Clubbing of Income

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CLUBBING OF INCOME

SECTION NATURE OF CLUBBED IN THE CONDITIONS/ RELEVANT REFERENCE

TRANSACTION HANDS OF EXCEPTIONS

60 Transfer of Income Transferor who Irrespective of: 1. Income for the

without transfer of transfers the purpose of Section 64
Assets. income. 1. Whether such includes losses. [P.
transfer is Doriswamy Chetty
revocable or not. 183 ITR 559 (SC)]
[also see Expl. (2) to
2. Whether the Section 64]
transfer is
effected before or 2. Section 60 does not
after the apply if corpus itself
commencement is transferred.
of IT Act. [Grandhi Narayana
Rao 173 ITR 593
(AP)]

61 Revocable Transferor who Clubbing not applicable Transfer held as revocable

transfer of Assets. transfers the Assets. if:
1. If there is provision
1. Trust/transfer to re- transfer
irrevocable during directly or indirectly
the lifetime of whole/part of income/
beneficiaries/ asset to transferor;
transferee or
2. If there is a right to
2. Transfer made reassume power,
prior to 1.4.1961 directly or indirectly,
and not revocable the transfer is held
for a period of 6 revocable and actual
years. exercise is not
necessary. [S.
Provided the transferor Raghbir Singh 57 ITR
derives no direct or 408 (SC)]
indirect benefit from
3. Where no absolute
such income in either
right is given to

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Clubbing of Income

case. transferee and asset

can revert to
transferor in
prescribed
circumstances,
transfer is held
revocable.
[Jyotendrasinhji vs.
S. I. Tripathi 201 ITR
611 (SC)]

64(1)(ii) Salary, Spouse whose total Clubbing not applicable 1. The relationship of
Commission, Fees income (excluding if: Spouse possesses husband and wife
or remuneration income to be technical or professional must subsist at the
paid to spouse clubbed) is greater. qualification and time of accrual of the
from a concern in remuneration is solely income. [Philip John
which an attributable to Plasket Thomas 49
individual has a application of that ITR 97 (SC)]
substantial* knowledge/qualification.
interest. 2. Income other than
salary, commission,
fees or remune-
ration is not eligible
for clubbing under
this clause

64(1)(iv) Income from Individual Clubbing not applicable 1. Income earned out of
assets transferred transferring the if: Income arising from
directly or asset. transferred assets not
indirectly to the The assets are liable for clubbed. [M.
spouse without transferred; S.S. Rajan 252 ITR
adequate 126 (Mad)]
consideration.
1. With an 2. Cash gifted to spouse
agreement to live and he/she invests to
apart. earn interest.
[Mohini Thaper vs.
2. Before marriage.
CIT 83 ITR 208 (SC)]
3. Income earned
when relation
3. Capital gain on sale
of property which
does not exist.
was received without
4. By Karta of HUF consideration from
gifting co- spouse
parcenary [Sevential M. Sheth
property to his vs. CIT 68 ITR 503
wife. (SC)]
L. Hirday Narain
vs. ITO 78 ITR 26
4. Transaction must be
real. [O.N. Mohindroo
(SC)
99 ITR 583 (Delhi)]

5. Property acquired
out of pin money.
R.B.N.J. Naidu vs.
CIT 29 ITR 194
(Nag.)

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Clubbing of Income

64(1)(vi) Income from the Individual Condition: Cross transfers are also
assets transferred transferring the The transfer should be covered [C.M.Kothari 49
to son’s wife. Asset. without adequate ITR 107 (SC)]
consideration.

64(1) Transfer of assets Individual Condition: 1. Transferor need not

(vii), (viii) by an individual transferring the necessarily have
to a person or Asset. 1. The transfer taxable income of his
AOP for the should be without own. [P. Murugesan
immediate or adequate 245 ITR 301 (Mad)]
deferred benefit consideration.
of his: (vii)- 2. Wife means legally
Spouse. (viii) - wedded wife.
Son’s wife. [Executors of the will
of T.V. Krishna Iyer
38 ITR 144 (Ker)]

64(1A) Income of a 1. If the Clubbing not applicable 1. Income out of

minor child [Child marriage for:- property transferred
includes step subsists, in for no consideration
child, adopted the hands of 1. Income of a to a minor married
child and minor the parent minor child daughter, shall not
married whose total suffering any be clubbed in the
daughter]. income is disability parents’ hands.
greater; or; specified u/s. [Section 27]
2. If the 80U. 2. The parent in whose
marriage 2. Income on hands the minor’s
does not account of income is clubbed is
subsist, in manual work entitled to an
the hands of done by the exemption up to Rs.
the person minor child. 1,500 per child.
who 3. Income on [Section 10(32)]
maintains the account of any
minor child. activity involving
3. Income once application of
included in skills, talent or
the total specialized
income of knowledge and
either of experience.
parents, it
shall continue
to be
included in
the hands of
some parent
in the
subsequent
year unless
AO is
satisfied that
it is
necessary to
do so (after
giving that
parent
opportunity
of being
heard)

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 Clubbing of Income

64(2) Income of HUF Income is included Clubbing applicable Fiction under this section
from property in the hands of even if: The converted must be extended to
converted by the individual & not in property is computation of income
individual into the hands of HUF. subsequently also. [M.K. Kuppuraj 127
HUF property. partitioned; income ITR 447 (Mad)]
derived by the spouse
from such converted
property will be taxable
in the hands of
individual.

* An individual shall deemed to have substantial interest in a concern for the purpose of Section 64(1)
(ii)

IF THE CONCERN IS A COMPANY IF THE CONCERN IS OTHER THAN A COMPANY

Person’s beneficial shareholding should not be less Person either himself or jointly with his relatives is
than 20% of voting power either individually or jointly entitled in aggregate to not less than 20% of the
with relatives at any time during the Previous Year. profits of such concern, at any time during the previous
(Shares with fixed rate of dividend shall not be year.
considered)

Note : The clubbed income retains the same head under which it is earned.

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