TMI Blog2020 (1) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... e Explanation 3 of the Act, is where the assets received by wife as gift from husband are invested by her in a business, in which she has her own separate investment as well, thereby attracting clubbing of income to the extent it is relatable to the investment of gifts received from husband in the common business. Loss (negative income) of ₹ 31,56,429/- from F O business is an illustration of such income, which was rightly clubbed by the assessee but wrongly denied partly. Going by the Explanation 3 read in conjunction with section 64(1)(iv) of the Act, the entire amount of loss resulting from the business of F O started by Mrs. Priti Bhaskarwar with the gifts received from the assessee is liable to be clubbed in the hands of the assessee. Assessee is entitled to club full loss of ₹ 31.53 lakh arising during the year from the business of F O carried on by Mrs. Priti Bhaskarwar, in his personal income. Appeal allowed. - ITA No. 502/PUN/2019 - - - Dated:- 20-1-2020 - Shri R.S. Syal, Vice President For the Appellant : Shri Nikhil Pathak For the Respondent : Shri S.P. Walimbe ORDER PE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the assessee up to 18.9.2013). The assessee failed to convince the ld. CIT(A) on his line of reasoning, who echoed the assessment order on this count. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 4. I have heard both the sides and perused the relevant material on record. Unassailed and the admitted position is that the assessee s wife incurred loss of ₹ 31,56,429/- in the business of F O which was started on 18-09-2013; such business was set up by the wife having some contribution from the assessee in the shape of gifts as per the AO; provisions of section 64 are attracted; `income includes `loss as per Explanation 2 at the end of section 64; and the assessee is otherwise entitled to set off the eligible loss against his separate income. The core of controversy is the computation of eligible amount of loss incurred by the assessee s wife which is eligible for set off against the assessee s income. Relevant clubbing provision in this regard is contained in section 64(1), material part of which reads as under:- 64.(1) In computing the total income of any individual, there shall be included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o investment by wife in such a new asset. Full income resulting from such an exclusive investment is liable to clubbed in the total income of husband. An example of such a situation can be a wife making a Fixed Deposit with a bank etc. out of gift of money received from husband. Full amount of interest income arising on such FDR is liable to be clubbed with the income of husband. The second situation can be where the amount of assets received by wife as gift from husband is not the exclusive investments in a business carried on by her. Rather, she has also made separate investment in the said business. In such a situation of a common pool of unidentifiable investments in the business, there arises difficulty in precisely attributing income of such a business to the investments made out of gift received from husband attracting clubbing and to investments made out of funds other than gift received from husband not attracting clubbing provision. It is in such a scenario that prescription of the Explanation 3 comes into play by providing that the amount of income from combined business as relatable to the assets transferred by husband should be computed by taking incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The assessee s wife admittedly started the business of F O on 18.9.2013 through ICICI Securities Ltd., which is a member of National Stock Exchange of India Ltd. Such a business was facilitated through a bank account maintained with ICICI bank. First transaction of purchase of certain securities totaling 450 in number with the value of approximately ₹ 27.00 lakh was carried out by the assessee s wife on 18-09-2013 through a Derivative Contract Note, whose copy has been placed at page 19 of the paper book. Since these were transactions in F O, the assessee s wife had to deposit margin money with ICICI Securities amounting to ₹ 2,21,589/-, which appears on page 31 of the paper book, in the Quarterly FNO Margin Ledger. Such an amount of ₹ 2.21 lakh and odd was debited on 18-09-2013 itself to the bank account maintained by her with ICICI bank. There are two deposits of ₹ 5.00 lakh each on 18-09-2013 and 22-08-2013 respectively in the said bank account, which was opened with the first such deposit. These two amounts of ₹ 5.00 lakh each were undisputedly gifted by the assessee to Mrs. Priti Bhaskarwar, which got deposited in her ICICI ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, it is clear that as on 18-09-2013, being the first day of the preceding year when the business of F O was set up by her, total investment through margin money was ₹ 2,21,589/- plus loss of ₹ 5,309/- incurred for that date. On that date itself, the assessee had gifted a sum of ₹ 5.00 lakh which got deposited in her bank account maintained with ICICI bank for the purpose of doing business in F O. Prior to that, another gift of ₹ 5.00 lakh was also made by the assessee to Mrs. Priti Bhaskarwar on 22-08-2013, which also got deposited in the same bank account maintained with ICICI bank for carrying out the business of F O. On going through the statement of ICICI bank account from 22.8.2013 to 31.3.2014, it can be seen that in all there are deposits of ₹ 80.00 lakh in addition to income arising on certain days and there are withdrawals in the shape of payments towards margin money and also loss happening on certain days. The entire amount of ₹ 80.00 lakh was gifted by the assessee to his wife through different gift transactions happening during the year in question. As I have to focus on the figure of total investment made Mrs. Priti Bhaskarwar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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