ii. Where there is transfer of income arising from an asset consequent to a

Transcription

1 SPECIAL STORY CLUBBING IN GENERAL SECTIONS 60 TO 63 Sunil M. Lala Advocate 1. The aforesaid provisions relating to clubbing of income arising to both relatives and non relatives can be segregated into two parts: i. Where there is transfer of income arising from an asset without transfer of the said asset. ii. Where there is transfer of income arising from an asset consequent to a revocable transfer of the said asset. 2. Transfer of income where there is no transfer of asset 1. Where income arising from an asset is transferred without transfer of the said asset the income arising to the transferee is to be taxed/clubbed in the hands of the transferor. S. 60 provides "All income arising to any person by virtue of a transfer whether revocable or not and whether effected before or after the commencement of this Act shall, where there is no transfer of the assets from which the income arises, be chargeable to income-tax as the income of the transferor and shall be included in his total income". 2. Transfer a. Meaning (S. 63) Clause (b) of S. 63 defines transfer as under: "transfer includes any settlement, trust, covenant agreement or arrangement". In S.P. Jaiswal vs. CIT (1997) 224 ITR 619 (SC) the assessee instructed his banker to transfer his deposit in the name of his three children and his wife. It was held that the aforesaid transaction being an arrangement amounted to a transfer. b. Transfer should be valid and effective The clubbing provisions are applicable only where the transfer is valid and effective; i.e., the transfer must be legally enforceable. If the transfer is not legally enforceable the clubbing provisions would not be applicable. Given herein below are a few illustrations / case laws

2 wherein the clubbing provisions were held to be not applicable as the transfer was not legally enforceable. i) Promise to pay interest. In CIT vs. Maharajadhiraj Sir Kameshwar Singh (1953) 23 ITR 190 (Pat) as a result of correspondence between the assessee and the then Vicereine, the assessee purchased certain government securities and promised to pay interest to the Viceroys War Purposes Fund for the duration of the War then going on. It was held that the promise was not legally enforceable and therefore the interest was includible in the hands of the assessee. ii) Oral transfer of house property.in CIT vs. Syed Saddique Immam (1978) 111 ITR 475 (Pat-FB) (SLP granted by the Supreme Court (1983) 141 ITR (St) 6 (SC)] the assessee, a Muslim orally transferred a house property to his wife in lieu of the dower debt. It was held that such transfer was not a true "Hiba-bil-iwaz" but was really a sale of property. As the value of the property exceeded Rs. 100 the transfer could be effected by a registered conveyance and not orally. Therefore the income from the said property was held to be assessable in the hands of the assessee as the transfer was not valid. iii) Shares registered in the name of the husband who settles the dividend receivable thereon on his wife by a written unregistered instrument. In Provat Kumar Mitter vs. CIT (1959) 37 ITR 91 (Cal), affirmed, (1961) 41 ITR 624 (SC) the assessee a registered shareholder settled dividend receivable on the shares for future years on his wife by a written but unregistered instrument. It was held that the transaction did not amount to a transfer of asset at all and that therefore the dividend income first accrued to the husband (assessee) and was therefore includible as his income. 3. Section 60 Not appliable where asset itself is transferred Where the transfer of income is consequent to /along with transfer of asset itself the clubbing provisions of S. 60 would not be applicable (though the provisions of 61 to 64 may apply) [V. Savarimuthu Nadar vs. CagIT, (1966) 59 ITR 511 (Mad), CIT vs. Ram Prasad Mehra, (1975) 100 ITR 468 (Bom), K. Arunachalam Mudaliar vs. CagIT, (1978) 111 ITR 780 (Mad), C. T. Senthilnathan Chettiar vs. State of Madras, (1968) 67 ITR 102 (SC), Chunilal Mulji Motani vs. CIT (1983) 139 ITR 166 (Cal), B.E. Properties P. Ltd. vs. CIT (1993) 201 ITR 810 (Cal) ] 4. Illustrations (where s. 60 is applicable) i. Where assessee makes a settlement of a part of his share of profit in a firm on his wife and two daughters. In A. R. Rangachari vs. CIT, (1955) 28 ITR 528 (Mad), affirmed, (1961) 42 ITR 25 (SC), assessee made a settlement for a period of eight years of a part of his share of profit in a firm on his wife and two daughters without transferring to them any interest in the partnership property or assets. It was held that it was a case of voluntary application of the income and hence, the entire share of profit was assessable in the hands of the assessee. ii. Where assessee assigns his right to receive income from a property in respect of half of the income.

