Chapter V
INCOME OF OTHER PERSONS, INCLUDED IN
ASSESSEE’S TOTAL INCOME
Transfer of income where
there is no transfer of assets. .
96[R1] 60. All
income arising to any person by virtue of a transfer whether revocable or not
and whether effected before or after the commencement of this Act shall, where
there is no transfer of the assets from which the income arises, be chargeable
to income-tax as the income of the transferor and shall be included in his
total income.
Revocable
transfer of assets.
61. All income arising to any
person by virtue of a revocable transfer of assets shall be chargeable to
income-tax as the income of the transferor and shall be included in his total
income.
Transfer irrevocable for a
specified period. .
96[R2] 62. (1) The provisions
of section 61 shall not apply to any income arising to any person by virtue of
a transfer—
(i) by way of trust which is not revocable
during the lifetime of the beneficiary, and, in the case of any other transfer,
which is not revocable during the lifetime of the transferee ; or
(ii) made before the 1st day of April, 1961, which is not
revocable for a period exceeding six years :
Provided that the transferor derives no direct or indirect benefit
from such income in either case.
(2) Notwithstanding
anything contained in sub-section (1), all income arising to any person by
virtue of any such transfer shall be chargeable to income-tax as the income of
the transferor as and when the power to revoke the transfer arises, and shall
then be included in his total income.
“Transfer” and “revocable
transfer” defined.
97[R3] 63. For the purposes of sections 60, 61
and 62 and of this section,—
(a) a transfer shall be deemed to be revocable if—
(i) it contains
any provision for the re-transfer directly or indirectly of the whole or any
part of the income or assets to the transferor, or
(ii) it, in any way, gives the transferor a right to re-assume
power directly or indirectly over the whole or any part of the income or assets
;
(b) “transfer” includes any settlement, trust, covenant,
agreement or arrangement.
Income of individual to
include income of spouse, minor child, etc..
98[R4] 64.99[R5] [1[R6] [(1)] In computing the
total income of any individual, there shall be included all such income as
arises directly or indirectly—
2[R7] (i) Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
(ii) 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 :
3[R8] [Provided that nothing in this clause shall apply in
relation to any income arising to the spouse where the spouse possesses
technical or professional qualifications and the income is solely attributable
to the application of his or her technical or professional knowledge and
experience ;]
4 [R9] (iii) Omitted
by the Finance Act, 1992, w.e.f. 1-4-1993.]
(iv) subject to the provisions of clause (i) of section 27 ,5 [R10] [* * *] to the
spouse of such individual from assets transferred directly or indirectly to
the spouse by such individual otherwise than for adequate consideration or in
connection with an agreement to live apart ;
6[R11] (v) Omitted by the Finance Act, 1992,
w.e.f. 1-4-1993.]
(vi) to the son’s wife 7[R12] [* * *] of such
individual, from assets transferred directly or indirectly on or after the 1st
day of June, 1973, to the son’s wife 8[R13] [* * *] by such
individual otherwise than for adequate consideration; 9[R14] [* * *]
(vii) to
any person or association of persons from assets transferred directly or
indirectly otherwise than for adequate consideration to the person or
association of persons by such individual, to the extent to which the income
from such assets is for the immediate or deferred benefit of his or her spouse 10[R15] [* * *]; and]
11[R16] (viii) to any person or association of persons
from assets transferred directly or indirectly on or after the 1st day of June,
1973, otherwise than for adequate consideration, to the person or association
of persons by such individual, to the extent to which the income from such
assets is for the immediate or deferred benefit of his son’s wife 12[R17] [* * *].]
13[R18] [Explanation
1.—For the purposes of clause (ii), the individual in computing
whose total income the income referred to in that clause is to be included,
shall be the husband or wife whose total income (excluding the income referred
to in that clause) is greater ; and where any such income is once included in
the total income of either spouse, any such income arising in any succeeding
year shall not be included in the total income of the other spouse unless the
Assessing Officer is satisfied, after giving that spouse an opportunity of
being heard, that it is necessary so to do.]
Explanation 2.—For the purposes of clause (ii), an individual shall
be deemed to have a substantial interest in a concern—
(i) in a case where the concern is a
company, if its shares (not being shares entitled to a fixed rate of dividend
whether with or without a further right to participate in profits) carrying not
less than twenty per cent of the voting power are, at any time during the
previous year, owned beneficially by such person or partly by such person and
partly by one or more of his relatives ;
(ii) in
any other case, if such person is entitled, or such person and one or more of
his relatives are entitled in the aggregate, at any time during the previous
year, to not less than twenty per cent of the profits of such concern.
