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TMI Blog1985 (10) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... as again sold on 31-1-1972 for Rs. 42,000 and another lorry APA 4640 was purchased on 2-12-1972. This was again sold on 31-7-1973 for Rs. 62,000 and another lorry APA 5000 was purchased on 10-8-1973 for Rs. 85,000. This lorry was sold on 26-6-1977 for Rs. 50,000 and purchased another lorry APA 7367 for Rs. 1,18,500. This was again sold by her on 7-5-1980 for Rs. 80,000 and purchased another lorry APA 9977 on 7-5-1980. The ITO held that the income from the lorry in the name of the assessee's wife is includible in the assessment of the assessee under section 64. He held that the sale proceeds of lorry APA 3054 which was transferred by the assessee to his wife and the income therefrom have gone to the purchase of lorry ADT 918. The sale proceeds of ADT 918 and its income have been converted into lorry APA 4640. With the sale proceeds of lorry APA 4640 and the income therefrom the lorry APA 5000 was purchased. This lorry was sold on 26-6-1977 and with the sale proceeds of this lorry and its income another lorry APA 7367 was purchased. This was again sold and with the sale proceeds and its income another lorry APA 9977 was purchased. He held that as seen from the above data all the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicability of section 64. He urged that from the facts narrated by the ITO, the purchase of the lorry held by the assessee's wife in this year should be traced to the sale proceeds of the lorry transferred by the assessee to his wife in 1970 and the income therefrom. Thus, there is direct proximity between the asset transferred and the income earned. Hence, her income has been rightly included in the assessment of the assessee. He urged that she is only a purdanashin lady and the assessee was actually managing her lorries. She has no other source of income. Everything belonged only to the assessee. Coming to the deletion of the addition of Rs. 23,561 he submitted that the unexplained investment is transferred by the assessee only as she has no source of investment. Hence, it is includible in the hands of the assessee under section 64. 14. We have considered the rival submissions. On 16-1-1970 the assessee transferred without consideration lorry APA 3054 valued at Rs. 46,675 to his wife Smt. Mehrunnisa Begum. The gift by way of transfer was made out of love and affection and to make her economically secure. This cannot be considered as an adequate consideration as the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income of the assessee under section 64. 15. In Sevantilal Maneklal Sheth v. CIT [1965] 57 ITR 45 (Bom.), the assessee transferred shares of the value of Rs. 69,730 in favour of his wife. These shares were sold by her subsequently for Rs. 1,54,800 resulting in a capital gain of Rs. 70,760. The whole sale proceeds were invested which fetched an interest of Rs. 9,288 per annum. Out of the interest of Rs. 9,288 interest of Rs. 4,183 was attributable to the value of assets amounting to Rs. 69,730 and the rest of interest of Rs. 5,104 was attributable to the sum of Rs. 70,860. Two questions were considered : (i) whether the capital gain of Rs. 70,860 was includible in the husband's income, and (ii) whether the interest is also includible in his total income. On those facts, the Bombay High Court held that the capital gain of Rs. 70,860 was includible in the husband's total income. It was also held that the interest of Rs. 4,183 which was attributable to the value of the asset, i.e., Rs. 69,730 was includible in the income of the husband but not the interest of Rs. 5,104. It was observed as under: "... Now, on this basis the amount of Rs. 1,54,800, which Bai Laxmibai depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be regarded as assets transferred by the assessee. The source of the dividend income from the bonus shares is not assets transferred by the assessee but the accretion thereto and that income cannot be regarded as arising even indirectly from the assets transferred by the assessee. The Legislature has not by enacting section 16(3)(a)(iv) sought to tax in the hands of the assessee income arising from accretion to the assets transferred by him to his minor children. 17. The above ratio was followed by the Madras High Court in T. Saraswathi Achi's case. In that case, the assessee gifted to her minor daughter 10,000 shares in a company. That company issued bonus shares to the minor daughter on the basis of the shares held by her. The Madras High Court held that the income from the bonus shares could not be included in the hands of the assessee. The above two decisions were followed by the Bombay High Court in CIT v. M.P. Birla [1983] 142 ITR 377 wherein it was held that the dividend income on the basis of shares held by the assessee's wife was not taxable in the assessee's hands under section 64(iii) of the Act as the bonus shares could not be regarded as 'assets transferred' by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty and it was used for the purposes of the assessee's business. After a period of eight years the said property was sold. The question arose whether the capital gains derived on the sale of house are includible in the total income of the assessee under section 64. It was held that on account of the time lag of eight years there is no proximate connection between the income derived by sale of the house and the cash gift and so the capital gain is not includible in the total income of the assessee. The order in the case of ITO v. Krishnakumarsinhji P. Parmar [1985] 11 ITD 237 of the Ahmedabad Bench of the Tribunal is also distinguishable as that is also a case of capital gain and on account of time lag of 5 years it was held that section 64 cannot be applied. The decision of the Supreme Court in CIT v. Prem Bhai Parekh [1970] 77 ITR 27 on which reliance was placed also has no application in this case. That is a case where it was held that the income of the minors arose as a result of their admission to the benefits of partnership and there is no nexus between the transfer of assets and the income in question. Similarly the decision of the Andhra Pradesh High Court in G. Ethirajulu v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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