Section 60

Section 60 — the law in short

What the courts have decided on section 60, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Sunil J. Kinariwala Supreme CourtHelps department
  I settled half of my share in the firm on a family trust by a deed. The firm credits the trust directly. Is that half still taxed as my income?
  Yes. The Supreme Court held that a partner's assignment of part of his share in a firm to a trust is an application of his income, not a diversion by overriding title, so the assigned share stays in his total income. The reason is what an assignment of a partnership share actually transfers. Under section 29(1) of the Indian Partnership Act the assignee gets no right or interest in the main partnership - only the right to receive that part of the profits referable to the assignment, and a share of the assets on dissolution. The trust here took as an assignee of the assigning partner's share of income and not as a sub-partner, because no sub-partnership came into existence. The income therefore reached the partner first and was passed on afterwards.
• Radhasoami Satsang v CIT Supreme CourtHelps taxpayer
  The department accepted your position for years and has now reversed it. Can it?
  Not without a material change. Res judicata does not strictly apply between years, but where a fundamental aspect running through several years has been found as a fact and allowed to stand, it should not be changed in a later year.
• K.A. Ramachar v CIT Supreme CourtHelps department
  A partner has assigned part of his share of firm profits to his wife and daughters by deed, and they draw the money straight from the firm. Is that his income or theirs?
  It remains his. Under the law of partnership it is the partner and the partner alone who is entitled to the profits, and a stranger, even an assignee, has no direct claim against the firm. What the deeds achieved was to make payment to the wife and daughters a valid discharge for the firm; what was paid was in law a portion of the partner's profits, taxable in his hands at the point of accrual.
• Provat Kumar Mitter v CIT Supreme CourtHelps department
  I assigned the dividends on my shares to my wife for her life but kept the shares. Is that dividend still my income?
  Yes. The Supreme Court held that the deed of 19 January 1953 was not a transfer of any existing property. The assessee kept the shares and so kept the right to participate in the company's profits; what he made was a contract to make over to his wife, during her life, every dividend that might in future be declared on those shares. The company could pay only the registered shareholder or on his orders, so the income continued to accrue to him and was afterwards paid over under the contract. That is an application of income after it accrues, not a diversion before it accrues.
• IVRCL-KBL (JV) v ACIT High CourtHelps taxpayer
  My joint venture bid for and won the contract, the whole of it was back-to-backed to a constituent member, and the government deducted TDS from the JV's bills. The Assessing Officer refuses the JV credit under Rule 37BA(2)(i), saying credit belongs to the member who did the work. Who gets it?
  The joint venture does. Rule 37BA(2)(i) displaces credit from the deductee to another person only where some provision of the Act makes the income assessable in that other person's hands, and only where the proviso's machinery has been followed - the deductee files a declaration with the deductor and the deductor reports the deduction in the other person's name. Neither condition was met, and the Court set aside the assessment orders to the extent they denied the JV credit.
• CIT v Mr and Mrs Govind B.C. Ghanekar High CourtHelps departmentNo later treatment found
  The gift deed says nothing about taking anything back, so surely the transfer is irrevocable and ss.61 to 63 cannot apply?
  The deed is not the only place to look. Section 63 enlarges the meaning of 'revocable transfer'; it does not confine it. Where the general law that governs the parties itself allows the transfer to be cancelled at will — there, Article 1181 of the Portuguese Civil Code permitting gifts between spouses to be freely cancelled by the donor — the transfer is revocable within s.61 and the income is chargeable in the transferor's hands.
• CIT v Mridu Hari Dalmia High CourtHelps departmentNo later treatment found
  I did not gift the money — I lent it, interest free, and it is shown as a loan in my books. Does that keep the income out of the clubbing net?
  Not where the supposed borrower cannot contract. A loan is in essence a contract, requiring two parties and an enforceable promise to repay; a minor's contract is void, and a person cannot lend to himself merely because he acts in two capacities. The Delhi High Court therefore held that the money handed over was a transfer of assets, and the interest earned on it was income arising from assets transferred, includible in the transferor's hands.

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.