Income from assets transferred to the spouse - (New) Section 99(1)(a)(ii) / (Old) Section 64(1)(iv)

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....ection 99(1)(a)(ii), the following conditions must exist: • 1. There must be a transfer of an asset • The individual must transfer an asset to the spouse. • 2. Transfer must be to the spouse • The recipient must be the transferor's spouse. • The marital relationship should exist at the time the income arises from the transferred asset. • 3. Transfer must be without adequate consideration • "Consideration" means something of value received in return. • Adequate consideration means fair market value or equivalent value. • 4. Transfer should not be under an agreement to live apart • Where assets are transferred ....

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....ncome from such asset shall be clubbed (taxable) in the hands of transferor • The relationship must exist both at the time of transfer of asset and at the time when income accrues. • Section 64(1)(iv) applies to all assets except House property. • This provision is not applicable to house property because in that case the transferor is deemed to be the owner of the house property and the annual value of the house property is taxed in the hands of transferor as per section 27. • The transaction must be real. • Capital gain on sale of property which was received without consideration from spouse. • Cash gifted to spouse and he/she invests to earn interest. Except....

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....2 where the transactions are inter-connected parts of the same arrangement adopted to evade the section. [ Commissioner of Income-Tax, Bombay City II Versus Keshavji Morarji And Another 1967 (3) TMI 11 - Supreme Court ] • The words " adequate consideration " denote consideration other than mere love and affection, which, in the case of a wife, may be presumed. When the law insists that there should be " adequate consideration " and not " good consideration ", it excludes mere love and affection. They may be good consideration to support a contract; but adequate consideration to avoid tax is quite a different thing. To insist on the other meaning is really to say that consideration must only be looked for, when love and aff....

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....le in the assessee's total income. [ Smt. Mohini Thapar (Deceased, By Legal Representives) Versus Commissioner of Income-Tax (Central), Calcutta, And Others 1971 (9) TMI 15 - Supreme Court ] • Where the money given by the assessee to his wife for constructing a house constitutes a transfer of an asset under Section 16(3) of the Income Tax Act. The Tribunal found as a fact that this amount was indeed transferred without adequate consideration and was used for constructing the house. Section 16(3) mandates that any income derived by the wife from such transferred assets should be included in the assessee's total income. [ R. Ganesan Versus Commissioner of Income-Tax, Madras 1965 (3) TMI 90 - Madras High Court ] ....