Whether a transfer is with adequate consideration?

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Ramesh (Querist)
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22 May 2015 Dear All!
Please advise in below case:
A person transfers a house to his spouse at fair market value (all legal procedures related to sale deed etc. are done) and accepting the payment in a cheque.
But he never deposits the cheque as there is no balance in his spouse account or
he deposits the cheque but cheque is bounced as there is no balance in spouse account and then never a fresh cheque is issued – whether it can be said a transfer with adequate consideration.
Rgds,
Ramesh

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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22 May 2015 It will be transfer without adequate consideration since no consideration has actually flowed. Even otherwise if this kind of arrangement is allowed than every person will take advantage of this and declare every transaction between him and his wife as for adequate consideration and thereby avoid clubbing of income provisions from transfer of any income generating asset.

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Ramesh

Ramesh (Querist)
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22 May 2015 Thanks Abhi ji.
What will be the treatment if the amount paid by husband to wife is booked as loan in the accounts of both the persons and interest is charged @1% only.

Rgds,

Ramesh

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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22 May 2015 Husband can give loan to wife and vice versa but it will be better if loan is given at market interest rate since giving of loan at such a nominal interest rate may not be acceptable to income tax officer if scrutiny comes and also it will be difficult to explain.

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Ramesh

Ramesh (Querist)
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22 May 2015 Thanks Sir for such a prompt and practical solution.

Rgds,

Ramesh

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