3 In CIT vs. P. P. Contractor, (1999) 192 ITR 261, 267 (Guj), followed in, CIT vs. P. P. Contractor, (1994) 208 ITR 771, 774 (Guj), the assessee had a right to receive income from a property during his lifetime. The assessee assigned his such right in respect of half of the income. It was held that such assignment was valid and, therefore, the assessee was liable to be assessed only in respect of the other half of the income, which had not been assigned. iii. Where there is lease of coal mines in consideration for commission and part of the commission is to be paid to a private trust. In CIT vs. Banwari Lal Agarwala, (1987) 167 ITR 321 (Pat), certain coal mines and coal-bearing lands which belonged to the assessee were leased out to a company under an agreement stipulating payment of commission at a specified rate. As per that agreement, one-third of such commission was to be paid to a private trust. It was held that there was no transfer of the commission-earning asset to the trust. Therefore, the entire commission income was assessable in the hands of the assessee. 5. Illustrations (where s. 60 is not applicable). Where a construction contract secured by an individual (partners) is to be executed by the firm. In CIT vs. R. L. Mishra, (1984) 147 ITR 424 (Bom), the assessee secured on 7th January, 1969, a contract for construction of a stadium. On 15th April, 1969, a partnership firm, consisting of three partners including the assessee, was formed. The partnership deed recited that the contract secured by the assessee shall be executed by the firm. Another partnership deed was executed on 26th November, 1969, one of the terms whereof was that the firm could carry on the business of contracting for construction of buildings, etc. The partnership firm constituted by the partnership deed dated 26th November, 1969, was granted registration under section 185. The assessee filed his return showing share income from the registered firm. The Income-tax Officer assessed the entire income from the contract work in the hands of the assessee by invoking section 60. It was held that section 60 could not be invoked in the circumstances of the case because the income-producing asset, namely the rights under the contract became the property of the firm. i. Where there is transfer by a partner of his share interest in the firm. In CIT vs. Smt. Nandiniben Narottamdas, (1983) 140 ITR 16 (Guj), the assessee, who was a partner in two firms, executed a trust deed donating her shareinterest in both the firms to the beneficiaries mentioned therein. She was thus to receive the share income in her capacity as a trustee. The Income-tax Officer sought to tax such share income in the hands of the assessee on the ground that she had transferred merely the income and not the income-producing asset itself. It was held that there was a transfer of the income-producing asset itself. It was held that there was a transfer of the income-producing asset, namely, the interest in the partnership; and section 60 could not be invoked.

4 ii. Where there is a deed of settlement executed by the assessee by which he irrevocably assigns to the trustees his right to receive share of profit from a firm after his retirement for the work done prior to retirement. In CIT vs. Manharlal Girdharlal Doshit, (1998) 231 ITR 89 (Guj), the assessee was a partner in a firm of solicitors from up to He retired from the firm on and after his retirement, the assessee was entitled to receive from the said firm his share of profit in respect of the work done prior to the date of his retirement. On , the assessee executed a deed of settlement by which he irrevocably assigned to the trustees, his such right to receive, recover and realise from the said firm, his share according to the various partnership deeds executed from time to time. In the calendar year 1976, an amount of Rs. 49,890 became payable by the firm towards the share of the settlor-assessee. It was held that the provisions of section 60 was not attracted in relation to the said sum of Rs. 49,890, for the assessment year iii. Where assessee HUF owning a certain share in a firm makes gift of part of its share as well as corpus by making a declaration of gift. In CIT vs. Grandhi Narayana Rao, (1988) 173 ITR 593 (AP), the assessee-huf, owning a certain share in a firm, made gift of one-fourth of such share by making a declaration of gift containing a categorical averment that the gift was not merely of the profits corresponding to the one-fourth share gifted but also of corpus itself. It was held that section 60 was not attracted as the corpus itself was transferred. iv. Where assessee creates annual charge in favour of his wife out of his income from house property In CIT vs. P. R. Thakkar, (1988) 170 ITR 224 (Bom), the assessee created an annual charge of Rs. 12,000 in favour of his wife out of his income from two house properties. Such annual charge was held deductible, for assessment years to , under the then section 24(1)(iv). Such annual sum paid to the wife was held not to be treated as income of the assessee by invoking the provisions of section 60. v. Where assessee owner of factory agrees to sell the same to the purchaser and the agreement provides that the profit from the factories from a specified date would be for the benefit of the transferee on completion of sale transaction. In Dalmia Cement Ltd. vs. CIT (1999) 237 ITR 617 (SC) the assessee-owner of factory had by an agreement dated agreed to sell same to "M" and agreement provided that profit from factories from would be for benefit of transferee on completion of sale transaction. It was held that though actual transfer of factory had taken place on , income pertaining to period to could not be assessed in the assessees hands by

