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TMI Blog1976 (4) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... d claimed that an amount of Rs. 58,000 arising out of sale of house standing in the name of her minor son, Suryanarayana Reddi, is not taxable as a capital gain. In the financial year 1956-57, the assessee made a cash gift of Rs. 90,000 to her minor son. This amount was utilised for purchasing a house property and it was used by the assessee for the purpose of her business. On July 5, 1965, the said property was sold by her to Tirupathi Devastanam for Rs. 1,48,000. The Income-tax Officer assessed the capital gain of Rs. 58,000 derived from the sale of the house in the hands of the assessee, invoking section 64(1)(iv) of the Income-tax Act. The assessee then preferred an appeal to the Appellate Assistant Commissioner who confirmed the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the investment, income is produced while the asset continues to belong to the assessee, while in the operation of a sale, gain is produced, which is still income, but in the process the title to the asset is parted with. Although the processes involved in the two cases are different, the gain which has resulted to the owner of the asset, in each case, is the gain, which has sprung up or arisen from the asset." In that view the learned judges held : "We see no reason why a restricted interpretation should be given to the provisions of section 16(3)(a)(iii) as contended for the appellant. On the contrary, the object of the enactment of the section is to prevent avoidance of tax or reducing the incidence of tax on the part of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Commissioner of Income-tax, the learned judges of the Supreme Court were dealing with a cash gift made by the assessee to his wife. From out of the cash gift, she purchased certain shares and invested the balance in deposits. The question was whether the income derived by the wife from the deposits and shares had to be assessed in the hands of the assessee under section 16(3)(a)(iii) of the Act. On those facts, it was held by the Supreme Court that the transfers were direct transfers and the income realised by the wife was income indirectly received in respect of the transfer of cash directly made by the assessee. The Supreme Court also found that there was a proximate connection between the income and the transfer of assets made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He then gifted Rs. 75,000 to each of his four sons, three of whom were minors. Subsequently, there was a reconstitution of the firm with effect from July 2, 1954, and the minor sons were admitted to the benefits of partnership in the firm. The question was whether the income arising to the minors by virtue of their admission to the benefits of partnership in the firm could be included in the total income of the assessee. The Tribunal found against the assessee. The Supreme Court reversed the decision of the Tribunal by holding that the connection between the gifts made by the assessee and the income of the minors from the firm was a remote one and it could not be said that that income arose directly or indirectly from the transfer of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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