Adequate consideration defeats clubbing under section 64(iii) when the transfer is supported by factual findings on value.

Section 64(iii) of the Income-tax Act could not be applied where the Tribunal found, on the evidence, that the transfer of the business to the assessee's wife was for adequate consideration. The Tribunal treated the consideration for goodwill and furniture as reasonable after considering the business's small profits, the need to allow remuneration to the proprietor, and the age and condition of the furniture. The High Court treated that conclusion as a factual finding, noted that all relevant circumstances had been considered, and declined to interfere. The reference was answered in favour of the assessee and against the Revenue.

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Issues: Whether section 64(iii) of the Income-tax Act, 1961 could be invoked to assess the income from the business transferred by the assessee to his wife, in light of the Tribunal's finding that the transfer was for adequate consideration.

Analysis: The Tribunal found, on the evidence, that the consideration of Rs. 2,000 for the goodwill and furniture was adequate, having regard to the small profits of the business, the need to account for reasonable remuneration to the proprietor, and the age and condition of the furniture. The reference challenged only that factual finding. The Court found no reason to interfere, as the Tribunal had considered all relevant circumstances and its conclusion was one of fact.

Conclusion: Section 64(iii) could not be invoked, and the question was answered in favour of the assessee and against the Revenue.

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