[Section-60] Transfer of income without transfer of assets
(i) If any person transfer any income from any assets without transferring the asset, such income in to be included in total income of transferor.
(ii) It is irrelevant, whether transfer is revocable or irrevocable and whether it is made before commencement of this act or after commencement.
Illustration: Mr. Mohit has transferred, through a duly registered document, income arising from a property to his son, without transferring that property. In whose hand will the rental income be charged?
Solution: Section 60 states that where there is transfer of income from an asset without transfer of asset, such income shall be included in total income of transferor. Hence, rental income from that property shall be clubbed in hands of Mr. Mohit.
[Section-61] REVOCABLE TRANSFER
If an assessee transfer an asset under a revocable transfer, income generated from such asset, shall be clubbed in hands of transferor.
[Section-63] Meaning of Revocable transfer
Transfer is deemed to be revocable if:
(a) It contain any provision for re-transfer of any part or whole of income or asset to transferor.
(b) It gives a right to transfer to re-assume power over any part or whole of income or asset.
[Section-62] Exception where clubbing provisions are not attracted even in case of revocable transfer
Provisions of section 61, will not apply in the following cases:
(i) A transfer by way of creation of trust, which is irrevocable during lifetime of beneficiary.
(ii) Any transfer which is irrevocable during lifetime of transferee.
(iii) Any transfer made before 01-04-1961, which is not revocable for a period exceeding
6 years.
[Section 64(1)(ii)] REMUNERATION TO SPOUSE
While computing total income of any individual, all such income which arise directly or indirectly to the spouse of such individual by way of salary, commission, fees or any other form of remuneration, whether in cash or in kind, from a concern in which such individual has a substantial interest.
Notes: (i) Clubbing provisions will not apply, where spouse of said individual possess technical or professional qualifications and income of spouse is attributable to the application of his/her technical or professional knowledge or experience.
(ii) Where both husband and wife has substantial interest in a concern and both are in receipt of income by way of salary etc. such income will be include in hands of that spouse, whose total income, excluding such income is higher. Here is an example for you:
[Section 64(1)(iv)] Income from Asset transferred to spouse
In computing total income of an individual income arising from transferred to spouse without adequate consideration, shall be included in income of that individual.
Notes: In following cases, clubbing provisions shall not be attracted on transfer of property to spouse,
(i) When such transfer is for adequate consideration,
(ii) Transfer is under an agreement to live apart,
(iii) Where transferred asset is house property, because under section 27 transferee will be known as deemed owner.
Relationship of husband and wife exist on date of transfer of assets.
[Section 64(1)(vii)] Transfer of assets for the benefit of Spouse to AOP or other person
An asset is transferred to other person or AOP, otherwise than for adequate consideration, for immediate benefit of spouse, then income arising directly or indirectly shall be clubbed in the hands of transferor.
CLUBBING OF INCOME ARISING TO SON'S WIFE
[Section 64 (1)(vi)] Transfer to son's wife
(i) Where an asset is transferred, directly or indirectly by an individual to his or her son's wife without adequate consideration, income from such asset is clubbed in the hands of transferor.
(ii) where the asset transferred, are invested by the transferee in business, proportionate income arising from such investment is included in income of transferor. If investment is in the nature of capital, proportionate interest on capital will be clubbed with income of transferor.
[Section 64(1)(viii)] Transfer to AOP or other person for benefit of son's wife
An asset is transferred to other person or association of persons (after 31-05-1973) without adequate consideration for benefit of Son's wife, the income on asset so transferred shall be clubbed in the hands of transferor.
[Section 64(1A)] Clubbing of Income of Minor
Income of minor shall be clubbed with income of the parent whose total income (excluding this income) is higher.
> Income derived by minor from manual work or from his skill, talent or specialised knowledge will not be clubbed in income of his parent.
> Once clubbing of minor's income is done with one parent, it will continue to be clubbed with that parent only. Assessing officer may club minor's income with that of other parent.
> Where marriage of parents does not exist, income of minor will be includible in income of that parent who maintain minor child.
> Income of Minor child, who is suffering from disability specified under section 80U shall not be included in hands of parent but shall be assessed in hands of child.
> Clubbing provisions are attracted even in respect of income of minor married daughter.
[Section 10(32)] EXEMPTION
In case, income of a minor is clubbed in hands of parent, the assessee can claim exemption of an amount being lower of the following:
(a) Rs. 1500, OR (b) Income so clubbed
[Section 64(2)] Conversion of Self acquired property into property of Hindu Undivided Family (HUF)
Where an individual, who is a member of HUF, convert at any time after 31-12-1969, his individual property into property of HUF of which he is a member, without adequate consideration, income from such property shall continue to be included in total income of that individual.
Where converted property has be proportioned, among members of the family, the income derived from such converted property is received by spouse shall be clubbed in the hands of transferor.
Income to be clubbed in hands of transferor, in following cases:
(a) Before partition: Entire income from such property.
(b) After partition: Income from assets attributable to spouse of transferor.
Distinction between Section 61 and Section 64
Main distinction between two sections is that section 61 applies only to a revocable transfer made by any person while section 64 applies to revocable as well as irrevocable transfer made only by individuals.
[Section 65] LIABILITY OF THE TRANSFEREE Where by reason of the :
> Provision contained in clubbing, or,
> Provisions contained in section 27(1),
total income from any asset of a person other than the assessee, is included in total income of assessee.
On service of notice of demand by Assessing officer, the person in whose name such asset stands, shall be liable to pay that portion of tax levied on the assessee which is attributable to the income so clubbed.
After application of provisions of clubbing income is taxable and tax liability arise in hands of transferor, but Section 65 empower income tax authorities to serve demand notice upon transferee.
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