklal Sheth v. CIT [1965] 57 ITR 45 (Bom.): Income attributable to the value of the transferred asset is includible.
- Poppatlal Bikamchand v. CIT [1959] 36 ITR 577 (Bom.): Dividend income from bonus shares not includible as they are accretions, not transferred assets.
- Smt. Mohini Thapar v. CIT [1972] 83 ITR 208 (SC): Income from transferred cash directly includible.
- C.R. Nagappa v. CIT [1969] 73 ITR 626 (SC) and V.D.M. RM. M. RM. Muthiah Chettiar v. CIT [1969] 74 ITR 183 (SC): Supported the inclusion of income attributable to the transferred asset.

2. Deletion of Rs. 23,561 Relating to Unexplained Investment:

Facts and Arguments:
- The ITO included Rs. 23,561 as unexplained investment by the wife in the assessee's total income, assuming it was transferred by the assessee.
- The Commissioner (Appeals) deleted this addition, stating there was no evidence of such transfer by the assessee.

Tribunal's Analysis:
- The Tribunal upheld the deletion by the Commissioner (Appeals), agreeing there was no evidence to prove the assessee had transferred the amount to his wife.
- The amount was included in the wife's assessment under section 69 of the Act, and it could not be considered as income arising from the transfer of any asset by the assessee.

Conclusion:
The Tribunal held that the income attributable to Rs. 37,000 from the lorry purchased in the current year is includible in the assessee's total income under section 64, but not the income attributable to the remaining amount. The deletion of Rs. 23,561 relating to unexplained investment by the assessee's wife was upheld due to lack of evidence of transfer by the assessee.

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