5 applying section 60 since the very existence of the agreement of transfer dated ruled out and totally excluded the application of section 60. vi. Where assessee is only managing trustee and the beneficiaries of the trust are the sons of the assessee In CIT vs. Sharad Narandas Patel [2002] 257 ITR 643 (Guj) the assessee was the only managing trustee and the beneficiaries of the trust were the sons of the assessee. The A.O., holding that the entire business and administration of the trust was being handled by the assessee and the entire income of the trust belonged to the assessee, made additions to the assessees individual income. It was held that the trust was created by one "R" who was related to the beneficiaries. As the trust was admittedly not created by the managing trustee, the income of the assessee-trust was not liable to be included in the individual income of the managing trustee u/s. 60. Transfer of income arising from asset consequent to revocable transfer of the said asset 0. Where income arising from an asset is transferred consequent to an irrevocable transfer of the said asset the income arising to the transferee is to be taxed/clubbed in the hands of the transferor. S. 61 provides "All income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income-tax as the income of the transferor and shall be included in his total income" 1. Revocable transfer. Meaning Clause (a) of s. 63 provides "a transfer shall be deemed to be revocable if i. it contains any provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor, or ii. it, in any way, gives the transferor a right to re-assume power directly or indirectly over the whole or any part of the income or assets"; a. Mere provision is sufficient actual retransfer or reassumption is not necessary For a transfer to be revocable so as to apply clubbing provisions a mere provision for retransfer or right to reassume power is sufficient and it is not necessary that the actual retransfer or reassumption of power must take place. [CIT vs. S. Ranghbir Singh, (1965) 57 ITR 408, 413 (SC)]

6 b. Transfer does not become revocable merely because the transferor has obtained a benefit In Mrs. Leela Nath vs. CIT (1982) 134 ITR 507 (Cal) it was held that mere transfer or enjoyment of any income or asset of the trust etc. by settlor-transferor without there being reserved any right in the transfer deed itself would not make the transfer revocable c. Transfer would be revocable even if the retransfer or reassumption is made dependent on a contingency Even if the provision for retransfer or reassumption is dependent on a contingency the transfer would be considered as revocable as the law does not specify that the said provision must be absolute or unqualified. [Tarunendra Nath Tagore vs. CIT (1958) 33 ITR 492 (Cal). Also see, Ramji Keshavji vs. CIT (1945) 13 ITR 105 (Bom), CIT vs. Rani Bhuwaneshwari Kuer, (1962) 45 ITR 357 (Pat), affirmed, (1964) 53 ITR 195 (SC)] d. In case of joint transferors transfer would be revocable even if there is provision for retransfer to only one of the joint transferors. In case of joint transferors, transfer would be revocable even if there is provision for retransfer to only one of the joint transferors. It is not necessary that all the transferors should obtain the benefit of retransfer [Ratilal Nathalal vs. CIT (1951) 20 ITR 307 (Bom), affirmed, (1954) 25 ITR 426 (SC)] e. Whether a conveyance of an out and out sale may also be revocable Even an out and out sale may be revocable if the conveyance provides for retransfer of the income or the assets to the transferor or even if it merely gives him a right to reassume power over the income or the assets, whether directly or indirectly [Tarunendra Nath Tagore vs. CIT (1958) 33 ITR 492 (Cal)] f. Transfer is revocable only if right of retransfer vests in the transferor (and not some other person) The prefix "re" in the expressions "retransfer" and "reassume" implies that the retransfer of income or asset or reassumption of power must be with respect to the original transferor and not some other person [CIT vs. Trustees of Sreeram Surajmull Charity Trust (1971) 79 ITR 649, 667 (Cal) ] In CIT vs. Ratilal Nathalal (1954) 25 ITR 426 (SC), the settlor was a Hindu undivided family and the trust deed was executed by two sole surviving coparceners representing the family. The trust deed contained provisions giving the income back to one of the coparceners. It was held that there was no retransfer to the original settlor, viz., the Hindu undivided family and hence the transfer was not a revocable one. g. Illustrations of revocable transfer

