9911796707
TMI Blog1994 (12) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 ? (ii) Whether, on the facts and in the circumstances of the case, the alleged transfer having been made in January, 1974, the provisions of the amended sub-section (1) of section 64, operative from April 1, 1976, along with Explanation 3 to the said sub-section was applicable to the facts of the case ? " The assessee, as an individual, has been assessed by the Income-tax Officer for the assessment year 1982-83 under section 143(3) of the Income-tax Act. The Commissioner of Income-tax while examining the records found that the assessee's wife was a partner of the partnership firm and had invested a sum of Rs. 5,000 as her capital which was a gift to her by her husband, the assessee. Accordingly, the income derived by the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e [1970] 77 ITR 27 (CIT v. Prem Bhai Parekh) as well as the decision of the Supreme Court in CIT v. Prahladrai Agarwala [1989] 177 ITR 398 (SC). Learned standing counsel appearing for the Revenue, on the other hand, contends that in view of Explanation 3 which was inserted by the Taxation Laws (Amendment) Act, 1975, the decision of the Supreme Court in Prem Bhai Parekh's case [1970] 77 ITR 27 is of no assistance to the assessee. In Prem Bhai Parekh's case [1970] 77 ITR 27 (SC), their Lordships of the Supreme Court were considering the provisions of section 16(3) of the Indian Income-tax Act, 1922, which is in pari materia with section 64 of the Income-tax Act, 1961. Their Lordships of the Supreme Court held that since section 16(3) create ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip in the firm. The partnership was based on agreement, and it is the event of agreement between the partners that brought the assessee's wife into the firm as partner. " Ultimately, their Lordships held that the High Court was right in answering the question in favour of the assessee and against the Revenue. It is to be noticed that Explanation 3 to section 64 though it had come into the statute book since April 1, 1976, had not been pressed into service obviously because the investment had been made prior to the Explanation being inserted in the statute book. Mr. Ray, learned standing counsel appearing for the Revenue, however, contended that section 64 of the Income-tax Act, like that of sections 60 to 63, was designed to overtake and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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. " The gift of Rs. 5,000 by the assessee in favour of his wife was in the year 1974, much prior to the insertion of Explanation 3 which came into force with effect from April 1, 1976. There is nothing in section 64 or the Explanation which was inserted by the Taxation Laws (Amendment) Act, 1975, to indicate that it was retrospective in nature and, therefore, the said Explanation cannot be considered for deciding the clubbing of income in respect of investment made prior to the amendment coming into force. In the aforesaid premises, we answer question No. 1 to the ef ..... X X X X Extracts X X X X X X X X Extracts X X X X
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