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1985 (6) TMI 73

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..... assessment year 1978-79 was assessed by the ITO on protective basis and that income was assessed in the hands of the husband for the assessment years 1978-79 to 1980-81. Both the assessees appealed to the AAC who held that the amount gifted by the husband to the wife was cash from which the wife purchased a house property and, therefore, the income arising to the wife was not from the assets transferred by the husband and, consequently, section 64(1)(iv) had no application. He, therefore, ordered the exclusion of that income from the assessments of the husband and in the appeal of the wife directed the ITO to treat the assessment of income from property in her hands as a substantive one. Feeling aggrieved, the revenue is in appeal before us .....

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..... [1965] 58 ITR 411, with reference to section 16(3) of the 1922 Act, the Hon'ble Madras High Court held that where an amount was transferred by the assessee to his wife towards construction of a house otherwise than for adequate consideration or in connection with the agreement to live apart, the income from the house property was includible in the total income of the assessee. In Smt. Mohini Thapar v. CIT [1972] 83 ITR 208, the Hon'ble Supreme Court held that where out of gifts of cash by the husband the wife purchased certain shares and invested the balance in deposits, the income derived by the wife from such deposits and shares, had to be assessed in the hands of the assessee under section 16(3)(a)(iii). The Hon'ble Supreme Court held t .....

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..... from the business as the value of the assets aforesaid as on the first day of the previous year bears to the total investment in the business by the spouse or the minor child as on the said day, shall be included in the total income of the individual in that previous year." According to the learned counsel for the assessee, Explanation 3 deals with a case where the assets transferred to spouse or a minor child are invested in any business and that in case the Legislature intended that assets transferred by a person to his spouse or minor child and converted into any property would be dealt with in the same manner, then this Explanation could be suitably worded by adding the words 'or property' after the word 'business' in the said Explan .....

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..... in 1975, only income arising to a minor from admission to the benefits of partnership in a firm in which a parent was a partner could be included in the income of the parent. By the amendment, clause (iii) was added to provide that income arising to a minor from the admission of the minor to the benefits of any partnership firm is includible in the income of the parent. Clause (ii) was also newly added to provide that income arising to the spouse by way of salary, commission, fees or any other form of remuneration whether in cash or in kind from a concern in which such individual had a substantial interest, was includible in the income of the individual. A proviso was appended to this clause making an exception in the case of income arisin .....

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