‘Revocable transfer’ means the transferor of asset assumes a right to re-acquire asset or income from such an asset, either whole or in parts at any time in future, during the lifetime of transferee. It also includes a transfer which gives a right to re-assume power of the income from asset or asset during the lifetime of transferee.
If the following conditions are satisfied, S. 61 will become applicable:
- An asset is transferred under a “revocable transfer”,
- The transfer for this purpose includes any settlement, or agreement
Then any income from such an asset is taxable in the hands of the transferor and not the transferee (owner).
In the case of irrevocable transfer of asset , the income from such assets will be deemed to be the income of the transferee (To whom the asset has been transferred), provided that the transfer is not for the benefit of the spouse of the transferor.
CLUBBING PROVISIONS AT A GLANCE−
| SECTION | NATURE OF TRANSACTION | CLUBBED IN THE HANDS OF | CONDITIONS/EXCEPTIONS | RELEVANT REFERENCE |
| 61 | Revocable transfer of Assets. | Transferor who transfers the Assets. | Clubbing not applicable if: 1. Trust/transfer irrevocable during the lifetime of beneficiaries/transferee or2. Transfer made prior to 1-4-1961 and not revocable for a period of 6 years. Provided the transferor derives no direct or indirect benefit from such income in either case. | Transfer held as revocable 1. If there is provision to re transfer directly or indirectly whole/part of income/asset to transferor;2. If there is a right to reassume power, directly or indirectly, the transfer is held revocable and actual exercise is not necessary. [S. Raghbir Singh 57 ITR 408 (SC)]3. Where no absolute right is given to transferee and asset can revert to transferor in prescribed circumstances, transfer is held revocable. [Jyotendrasinhji vs. S. I. Tripathi 201 ITR 611 (SC)] |
Reference:
As Per Section 61, of the Income Tax Act, 1961-
Revocable transfer of assets.
61. 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.