Explanation 2A—14
[R19] [Omitted by
the Finance Act, 1992, w.e.f. 1-4-1993.]
15 [R20] [Explanation
3.—For the purposes of clauses (iv) and (vi),
where the assets transferred directly or indirectly by an individual to his
spouse or son’s wife (hereafter in this Explanation referred to as “the
transferee”) are invested by the transferee,—
(i) in any business, such investment being
not in the nature of contribution of capital as a partner in a firm or, as the
case may be, for being admitted to the benefits of partnership in a firm, that
part of the income arising out of the business to the transferee in any
previous year, which bears the same proportion to the income of the transferee
from the business as the value of the assets aforesaid as on the first day of
the previous year bears to the total investment in the business by the transferee
as on the said day ;
(ii) in
the nature of contribution of capital as a partner in a firm, that part of the
interest receivable by the transferee from the firm in any previous year, which
bears the same proportion to the interest receivable by the transferee from
the firm as the value of investment aforesaid as on the first day of the
previous year bears to the total investment by way of capital contribution as a
partner in the firm as on the said day,shall be
included in the total income of the individual in that previous year].
16[R21] (1A) In computing the total income of any
individual, there shall be included all such income as arises or accrues to his
minor child17[R22] [, not being a
minor child suffering from any disability of the nature specified in section
80U] :
Provided that nothing
contained in this sub-section shall apply in respect of such income as arises
or accrues to the minor child on account of any—
(a) manual work done by him ; or
(b) activity involving application of his skill, talent or specialised knowledge and experience.
Explanation.—For the purposes of this sub-section, the income of the
minor child shall be included,—
(a) where the marriage of his parents subsists, in the income of
that parent whose total income (excluding the income includible under this
sub-section) is greater ; or
(b) where
the marriage of his parents does not subsist, in the income of that parent who
maintains the minor child in the previous year,and where any such income is once included in the
total income of either parent, any such income arising in any succeeding year
shall not be included in the total income of the other parent, unless the
Assessing Officer is satisfied, after giving that parent an opportunity of
being heard, that it is necessary so to do.]
18[R23] (2) Where, in the case of an individual being
a member of a Hindu undivided family, any property having been the separate
property of the individual has, at any time after the 31st day of December,
1969, been converted by the individual into property belonging to the family
through the act of impressing such separate property with the character of
property belonging to the family or throwing it19[R24] [into the common
stock of the family or been transferred by the individual, directly or indirectly,
to the family otherwise than for adequate consideration (the property so
converted or transferred being hereinafter referred to as the converted
property)], then, notwithstanding anything contained in any other provision of
this Act or in any other law for the time being in force, for the purpose of
computation of the total income of the individual under this Act for any
assessment year commencing on or after the 1st day of April, 1971,—
(a) the individual shall be deemed to have transferred the
converted property, through the family, to the members of the family for being
held by them jointly ;
(b) the income derived from the converted property or any part
thereof20[R25] [* * *] shall be
deemed to arise to the individual and not to the family ;
21[R26] (c) where
the converted property has been the subject-matter of a partition (whether
partial or total) amongst the members of the family, the income derived from
such converted property as is received by the spouse22[R27] [* * *] on
partition shall be deemed to arise to the spouse22[R28] [* * *] from
assets transferred indirectly by the individual to the spouse22[R29] [* * *] and the
provisions of sub-section (1) shall, so far as may be, apply accordingly :]
Provided that the
income referred to in clause (b) or clause (c) shall, on being
included in the total income of the individual, be excluded from the total
income of the family or, as the case may be, the spouse23[R30] [* * *] of the
individual.
Explanation24[R31] [1].—For the purposes of sub-section (2),—
25[R32] [* * *]
“property” includes any interest in property, movable or immovable, the
proceeds of sale thereof and any money or investment for the time being
representing the proceeds of sale thereof and where the property is converted
into any other property by any method, such other property.
27[R34] [Explanation
2.—For the purposes of this section, “income”
includes loss.]
Liability
of person in respect of income included in the income of another person.
65. Where, by reason of the
provisions contained in this Chapter or in clause (i)
of section 27, the income from any asset or from membership in a firm of a
person other than the assessee is included in the
total income of the assessee, the person in whose
name such asset stands or who is a member of the firm shall, notwithstanding
anything to the contrary contained in any other law for the time being in
force, be liable, on the service of a notice of demand by the28[R35] [ Assessing]
Officer in this behalf, to pay that portion of the tax levied on the assessee which is attributable to the income so included,
and the provisions of Chapter XVII-D shall, so far as may be, apply accordingly
:
Provided that where
any such asset is held jointly by more than one person, they shall be jointly
and severally liable to pay the tax which is attributable to the income from
the assets so included.
