CLUBBING OF INCOME

SECTION NATURE OF TRANSACTION CLUBBED IN THE
HANDS OF
CONDITIONS/EXCEPTIONS RELEVANT REFERENCE
60 Transfer of Income without transfer of Assets. Transferor who transfers
the income.
Irrespective of:
1. Whether such transfer is
revocable or not.
2. Whether the transfer is
effected before or after the
commencement of IT Act.
1. Income for the purpose of
Section 64 includes losses. [P. Doriswamy Chetty 183 ITR 559 (SC)] [also see Expl. (2) to Section 64]
2. Section 60 does not apply if corpus itself is transferred. [Grandhi Narayana Rao 173 ITR 593 (AP)]
61 Revocable transfer of Assets. Transferor who transfers
the Assets.
Clubbing not applicable if:
1. Trust/transfer irrevocable during the lifetime of beneficiaries/transferee or
2. Transfer made prior to 1-4-1961 and not revocable for a period of 6 years.
Provided the transferor derives no direct or indirect benefit from such income in either case.
Transfer held as revocable
1. If there is provision to re transfer directly or indirectly whole/part of income/asset to transferor;
2. If there is a right to reassume power, directly or indirectly, the transfer is held revocable and actual exercise is not necessary.
[S. Raghbir Singh 57 ITR 408 (SC)]
3. Where no absolute right is given to 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, Commission,
Fees or remuneration
paid to spouse from a concern in which an individual has a
substantial* interest.
Spouse whose total
income (excluding
income to be clubbed)
is greater.
Clubbing not applicable if:
Spouse possesses technical
or professional qualification
and remuneration is solely
attributable to application of
that knowledge/qualification.
1. The relationship of husband
and wife must subsist at the
time of accrual of the income. [Philip John Plasket Thomas 49 ITR 97 (SC)]
2. Income other than salary, commission, fees or remuneration is not clubbed under this clause
64(1)(iv) Income from assets
transferred directly or indirectly to the spouse without adequate consideration.
Individual transferring
the asset.
Clubbing not applicable if:
The assets are transferred;
1. With an agreement to
live apart.
2. Before marriage.
3. Income earned when relation does not exist.
4. By Karta of HUF gifting co-parcenary property to his wife.
L. Hirday Narain vs. ITO 78 ITR 26 (SC)
5. Property acquired out of pin money.
R.B.N.J. Naidu vs. CIT 29 ITR 194 (Nag.)
1. Income earned out of Income arising from transferred assets not liable for clubbed.
[M.S.S. Rajan 252 ITR 126
(Mad)]
2. Cash gifted to spouse and he/she invests to earn interest. [Mohini Thaper vs. CIT 83 ITR 208 (SC)]
3. Capital gain on sale of property which was received without consideration from spouse [Sevential M. Sheth vs. CIT 68 ITR 503 (SC)]
4. Transaction must be real.
[O.N. Mohindroo 99 ITR 583
(Delhi)]
64(1)(vi) Income from the assets transferred to son’s wife. Individual transferring
the Asset.
Condition:
The transfer should be without adequate consideration.
Cross transfers are also covered
[C.M.Kothari 49 ITR 107 (SC)]
64(1)(vii), (viii) Transfer of assets by an individual to a person or AOP for the immediate or deferred benefit of his:
(vii) - Spouse.
(viii) - Son’s wife.
Individual transferring
the Asset.
Condition:
1. The transfer should be
without adequate consideration.
1. Transferor need not necessarily have taxable income of his own.
[P. Murugesan 245 ITR 301
(Mad)]
2. Wife means legally wedded
wife. [Executors of the will of
T.V. Krishna Iyer 38 ITR 144
(Ker)]
64(1A) Income of a minor child
[Child includes step child, adopted child and minor married daughter].
1. If the marriage subsists, in the hands of the parent whose total income is greater; or;
2. If the marriage does not subsist, in the hands of the person who maintains the minor child.
3. Income once included
in the total income of either of parents, it shall continue to be included in the hands of same parent in the subsequent year unless AO is satisfied that it is necessary to do so (after giving that parent opportunity of being heard)
Clubbing not applicable for:—
1. Income of a minor child
suffering any disability specified u/s. 80U.
2. Income on account of manual work done by the minor child.
3. Income on account of any
activity involving application
of skills, talent or specialized knowledge and experience.
1. Income out of property transferred for no consideration to a minor married daughter, shall not be clubbed in the parents’ hands. [Section 27]
2. The parent in whose hands
the minor’s income is clubbed is entitled to an exemption up to Rs. 1,500 per child. [Section 10(32)]
64(2) Income of HUF from
property converted by the individual into HUF property.
Income is included in
the hands of individual
& not in the hands of
HUF.
Clubbing applicable even if:
The converted property is
subsequently partitioned;
income derived by the spouse
from such converted property
will be taxable in the hands
of individual.
Fiction under this section must
be extended to computation of
income also. [M.K. Kuppuraj
127 ITR 447 (Mad)]
* 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 than 20% of voting power either individually or jointly with relatives at any timeduring the Previous Year. (Shares with fixed rate of dividend shall not be considered) Person either himself or jointly with his relatives is entitled in aggregate to not less than 20% of the profits of such concern, at any time during the previous year.

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