Hv a querry about application of Clubbing Provisions to interest income accruing to an ear-marked fund meant & kep aside for a minor child's education & general welfare & future marriage event, derived from a divorce settlement at the hands of a female assesse.
Whether we hv any established case laws on this subject >??
Dear Jitendra,
Ur query is worth thinking but I feel that provision of clubbing in case of minor are independent of the two concepts "DIVERSION BY OVERRIDING TITLE" or "APPLICATION OF INCOME"..
Hence in my view this income will be clubbed in the hands of his mother..
hi,
accordingl to me also amir is right...Also i wish to add that it is a clearly just an indirect way to make minor son beneficiary......so whn he is beneficiary directly or indirectly the said income will be clubbed as per provisions of clubbing......also this is not case of application of income but just earning it so it will be clubbed...............
Income of minor to be clubbed with income of either one of the parents
As per my View Amir is right. The income need t o be clubbed in the hands of parents whose GTI is greater.
Hi Jitendra,
Could you please advice who is the registered owner of the funds. If the registered owner of the Fund is not Child , the interest income will be taxable in the hands of registered owner and there is no question of clubbing.
It may be possible that fund has been kept aside for education and marriage of a child out of personal agreement between parents, however personal agreements do not override Law
Nice view of Naveen. But i think in your case, the investment would have been made in the name of the child.
Jitendra, it is covered in the explanation to section 64(1A) that, where the marriage does not subsist, the income of the minor child will be clubbed in the hands of the parent who maintains the minor child in the previous year.
Hence it would be clubbed with the mother's income, even if the investment had been made by the father of the child.
To avoid tax for now, i suggest that the income be offered on cash basis instead of accrual. It would be possible to defer, (and if possible avoid) the clubbing and tax, by waiting for the child to attain majority and offer the income to tax in the child's own name.
CAclubindia
