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Clubbing of income

Arka Bose (None) (313 Points)

10 June 2011

Suppose Mr A gifts rs 100000 debentures to Mrs A.Now Mrs A sells them at Rs 150000.Then she reinvestes this amount in other debentures to earn interest of Rs 15000.

How will the income be clubbed?

Will Rs 50000 of capital gains are to be clubbed with Mr A's income and other 15000 will be clubbed proportionately?

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9 Replies

Vinit (CA Final ) (188 Points)
Replied 10 June 2011

Yes Rs. 50000/- will taxable in the hands of Mr. A as CG and Rs. 15000/- in the hands of Mr. A and Mrs. A Rs. 10000/- and Rs.5000/- respectivele. Becouse the clubbing provision will only applies on income from assets but not on income from income.

1 Like

CA. Roopali Kadam (Jobs on assignment basis.) (1453 Points)
Replied 11 June 2011

Originally posted by : Vinit
	Yes Rs. 50000/- will taxable in the hands of Mr. A as CG and Rs. 15000/- in the hands of Mr. A and Mrs. A Rs. 10000/- and Rs.5000/- respectivele. Becouse the clubbing provision will only applies on income from assets but not on income from income.

1. income from assets transferred, here debentures CG 50000 in hands of mr A- Agreed

2. Income from income 5000 in hands of mrs A - Agreed

3. transferred asset is converted into cash - cash into another debenture. and income on this new debenture in hands of again mr A?? i doubt. This new asset was not transferred by mr A to mrs A . Act also does not provide-- income from asset transferred and Subsequent transferred asset's transfer. plz correct me if i m wrong

rachit jain (chartered accountant ) (635 Points)
Replied 11 June 2011

50000 will be taxable in the hand of Mr. A and 15000 in the hand of Mrs.A

Arka Bose (None) (313 Points)
Replied 12 June 2011

I also think 15000 is to be divided proportionately ....... that is 10000 and 5000

income tax deems the owner of transferred assets,thus if that asset is sold that value should be with the transferrer only....a

CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 12 June 2011

Originally posted by : rachit jain
	50000 will be taxable in the hand of Mr. A and 15000 in the hand of Mrs.A

AGREED.

CLUBING PROVISION DOESNT APPLY TO THE NEW ASSET PURCHASED

BY THE TRANFEREE FRM TRF OF ORIGINAL ASSET.

Arka Bose (None) (313 Points)
Replied 12 June 2011

can you please show me where actually have you found out that clubbing provision doesnt apply to newly purchased asset?

CA. Roopali Kadam (Jobs on assignment basis.) (1453 Points)
Replied 12 June 2011

I am studying this link which is a case law on our clubbing topic

https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2009ITAct/%5B1988%5D173ITR0112(Mad).htm

https://www.indiankanoon.org/doc/782384/

Therefore i was in doubt.

I think so from whatever i studied, on the basis of proximity between the asset transferred and the income earned(as mentioned in case laws) 10000 in the hands of Mr A and 5000 mrs A

deepakkumar (no) (27 Points)
Replied 20 December 2011

mr X transfer his asset to mrY with a condition that any income arises from such transfer of asset,from that income 20% should be refund to Mr X..In that case what the amount should be clubbed in tha hands of Mr X and taxable in hnds of Mr Y?