TMI Blog1991 (9) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is no scope for the application of section 54(1) of the Income-tax Act, 1961, in respect thereof ? Facts relevant and requisite can briefly be stated thus : Land measuring an extent of 2.45 acres (50 cents) comprised in Survey No. 945/1 of Poonithura Village originally belonged to the assessee. He gifted the same to his wife in the year 1960. He, thereafter, constructed a building on the said land in the year 1970. The Government of Kerala, in the year 1973, acquired the aforesaid land and the building and also the adjoining land of an extent of 5.79 acres belonging to the assessee for a public purpose, namely, widening of the National Highway. The Land Acquisition Officer awarded compensation in a sum of ₹ 73,500 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellate Assistant Commissioner of Income-tax, Ernakulam, wherein he reiterated the various contentions he had raised before the assessing authority. He also raised the contention that, if the capital gains the wife is liable to account for is liable to be assessed in his hands, then he is entitled to the benefit of section 54. The Appellate Assistant Commissioner by his order accepted this case of the assessee. He accordingly found that the assessee is entitled to the benefit of section 54 in respect of the capital gains he has been called upon to account for which, but for section 64, should have been accounted for by the wife. The assessee as also the Department attacked the said order of the Appellate Assistant Commissioner by filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... What is more important is that the compensation for the building has been awarded by the Land Acquisition Officer and by the learned Second Additional Subordinate judge, Ernakulam, only to the husband in respect of the buildings, while compensation for the land was awarded to the assessee's wife. In the face of these circumstances, it is idle for the Department to contend, for the first time, before us that the building in question also belonged to the assessee's wife, and that the assessee was residing there only as a member of the family and not in his capacity as the owner. The only inference possible from the above findings which stand unchallenged can be stated thus : The assessee can claim compensation for the buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated in section 64 are satisfied. We shall now consider the scope of section 64 : 64. (1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly-. (iv) subject to the provisions of clause (i) of section 27, in a case not falling under clause (i) of this sub-section, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration and in connection with an agreement to live apart; The compensation amount the wife of the assessee was found entitled to get on her land being acquired by the Government, satisfies the requirements prescribed in clause (iv) of sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etely lost if the individual in whose total income the loss is to be included is not permitted to carry forward the loss under section 24(2), since that would be the result of the strict literal construction, it is apparent that that could not have been the intent of Parliament. Therefore, where section 16(3) of the Act operates, the profit or loss from a business of the wife or minor child included in the total income of the assessee should be treated as the profit or loss from a 'business carried on by him' for the purpose of carrying forward and set off of such loss under section 24(2) of the Act. On a consideration of the scheme of the Act and the provisions therein as noted before, the share income of the wife and minor ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plished would get defeated by such interpretation, then a construction that would avoid such absurdity shall be thought of. Under such circumstances, a construction which results in equity rather than injustice shall be preferred although it is often said that equity and taxation are strangers. This principle of construction, in our view, shall govern the field here because, in the case on hand, we are dealing with an artificial liability created for counteracting the effect of attempts by the assessee to reduce his tax liability by transfer of assets. If that be so, the capital gains in question cannot be said to be in any way different from the capital gains of the assessee for the purpose of the Act -(see Gotla's case [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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