Section 62

Section 62 — the law in short

What the courts have decided on section 62, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v M.K. Chandrakanth High CourtHelps taxpayerValidity unconfirmed
  My client's trust deed says that if the purpose fails after twenty years the fund reverts to the settlor. Does that clause alone make the trust revocable, so that the income is taxed in the settlor's hands from day one?
  No. A clause that operates only on the failure of the settlement, after a fixed period, does not make the trust revocable while the settlement is running. For the years in which the contingency has not arisen the deed must be read without that clause, and if during the operation of the settlement the settlor can neither enjoy the income nor reassume power over the income or assets, s.63 is not attracted and s.61 does not apply.
• CIT v Mr and Mrs Govind B.C. Ghanekar High CourtHelps departmentValidity unconfirmed
  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.
• Nawal Kishore Chowdhury v ITO High CourtHelps taxpayerValidity unconfirmed
  The department has treated my client's trust as revocable, taxed the income in the settlor's hands, and is now attaching the trust's rents under s.226(3) to recover the settlor's arrears for a string of other years. Can it do that?
  Not on that basis. Section 65 is the only route by which the person in whose name the asset stands can be made to pay, and it permits recovery only on the service of a notice of demand on that person and only of the portion of the tax levied on the assessee which is attributable to the income so included. Where no such notice was served, and where the demand covers years and amounts unrelated to the trust income, s.65 has been breached and the recovery notices are liable to be quashed.

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.