PROMINENT MOTORS INDIA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) There are three references under the I.T. Act, 1961, at the instance of Shri goal Dass, proprietor of M/s. Prominent Motors (India), Delhi (hereinafter referred to as "the assessed"). They relate, to the assessment years 1967 -68, 1968 -69 and 1969 -70, the relevant previews years being the preceding financial years. The questions referred to us are common for all three years and read as under:

(2.) Whether, on the facts and in the circumstances of the case, the Income Tax Officer was debarred form challenging the validity of the gift for the assessment years in question -

(3.) For the assessment years 1964 -65, assessed claimed to have paid interest amounting to Rs. 12,000 to his wife. But since this interest income was earned by her from assets gifted to here by the assessed, the interest income was also to be treated as assessed's income. In other words, the interest payable by the assessed to his wife and the addition under s. 64 balanced each other. For the assessment years 1965 -66 and 1966 -67, the interest claimed to have been paid by the assessed to his wife came to Rs. 13,440 and Rs. 15,908, respectively. Out of this, the sum of Rs. 12,000 attributable to the original gift of Rs. 1 lakh was not allocable to the assessed as a deduction for the reasons mentioned above. So far as the balance of Rs. 1,440 for the assessment year 1965 -66 and Rs. 3,908 the assessment year 1966 -67 were concerned, these represented the income of the wife attributable to the interest which was due to her form the assessed and not to the asset transferred by the assessed to her. These amounts were, Therefore, permitted as deduction in the two assessment years above mentioned.