TaxTMI 
TaxTMI 
2026 (6) TMI 599
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....ss incurred by the spouse was the result of funds transferred without adequate consideration, thus satisfying the conditions for clubbing of income under Section 64(1)(iv) of the Income Tax Act, 1961. 2.3 The Learned Commissioner of Income Tax (Appeals) did not properly consider the ratio laid down in the case of Damodar K. Shah vs. Commissioner of Income Tax (2001) 966 CTR 429 (Guj.) and CIT vs. Keshavji Morarji (1967) 66 ITR 142 (SC), where it was held that income arising from assets transferred to the spouse is to be included in the total income of the transferor. 2.4 The Learned Commissioner of Income Tax (Appeals) erred in concluding that the income/loss arising from the risk-taking process by the spouse should be treated as independent, despite the fact that the funds utilized for such trading were directly transferred by the appellant, thereby attracting the provisions of Section 64(1)(iv) of the Act 2.5 The Learned Commissioner of Income Tax (Appeals) did not consider the principle of beneficial ownership and control, which establishes that the loss should be attributed to the person who exercises real control over the funds and transactions, as h....
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....examination of KYC documents that it was not mentioned anywhere the wife would not be doing trading and the assessee would be handling all the transactions. He held that since the income / loss generated in the wife's case was not only on account of such transfer (money) but was a result of risk-taking process of the trading done by the wife. Hence, the loss was to be treated as her own loss and he declined to allow the same to be carried forward in the hands of the assessee. He issued a draft assessment order to the assessee, in response to which the assessee submitted that even speculative profit of Rs. 30,239/- of Smt. Ruchi Yadav had been considered in his ITR and that his claim was as per the provisions of section 64(1)(iv). It was further submitted that the KYC documents did not offer an opportunity to explain that the wife would not be doing the trading and the assessee would be handling all the transactions etc,. However, the ld. AO was not convinced and accordingly he disallowed the claim of loss on account of clubbing. 3. Aggrieved with the said order, the assessee went in appeal before the ld. CIT(A). The ld. CIT(A) observed that from the perusal of the bank statement....
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....without consideration. As a result of this, Smt. Ruchi Yadav had total capital of Rs. 1,95,81,193/-. From the aforesaid capital, the assessee had undertaken trading in derivatives and equities on her behalf and as a result of this she incurred a loss of Rs. 1,95,44,302/-. Bifurcating this loss from derivative trading in the de-mat account of Smt. Ruchi Yadav, the ld. AR pointed out that while derivative loss of Rs. 80,19,057/- were attributable to the own capital of Smt. Ruchi Yadav, the loss of Rs. 1,15,25,245/- were attributable to derivative transactions from the gift received from the assessee. Thus, he argued that as per the provisions of sections 64(1)(iv), any loss derived from such transactions was allowable to be set off against the profits of the assessee. For this proposition, he placed reliance on various case laws which were furnished by him as part of the second paper book filed by him on 14.11.2025. The case laws relied upon by him were i. Smt. Mohini Thapar vs. CIT (1972) 83 ITR 208 (SC) ii. Potti Veerayya Sresty v. Commissioner of Income-Tax, A.P. (1972) 85 ITR 194 (AP) iii. Damodar K. Shah vs. CIT (2001) 119 taxman 882 (Guj) iv.....
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....y of gift has been transferred for any consideration or in respect of any agreement to live a part. Ongoing through the case laws furnished by the assessee, it is observed that that in the case of Smt. Mohini Thapar (supra), the Hon'ble Supreme Court was dealing with a case where the assets transferred were the gift of cash amounts to his wife. Those assets were subsequently invested in shares or deposits. The Hon'ble Supreme Court held that the incomes realized either as dividend from shares or as interest from deposits, were income indirectly received in respect of transfer of cash directly made. Therefore, it held that the net cast by section 16(3)(a)(iii) of the 1922 Act, included not merely the income that arose directly from the assets transferred but also that income that arose indirectly from the assets transferred. They held that the income that can be brought to tax under section 16(3)(a)(iii) must have a nexus with the assets transferred directly or indirectly and because in that particular case, the income had a nexus with the assets transferred, the Hon'ble Court held that the income derived by the wife was rightly included in the assessee's total income under section ....