7 i. Where the trust deed gives power to the settlor to make loans to any person including himself with or without security. In CIT vs. Sir Kikabhai Premchand, (1948) 16 ITR 207 (Bom), a trust created for establishment of a sanatorium was to remain operative and irrevocable for a period of six years and three months from the date of the execution of the deed. The settlor was a trustee along with other persons. The clause in the deed dealing with investments gave power to the settlor to make loans to any person including himself with or without security or howsoever as the settlor determined as if he were absolutely entitled to such monies. Held, that the settlor derived an indirect benefit from the income of the trust and, therefore, such income was subject to tax in the hands of the settlor. ii. Where while settling his property in favour of his wife and sons assessee directs that certain properties should be given over by the sons for providing a stridhan to his daughter and the deed further provides that in case of any delay caused to the execution by the sons of the stridhan conveyance the assessee shall have full right to execute such a deed by selecting properties of equal value from the properties settled on the sons. In K. Subramania Pillai vs. Ag ITO (1964) 53 ITR 764 (Mad), while settling his properties in favour of his wife and three sons (two of them minors) the assessee directed that certain properties described in the schedules should be given over by the sons for providing a stridhan to his daughter. The deed further provided that in case any obstruction or delay was caused to the execution by the sons of the stridhan conveyance, the assessee shall have full right to execute such a deed by selecting properties of equal value from the properties settled on sons. It was held that the deed of settlement was revocable as it contained a provision for reassumption of power by the settlor. iii. Where the properties are settled upon the trust subject to payment to a specified sum which may be realised by sale of some of the properties and with a charge in favour of the settlor for the deficit on such sale. In CIT vs. Jitendra Nath Mallick (1963) 50 ITR 313 (Cal), with an intention to settle valuable properties owned by "A" for the benefit of himself, his three sons and two daughters-in-law, "A" executed a trust deed so settling the properties on trust unto himself and his sons as trustees. One of the stipulations in the trust deed was that the trustees would pay to "A" a sum of Rs. 60,000/- either in a lump or by instalments and if they did so within a period of 12 months from the date of the trust deed, two of the properties named in the trust deed will revert to the trust, otherwise the settlor may sell the said two properties and for the deficit, if any, the trust properties shall be charged. It was held that if properties are settled upon trust, but subject to

8 the payment of a specified sum, which may be realised by the sale of some of the properties and with a charge in favour of the settlor for the deficit on such sale, the net result is to leave the settlor with a contingent right to follow all the properties and put them up for sale, and this gives him a right to reassume power directly or indirectly over the assets, making the entire transfer revocable. iv. Where under the trust deed the assessee has the power to remove the trustee and shebait and also to alter and modify the trust deed. In Panchanan Dey vs. CIT (1983) 142 ITR 762 (Cal), certain properties were settled by the assessee on trust for the benefit of three deities. Under the trust deed, the assessee had the power to remove the trustee and shebait and also to alter and modify the trust deed. It was held that the trust was a revocable one. v. Where assessee settles a house property on trust for charitable purposes and the deed reserves a right to the settlor to reside in flats in property free of rent. In Chunilal Mulji Motani vs. CIT (1983) 139 ITR 166 (Cal), the assessee settled a house property on trust for public charitable purposes. The deed reserved a right to the settlor to reside in two of the flats of the property free of rent and to receive certain amount annually from the trust income. It was held that because of such stipulation, the trust was revocable. vi. Where in the deed of settlement the assessee reserves unto himself the right to cancel, revoke or alter the settlement. In C. T. Senthilnathan Chettiar vs. State of Madras (1968) 67 ITR 102 (SC), a case under the Madras Agricultural Income-Tax Act, "A" settled certain properties giving an inalienable life interest in favour of his concubine and, after her lifetime, absolute rights in favour of the children that may be born to her by him. If there were no such children, the properties were to revert to him or his heirs. In the deed of settlement, "A" reserved unto himself the right to cancel, revoke or alter the settlement in case the concubine failed to reside with him or conducted herself in a manner to the prejudice of him. Held, the settlement was revocable and income from settled properties was assessable in the hands of "A". vii. Where there is a stipulation in the deed that assessee can revoke the deed with the consent of his wife. In Behramji Sorabji Lalkaka vs. CIT (1948) 16 ITR 301 (Bom), the assessee and his wife executed a deed settling properties on trust for the benefit of their two daughters and son, A, B, and C, the last two being minors at the time of execution. There was a stipulation in the deed that the assessee could

