1985 (4) TMI 21 - HC - Income Tax

Tribunal rules wife's ownership of property, exempts income from assessment

The Tribunal found that the sum of Rs. 1,40,000 invested by the assessee in constructing the house property was advanced as a loan to his wife. As a ... Inclusions In Total Income, Total Income Issues Involved:1. Whether the Tribunal had evidence to hold that the sum of Rs. 1,40,000 invested by the assessee in the construction of house property was advanced by way of a loan to his wife.2. If the answer to question No. one is in the negative, whether the Tribunal was justified in holding that the income from the property was not assessable in the hands of the assessee under section 64(iii) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Evidence of Loan:The primary issue was whether the sum of Rs. 1,40,000 invested by the assessee in constructing the house property was advanced as a loan to his wife. The Tribunal had to consider multiple aspects, including the source of funds, the ownership of the property, and the management and enjoyment of the property.The facts revealed that the assessee's wife, Smt. Hasena Begum, inherited agricultural land from her father and claimed to have earned income from it. She filed a disclosure petition stating she had earned Rs. 1,50,000 from agricultural activities over several years. However, the Commissioner of Income-tax rejected her petition, leading the assessee to declare the income as his own.The Income-tax Officer initially included the house property income in the assessee's total income, doubting the genuineness of the loan claim. The Appellate Assistant Commissioner, however, found evidence supporting the wife's ownership and management of the property, including deeds of conveyance, tax receipts, rent receipts, and a note book showing rent collections and loan repayments.The Tribunal, in its earlier order, considered the assessee's settlement with the Commissioner, where the assessee admitted that Rs. 1,40,000 of the total investment was his concealed income. Despite this, the Tribunal found that the wife had some agricultural savings and rental income, contributing to the property investment.The Tribunal upheld the Appellate Assistant Commissioner's view that the property belonged to the wife, noting that the management and usufruct of the property were with her. The Tribunal also considered the affidavit filed by the wife, which was not contested by cross-examination, and accepted the genuineness of the account books showing loan repayments by cheque.2. Justification under Section 64(iii):Given the affirmative answer to the first question, the second question regarding the applicability of section 64(iii) of the Income-tax Act, 1961, did not require an answer. The Tribunal's conclusion that the income from the property was not assessable in the assessee's hands was based on the finding that the funds were advanced as a loan to the wife, who managed and enjoyed the property independently.Conclusion:The Tribunal had sufficient evidence to conclude that the sum of Rs. 1,40,000 was advanced by the assessee to his wife as a loan. This included uncontroverted statements, genuine account books, and the wife's independent income and management of the property. Consequently, the income from the property was not assessable in the hands of the assessee. The judgment was in favor of the assessee, and the second question was deemed unnecessary to address. There was no order as to costs.