INCOME TAX ACT, 1961

Section 64(1)(iii)

Clubbing of income - Under section 64 - AO not allowing set-off of business loss - Loss in F&O business incurred by wife--Assessee gifted the account of wife

AO observed that assessee clubbed loss from business of his spouse in view of the provisions of section 64. Assessee submitted that during the year he gifted a sum to his wife, who started business of Futures and Options. Assessee claimed that she incurred loss in such business, which was clubbed in his hands. AO accepted the primary claim of the assessee of his wife having incurred loss in the business of F&O and further that loss from such business was eligible for set off against the income of assessee in terms of section 64(1)(iv). He, however, did not accept the assessee's contention that the entire loss be set off against the assessee's income. AO held that only that part of the business loss incurred by assessee's wife could be set off against assessee's income which bears proportion of amount of investment out of gift on the first day of previous year to the total investment in the business as on the first day of previous year. Held: Assessee gifted certain Fixed Deposit receipts and other amounts to his wife not only in this year but also in earlier years. Going by Explanation 3 read in conjunction with section 64(1)(iv), the entire amount of loss resulting from business of F&O started by wife of assessee with gifts received from assessee was liable to be clubbed in the hands of assessee. Assessee was entitled to club full loss arising during the year from the business of F&O carried on by his wife.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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