9 revoke the deed with the consent of his wife and his three children, or any two of them. It was held that the trust deed was revocable. i) Illustrations of non-revocable transfer i. Where after the death of the wife of the settlor the income was to be returned to the settlor. In Ramji Keshavji vs. CIT (1945) 13 ITR 105 (Bom), approved in CIT vs. S. Raghbir Singh (1965) 57 ITR 408 (SC), in pursuance of a consent decree, "A" executed in favour of his wife a deed of trust conveying certain properties to the trustees but reserved to himself the right to occupy a portion of the premises conveyed which was already in his occupation. The deed provided that the net income from the property was to be paid by the trustees to his wife during her lifetime and that the wife should maintain the minor children and run the household (cl. 3). In the event of "A" surviving his wife, the income was to be paid to "A" (cl. 4). The deed also provided that in case of protracted illness of "A" the wife could apply to the trustees for payment to her of a certain sum (cl. 5). It was held that the provision in the deed did not amount to a retransfer of the assets or income or a reassumption of power directly or indirectly to the assessee and the transfer was not hit by these provisions. The deed could not be rendered revocable only because after the death of the wife of the settlor the income was to return to the settlor. The words "retransfer" or "reassume" necessarily involve a second transaction of a later time. ii. Where capital of A is retained by B with a guarantee to pay B a minimum fixed sum during the lifetime of B and the said capital would come to belong to B on the death of A. In D. R. Shahapure vs. CIT, (1946) 14 ITR 781 (Bom), approved in CIT vs. S. Raghbir Singh, (1965) 57 ITR 408 (C), with a view to make provision for his fifth wife, "A" made an entry in his business books, which, after reciting of his earlier promise to hand over to her an estate of Rs. 20,000 for her benefit up to her death, stated as follows: "The capital supplied to you will remain entirely mine but you will get the income over it up to the end of your life. This capital I will not take back up to the end of your life but I will do business for you on this capital and see that you get Rs. 600 per annum for you..you can spend Rs. 600 as you like and if there is any extra income you can utilise it on anything you wish to buy..after your death the capital will be mine."it was held that the entry was an irrevocable covenant to pay the income accruing

10 on Rs. 20,000 with a guarantee that there should be Rs. 600 a year and amounted to a "settlement". The income which was paid to the wife could not therefore be included in As total income. iii. Where the trust deed provides that the beneficiaries would be excluded from the category of the beneficiaries on commission of the specified conditions but the settlor does not reserve any interest in himself in praesenti In CIT vs. Rani Bhuwaneshwari Kuer (1962) 45 ITR 357 (Pat), affirmed, (1964) 53 ITR 195 (SC), the relevant deed of settlement provided that in case the beneficiaries acted in a certain manner or committed any breach of any of the conditions and limitations thereby imposed, the beneficiaries were to be deemed to have been excluded from the category of beneficiaries and their share was to be dealt with by the settlor or enjoyed by her in her entire discretion. It was held that the income was not assessable in the hands of the settlor so long as the beneficiaries did not lose their right in terms of the deed of settlement over the assets and the deed was revoked. This was so because the settlor did not reserve any interest in her in present. iv. Where the settlor reserves no right to himself to use the income In S. Raghbir Singh vs. CIT (1961) 42 ITR 410 (Punj), affirmed in CIT vs. S. Raghbir Singh, (1965) 57 ITR 408 (SC), on partition of his family, the assessee was allotted 400 shares in a company and debts for about Rs. 4 lakhs. Assessee created a trust in respect of 300 shares, 80% of the net income was to be spent on repayment of the debts as well as on education and maintenance of his children and grandchildren, and 20% on various charitable purposes. However the settlor had no right to use the aforesaid income It was held that the trust was not revocable and income therefrom could not be assessed in the hands of the assesse. v. Where the settlor alone has the power to fill up the vacancies in the office of the trustees. In CIT vs. Trustees of Sreeram Surajmull Charity Trust, (1971) 79 ITR 649 (Cal), the assessee created a trust by a registered deed and conveyed the trust property to the trustees-himself and two others. Clause 12 of the trust deed provided that the trustees could invest the corpus and or the income of the trust property with such persons and firms/including themselves and their own firms, as the trustees may think proper. If all the trustees consented, the then present investments could be varied by them. Clause 13 fixed the number of