[R1]For relevant case laws, See Case Laws
[R2]For relevant case laws, See Case Laws
[R3]For relevant case laws, See Case Laws
[R4]See also Letter [F.No. 12/2/63-IT (A-I)], dated 20-11-1963.
[R5]Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R6]Inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971
[R7]Prior to omission, clause (i) as reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, which was earlier omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date, read as under :
“(i) to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is a partner ;”
[R8]Restored to its original version by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R9]Prior to its omission, clause (iii), as reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under :
“(iii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm ;”
[R10]Words “in a case not falling under clause (i) of this sub-section,” omitted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier these words were reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989
[R11]Prior to its omission, clause (v), as amended by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under :
“(v) subject to the provisions of clause (i) of section 27, in a case not falling under clause (iii) of this sub-section, to a minor child of such individual, from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration ;”
[R12]Words “or son’s minor child,” omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R13]Words “or son’s minor child,” omitted by the Finance Act, 1992, w.e.f. 1-4-1993
[R14]“and” omitted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985
[R15]Words “or minor child or both” omitted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier these words were amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985 and Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989
[R16]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985
[R17]Words “or son’s minor child or both” omitted by the Finance Act, 1992, w.e.f. 1-4-1993
[R18]Substituted for existing Explanations 1 and 1A by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to substitution, Explanations 1 and 1A, as amended by the Finance Act, 1979, w.e.f. 1-4-1980, the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under :
“Explanation 1.—For the purposes of clause (i) and clause (ii), the individual, in computing whose total income the income referred to in that clause is to be included, shall be the husband or wife whose total income (excluding the income referred to in that clause) is greater ; and, for the purposes of clause (iii), the income of the minor child from the partnership shall be included in the income of that parent whose total income (excluding the income referred to in that clause) is greater ; and where any such income is once included in the total income of either spouse or parent, any such income arising in any succeeding year shall not be included in the total income of the other spouse or parent unless the Assessing Officer is satisfied, after giving that spouse or parent an opportunity of being heard, that it is necessary so to do.
Explanation 1A.—For the purposes of clause (i), where the spouse of an individual is a beneficiary under a trust, the income arising to the trustee from the membership of the trustee in a firm carrying on a business in which such individual is a partner shall, to the extent such income is for the immediate or deferred benefit of the spouse of such individual, be deemed to be income arising indirectly to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is a partner.”
[R19]Prior to its omission, Explanation 2A, as inserted by the Finance Act, 1979, w.e.f. 1-4-1980 and later amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under :
“Explanation 2A.—For the purposes of clause (iii), where the minor child of an individual is a beneficiary under a trust, the income arising to the trustee from the membership of the trustee in a firm shall, to the extent such income is for the benefit of the minor child, be deemed to be income arising indirectly to the minor child from the admission of the minor to the benefits of partnership in a firm.”
[R20]Substituted for existing Explanation 3 by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to substitution, Explanation 3, as amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read as under :
‘Explanation 3.—For the purposes of clauses (iv), (v) and (vi), where the assets transferred directly or indirectly by an individual to his spouse or minor child or son’s wife or son’s minor child (hereafter in this Explanation referred to as “the transferee”) are invested by the transferee in any business, that part of the income arising out of the business to the transferee in any previous year, which bears the same proportion to the income of the transferee from the business, as the value of the assets aforesaid as on the 1st day of the previous year bears to the total investment in the business by the transferee as on the said day, shall be included in the total income of the individual in that previous year.’
[R21]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993
[R22]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995
[R23]Inserted by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971.
[R24]Substituted for “into the common stock of the family (such property being hereinafter referred to as the converted property)” by the Finance Act, 1979, w.e.f. 1-4-1980.
[R25]“in so far as it is attributable to the interest of the individual in the property of the family” omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976
[R26]Substituted, by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-197
[R27]Words “or minor child” omitted by the Finance Act, 1992, w.e.f. 1-4-1993
[R28]Words “or minor child” omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R29]Words “or minor child” omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R30]Words “or minor child” omitted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier word “child” was substituted for “son” by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R31]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980
[R32]“(1)” omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R33]Clause (2) omitted, by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976
[R34]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980
[R35]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988