Section 16(3)(a)(iv) of the Indian Income-tax Act, 1922 — the law in short
What the courts have decided on section 16(3)(a)(iv) of the Indian Income-tax Act, 1922, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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CIT v Prem Bhai Parekh
Supreme CourtHelps taxpayerSuperseded by amendment
I gifted money to my children, who put it into a firm and were admitted to the benefits of partnership. Is their share income clubbed with mine as arising from the gift?
No, on the provision then in force. The Supreme Court held that a clubbing provision creates an artificial income and must be strictly construed. Before income can be brought within it, the income must be proved to have arisen directly or indirectly from the transfer of assets made by the assessee, and the connection between the transfer and the income must be proximate: the income must arise as a result of the transfer, not merely be connected with it in some manner. Here the minors' income arose from their admission to the benefits of the partnership, so the connection with the gift was remote.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
