High Court Of Allahabad
Auto Sales Properties vs. CIT
Section 64(1)(iv), 260A
Sushil Harkauli & K.N. Ojha, JJ.
IT Appeal No. 176 of 2000
16th July, 2007
JUDGMENT
By the court :
We have heard learned counsel for the appellant as well as learned standing counsel for the IT Department. This appeal has been filed under s. 260A of the IT Act, 1961. The facts are that one Brij Mohan Gupta and one Anil Gupta were partners in a firm known as M/s Auto Sales, which was dissolved on 31st Oct., 1978. On the next day, i.e., 1st Nov., 1978, a new partnership firm was constituted known as M/s Auto Sales Properties. This new firm had three partners. Two of the partners were the wives of Brij Mohan Gupta and Anil Gupta who had 47 per cent share each, in the firm. The third partner Shiv Charan Agarwal had a nominal 6 per cent share in the new firm. A building known as Auto Sales Building situate at 18, Kanpur Road, Allahabad, was let out on 1st Nov., 1978, by Brij Mohan Gupta and Anil Gupta to the new firm in which excluding the nominal share of 6 per cent the bulk holding belonged to the two wives of the aforesaid two lessors. The property was let out to this new firm at a monthly rent of Rs. 4,000 only, whereas prior to it the property was fetching a rent of Rs. 7,515. Apparently, the income from this building, which had been leased by the owners Brij Mohan Gupta and Anil Gupta in favour of their wives was only rental income. Applying s. 64(1)(iv), the income from the building was clubbed as income from house property with the income of the husbands. This has been upheld by the Tribunal. The clubbing is being challenged on the ground that s. 64 (1)(iv) has been wrongly applied. For the applicability of s. 64(1)(iv), there are two conditions : Assets should be transferred to spouse directly or indirectly by an individual.
The transfer must be otherwise than (a) for adequate consideration, or (b) under an agreement to live apart. If these two conditions are satisfied, the income arising from such asset directly or indirectly would be included in the total income of the individual who has made the transfer. A “lease” of a building or property is a “transfer” within the meaning of the Transfer of Property Act, 1882. A building, which was fetching a rent of Rs. 7,515 just prior to the disputed letting for a sum of Rs. 4,000 only is obviously for inadequate consideration. It is nobody’s case that the lease or transfer is in connection with an agreement between the husband and wife to live separate from each other. Therefore, the income arising from such building which has been let out would be liable to be included in the income of the husbands, who have let out the property in favour of their wives at the inadequate or reduced rent of Rs. 4,000. The transfer in favour of the firm in which 94 per cent share is held by the wives would be deemed to be a transfer “indirectly” to the wives. In the circumstances, this Court is of the opinion that the Tribunal was right in rejecting the contention of the appellant. The question has also been sought to be raised that the income from the building should not be treated as income from house property, but should be treated as business income. In support of this, a decision of the Karnataka High Court has been relied upon from the side of the appellant. The decision is CIT vs. Shah Brothers (2000) 160 CTR (Kar) 281 : (2000) 243 ITR 445 (Kar). We have examined the decision. In our opinion, the decision is on a different point. In the present case, when the building has been let out in favour of a “newly constituted” firm, the income, without anything more being shown by the assessee would be income from house property and not business income. In any case for the purpose of clubbing income under s. 64, it is not relevant whether the income is from house property or business income. The order of the Tribunal is based on pure findings of fact recorded on the basis of appreciation of facts and circumstances. No question of law arises. The appeal is accordingly dismissed.
[Citation : 294 ITR 507]