11 trustees to a minimum of two and maximum of five. The settlor alone had power during his lifetime to fill up the vacancies in the office of the trustees and to appoint additional trustees within those limits. After settlors death, the trustees had that power. It was held that the trust was not a revocable trust. vi. vii. viii. Where trust deed provides a) as to how the income will be dealt with by the settlor on death of the beneficiaries b) that the settlor shall have no right over the corpus or the income. In CIT vs. Sir S. M. Bose, (1952) 21 ITR 135 (Cal), the deed of trust provided that the settlor trustee shall pay the net income from the trust property to his daughter during the term of her natural life, for her sole and separate use. It also provided as to how the income was to be dealt with on the death of the daughter, making it clear that the settlor shall have no right whatsoever over the corpus or the income and that he had no power of revocation. It however, provided that as long as the settlor or persons named as trustees in addition or substitution, shall act as trustees, they shall not be accountable to any of the beneficiaries relating to the income of the trust estate. It was held that the last provision did not give the settlor control over the trust income and did not amount to a right to reassume power. The trust was therefore not revocable. Deed of dedication in favour of a temple. In CIT vs. Ramchandraji Maharaj ka Bada Mandir, (1984) 146 ITR 442 (MP), one G executed a deed of dedication in favour of a temple in respect of certain agricultural property. G continued to manage such property. It was, on facts, held that the dedication was absolute and irrevocable. The property was continued to be managed by G in his capacity as Sarvarkar. ix. Where trust deed provides that the trust funds would revert to the settlor in case the marriage of the beneficiaries does not take place within a specified period. In CIT vs. M. K. Chandrakanth, (1997) 225 ITR 101, (Mad), followed in CIT vs. Smt. M. C. Sathiyavathi (1997) 225 ITR 109, 112 (Mad), the assessee settled, on , certain properties for the benefit of his prospective son-in-law and daughterin-law when the settlors children were minors. One clause in the trust deed provided that if marriages of the settlors children did not take place within 20 years of the settlement, the trust funds would revert to the settlor. It was held that such clause was not operative

12 for the assessment years and Therefore, the trust so created was not revocable for those years and the income from the trust funds was not includible in the total income of the settlor for those year. x. Contribution made by assessee to revocable trust created by a husband. In CWT vs. Satyavathi [2000] 243 ITR 303 (Mad) it was held that interest income attributable to the contributions made by assessee to revocable trust created by her husband for benefit of his would be sonin-law/daughter-in-law cannot be assessed to tax in her hands in terms of section 61 as the contributions made by the assessee to the trust were irrevocable gifts. xi. Revocation of gift of shares does not imply reversion of bonus shares issued on such gifted shares. 2. Exceptions to the clubbing provisions In CIT vs. Om Prakash Munjal [2002] 257 ITR 120 (P & H) the assessee had made a revocable gift of shares and on such gifted shares the donee received bonus shares and dividend. The department contended that as the gift of the original shares was revocable the bonus shares were also revocable and that therefore the dividend earned on the bonus shares were taxable in the hands of the donor assessee. It was held that the said dividend income could not be taxed in the hands of the donor assessee as the revocation of the gift does not automatically imply even the reversion of bonus shares. It was further held that in ordinary practice, a person who sells a share keeps the bonus shares which he has got and the bonus shares do not accompany the original shares when they are sold.. Clubbing provisions of s. 61 would not be applicable where there is transfer of income consequent to transfer of asset wherein the transfer of asset is irrevocable for a specified period; i.e., the transfer of asset is revocable only after a specified period. S. 62 provides : 1. "The provisions of section 61 shall not apply to any income arising to any person by virtue of a transfer. provided that the transferor derives no direct or indirect benefit from such income in either case. 2. Notwithstanding anything contained in sub-section (1), all income arising to any person by virtue of any such transfer shall be chargeable to income-tax as the income of the transferor as and where the power to revoke the transfer arises, and shall then be included in his total income".

13 a. There is no "benefit" where a husband makes a settlement for the exclusive and independent maintenance of his wife. In order to avail of the provisions of s. 62 i.e., in order to escape from the clubbing provisions of s. 61 it is a mandatory condition that the transferor derives no direct or indirect benefit. The benefit contemplated in the proviso to s. 62(1) is a real benefit and not notional or abstract. Therefore, where a husband makes a settlement for the exclusive and independent maintenance of his wife it cannot be said that he has received an indirect benefit so as to apply the clubbing provisions of s. 61 [D. R. Shahapure vs. CIT (1946) 14 ITR 781 (Bom)].