1985 (5) TMI 120 - AT - Income Tax

Summary

Issues Involved:
1. Ownership of house property (benami nature of transaction).
2. Source of investment for the property.
3. Application of Section 64 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Ownership of House Property (Benami Nature of Transaction):

The primary issue was whether Smt. Alka Chaudhary was the owner of the ground and first floors of the house property on plot Nos. 93-94, Central Avenue Road, Nagpur, or merely a benamidar for her husband, Dr. Vinayak Chaudhary. The department contended that Dr. Vinayak Chaudhary was the exclusive owner of the entire property, including the plots, and that Smt. Alka Chaudhary was merely his benamidar. The Tribunal referenced the well-recognized tests laid down by various High Courts and the Supreme Court for determining the benami nature of transactions, including the burden of proof, the intention of the parties, the source of purchase money, the nature and possession of the property, the motive for the transaction, and the conduct of the parties.

The Tribunal found that both Dr. Chaudhary and Smt. Alka Chaudhary made equal contributions towards the purchase of the plots and the construction of the house. The Tribunal noted that the application for co-allotment of the plots was made by both parties, and subsequent payments were made by both, with Dr. Chaudhary being reimbursed by Smt. Alka Chaudhary for her share. The Tribunal concluded that Smt. Alka Chaudhary was not a benamidar but a co-owner in her own right.

2. Source of Investment for the Property:

The Tribunal examined the sources of investment for the construction of the house property. Smt. Alka Chaudhary claimed to have made investments through various sources, including cash deposits, loans from Vijaya Bank, and loans from individuals. The department challenged the availability of funds with Smt. Alka Chaudhary, arguing that her contributions were negligible and an afterthought.

The Tribunal found that Smt. Alka Chaudhary had satisfactorily explained her sources of investment, including a cash flow statement and evidence of loans. The Tribunal noted that the loan of Rs. 2,10,000 from Vijaya Bank was jointly sanctioned to Dr. Chaudhary and Smt. Alka Chaudhary, and the bank had confirmed this. The Tribunal also accepted the loans from Professor Mahure and Mr. Phalak as genuine and utilized for construction.

3. Application of Section 64 of the Income-tax Act, 1961:

The AAC had alternatively held that the income accruing to Smt. Alka Chaudhary was liable to be included in the income of Dr. Chaudhary under Section 64 of the Act. The Tribunal disagreed, stating that Section 64 presupposes that the wife or minor child is the real owner of the asset but acquired it through a transfer from the husband or father without consideration. Since Smt. Alka Chaudhary was found to be a co-owner in her own right and had made contributions towards the property, Section 64 was not applicable.

The Tribunal referenced the case of K.D. Ghosh v. CIT, where the Calcutta High Court held that income arising from gifted assets to the wife was includable in the husband's income. However, the Tribunal found that the facts of the present case were different, as Smt. Alka Chaudhary had made contributions and reimbursed Dr. Chaudhary for her share, making it a case of joint ownership rather than a gift or transfer without consideration.

Conclusion:

The Tribunal held that Smt. Alka Chaudhary was not a benamidar of Dr. Chaudhary but a co-owner of the ground and first floors of the house property in her own right. The income arising from her portion of the property could not be included in the total income of Dr. Chaudhary. The appeal filed by the assessee was allowed.