CHAPTER V
INCOME OF
OTHER PERSONS, INCLUDED IN ASSESSEE’S
TOTAL INCOME
Transfer of
income where there is no transfer of assets.
11[R1] 60. All income arising to any
person by virtue of a transfer12-13[R2] 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.
61. All
income arising to any person by virtue of a revocable transfer12-13[R3] 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.
14[R4] 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.
15[R5] 63. For the purposes of sections
60, 61 and 62 and of this section,—
(a) a transfer16[R6]
shall be deemed to be revocable if—
(i) it contains
any provision for the re-transfer directly or indirectly16[R7]
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”16[R8]
includes any settlement, trust, covenant, agreement or arrangement16[R9]
Income of individual to include income
of spouse, minor child, etc.
17[R10] 64. 18[R11] [19[R12] [(1)] In computing the
total income of any individual, there shall be included all such income as
arises directly or indirectly—
(i) 20[R13] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
(ii) to the spouse21[R14] 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 :
22[R15] [Provided that nothing in this
clause shall apply in relation to any income arising to the spouse where the
spouse possesses technical or professional qualifications21[R16] and the income is solely attributable to
the application of his or her technical or professional knowledge and
experience ;]
(iii) 23[R17] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
(iv) subject to the
provisions of clause (i) of section 27, 24[R18] [* * *] to the spouse25[R19] of such individual from assets transferred25[R20] directly or indi-rectly
to the spouse by such individual otherwise than for adequate consideration25[R21] or in connection with an agreement to
live apart ;
(v) 26[R22] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
(vi) to the son’s
wife, 27[R23] [* * *] of such individual, from assets
transferred25[R24] directly or indirectly on or after the 1st
day of June, 1973, to the son’s wife 28[R25] [* * *] by such individual otherwise than
for adequate consideration; 29[R26] [* * *]
(vii) to any person30[R27] or association of persons from assets
transferred30[R28] directly or indirectly otherwise than for
adequate consideration30[R29] 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 benefit30[R30] of his or her spouse 31-32[R31] [* * *]; and]
33[R32] [(viii) to any person30[R33] or association of persons from assets
transferred30[R34] directly or indirectly on or after the
1st day of June, 1973, otherwise than for adequate consideration30[R35] , 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 benefit30[R36] of his son’s wife 34[R37] [* * *].]
35[R38] [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 necessary36[R39] 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.—37[R40] [Omitted
by the Finance Act, 1992, w.e.f. 1-4-1993.]
38[R41] [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.]
39[R42] [(1A) In computing the total income of any
individual, there shall be included all such income as arises or accrues to his
minor child
40[R43] [,
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
know-ledge 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.]
41[R44] [(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 it 42[R45] [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 thereof43[R46] 44[R47] [* * *] shall be deemed to arise to the
individual and not to the family ;
45[R48] [(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 spouse 46[R49] [* * *] on partition shall be deemed to
arise to the spouse 46[R50] [* * *] from assets transferred indirectly
by the individual to the spouse 46[R51] [* * *] 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 spouse 47[R52] [* *
*] of the individual.
Explanation 48[R53] [1].—For the purposes of sub-section (2),—
49[R54] [* *
*] “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.
51[R56] [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 the 52[R57] [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
[R2]For the meaning of term/expression “transfer”
[R3]For the meaning of term/expression “transfer”
[R4]For relevant case laws
[R5]For relevant case laws
[R6]For the meaning of the terms “transfer”, “indirectly” and “arrangement”, see Direct Taxes Manual, Vol. 3.
[R7]For the meaning of the terms “transfer”, “indirectly” and “arrangement”, see Direct Taxes Manual, Vol. 3
[R8]For the meaning of the terms “transfer”, “indirectly” and “arrangement”, see Direct Taxes Manual, Vol. 3.
[R9]For the
meaning of the terms “transfer”, “indirectly” and “arrangement”, see Direct
Taxes Manual, Vol. 3.
[R11]Substituted
by the Taxation Laws (Amendment) Act, 1975, w.e.f.
1-4-1976.
[R12]Inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R13]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 ;”
[R14]For the meaning of the term/expression “spouse” and “technical or professional qualifications”
[R15]Restored to its original version by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R16]For the meaning of the term/expression “spouse” and “technical or professional qualifications”
[R17]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
[R18]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.
[R19]For the meaning of the terms/expressions “spouse”, “transferred” and “adequate consi-deration”
[R20]For the meaning of the terms/expressions “spouse”, “transferred” and “adequate consi-deration”,
[R21]For the meaning of the terms/expressions “spouse”, “transferred” and “adequate consi-deration”
[R22]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 ;”
[R23]Words “or son’s minor child,” omitted by the Finance Act, 1992, w.e.f. 1-4-1993
[R24]For the meaning of the terms/expressions “spouse”, “transferred” and “adequate consi-deration”
[R25]Words “or son’s minor child,” omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R27]For the meaning of the terms/expressions “any person”, “transferred”, “adequate consi-deration” and “deferred benefit”
[R28]For the meaning of the terms/expressions “any person”, “transferred”, “adequate consi-deration” and “deferred benefit”
[R29]For the meaning of the terms/expressions “any person”, “transferred”, “adequate consi-deration” and “deferred benefit”
[R30]For the meaning of the terms/expressions “any
[R31]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.
[R32]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R33]For the meaning of the terms/expressions “any person”, “transferred”, “adequate consi-deration” and “deferred benefit”
[R34]For the meaning of the terms/expressions “any person”, “transferred”, “adequate consi-deration” and “deferred benefit”
[R35]For the meaning of the terms/expressions “any person”, “transferred”, “adequate consi-deration” and “deferred benefit”
[R36]For the meaning of the terms/expressions “any person”, “transferred”, “adequate consi-deration” and “deferred benefit”,
[R38]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.”
[R39]For the meaning of the term “necessary
[R40]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.”
[R41]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.’
[R42]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R43]Inserted
by the Finance Act, 1994, w.e.f. 1-4-1995.
[R44]Inserted
by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
[R45]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
[R46]For meaning of expression “or any part thereof
[R47]“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
[R48]Substituted, by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R49]Words
“or minor child” omitted by the Finance Act, 1992, w.e.f.
1-4-1993.
[R50]Words
“or minor child” omitted by the Finance Act, 1992, w.e.f.
1-4-1993.
[R51]Words “or minor child” omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R52]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.
[R53]Inserted
by the Finance Act, 1979, w.e.f. 1-4-1980.
[R54]“(1)”
omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f.
1-4-1976.
[R55]Clause (2) omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R56]Inserted
by the Finance Act, 1979, w.e.f. 1-4-1980.
[R57]Substituted
for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.