TMI Blog2014 (12) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. DR and also held by the ld. Assessing Officer, as well as by the ld. Commissioner of Income tax (Appeals). The assessee was not the owner of the asset which was transferred to the wife, as argued by the ld. DR, rather out of the interest free loan, the wife of the assessee purchased/acquired “new asset” in her own name from the third parties, thus, in our view, there is no justification for adding the amount as no ‘asset’ has been transferred. For application of section 64 (1)(iv) of the Income tax Act, it is imperative that an individual must have transferred the income yielding “asset” to his spouse. It is only then that in computing the total income of the individual the income arising from such asset can be included. Where an assessee has merely created a charge upon his half share in two properties in respect of his obligation to pay his wife an annual sum, section 64 (1)(iv) would not be attracted. - Following decision of CIT, Gujarat vs. Keshavlal Lallubhai Patel [1964 (11) TMI 9 - SUPREME Court] - Decided in favour of assessee. - WTA No. 09/Mum/2013 - - - Dated:- 10-12-2014 - Shri Joginder Singh, JM And Shri D. Karunakara Rao, AM,JJ. For the Appellant : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised that simply to bring the taxable income in the lower bracket this arrangement was made by the assessee. 4. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee declared net wealth of ₹ 2,75,28,460/- in his wealth tax return. The ld. Assessing Officer accepted the wealth declared by the assessee by passing an order u/s 16(3) of the Wealth Tax Act, 1957. The Revenue audit raised a query, consequently, notice dated 15/03/2011 u/s 17of the Wealth Tax Act, 1957, was issued to the assessee. The wife of the assessee, Ms. Gauri Khan, purchased a residential house at Delhi for ₹ 1,65,95,000/- and jewellery worth ₹ 70,22,658/- out of the loan of ₹ 2,28,88,530/- given by the assessee. The Assessing Officer was of the view that wealth of the assessee escaped assessment, therefore, the loan amount of ₹ 2,28,88,530/- was to be clubbed in the hands of the assessee for computation of his net wealth. He further observed that the jewellery would have been purchased by the assessee which he deliberately avoided, thus, there was indirect transfer of asset to the wife, by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut does not include :- (1) A house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than five lakh rupees; (2) Any house for residential or commercial purposes which forms part of stock-in-trade; (3) Any house which the assessee may occupy for the purpose of any business or profession carried on by him; (4) Any residential property that has been let-out for a minimum period of three hundred days in the previous year; (5) Any property in the nature of commercial establishments or complexes; (ii) Motor cars (other than those used by the assessee in the business of running them on hire or as stock-intrade; (iii)Jewellery, bullion, furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals; Provided that where any of the said assets is used by the assessee as stock-in-trade, such asset shall be deemed as excluded from the assets specified in this sub-clause; (iv) yachts, boats and aircrafts (other than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset which was transferred to the wife, as argued by the ld. DR, rather out of the interest free loan, the wife of the assessee purchased/acquired new asset in her own name from the third parties, thus, in our view, there is no justification for adding the amount as no asset has been transferred. 4.3 If this issue is analysed, with respect to the claim of the Revenue, we are expected to see whether the assessee, has indulged in any unjustified method to avoid its tax liability? During hearing a question was posed upon the ld. Counsel for the assessee as during the relevant period how much tax was paid? The assessee filed its statement of income for the year ending 31st March, 2006 (Assessment Year 2006-07). We find that the net taxable income has been shown by the assessee to the tune of ₹ 36,63,98,754/- and on which TDS to the tune of ₹ 1,95,71,429/- was also deducted and finally tax was paid to the tune of ₹ 10,25,00,000/-. It is not the case that the assessee formulated this devise to remain below the maximum tax bracket rather the assessee is already paying the tax at a maximum rate. It is also not the case that with an intention to remain below the wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worth of money; in the meanwhile, the debtor is free to use the loan in whatever manner he likes; the investment made by him by utilizing the loan need not necessarily be disturbed at the time of returning the loan. As discussed earlier it was merely an interest free loan, thus it cannot be said to be a device for evasion of tax or transfer of asset. 4.5 For application of section 64 (1)(iv) of the Income tax Act, it is imperative that an individual must have transferred the income yielding asset to his spouse. It is only then that in computing the total income of the individual the income arising from such asset can be included. Where an assessee has merely created a charge upon his half share in two properties in respect of his obligation to pay his wife an annual sum, section 64 (1)(iv) would not be attracted. As discussed earlier there is no transfer of asset as such rather, an interest free loan was given to the wife, therefore, from this angle also there is no case of the Revenue. The ratio laid down in CIT vs. Mrs. Hasina Begum(wife) and Ors. (158 ITR 215)(Cal.) supports our view. In the present case, the wife of the assessee is having independent source of income, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another; iii) that the word indirectly did not destroy the significance of the word transfer ; iv)that partition of Joint Hindu Family property was not transfer in the strict sense; v) that there was no transfer of asset, direct or indirect, within the meaning of section 16(3)(a)(iii) or (iv) to the respondent s wife or minor son. 4.7 While coming to the aforesaid conclusion the Hon'ble Apex Court followed the decision in Potts Executors vs. Commissioner of Inland Revenue (1950) 32 tax cas.211, and distinguished the decision in CIT vs. C.M. Kothari, (1963) 49 ITR (SC) 107 and approved the decision pronounced in Gutta radha Krishnaiah vs. Gutta Sarasamma (1951) ILR (Mad.) 607, Stremann vs. CIT (41 ITR 297) and Jagganath vs. State of Punjab (1962) 64 PLR 22 . In view of the clear facts and the proposition of law, as discussed herein above, we find merit in the appeal of the assessee, consequently, the order of the ld. Commissioner of Income tax (Appeals) is reversed, resulting into deciding this ground in favour of the assessee. Finally, the appeal of the assessee is partly allowed. This order was pronounced, in the open court, on 10th December, 2014. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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