Opinion Of Eminent Legal Luminaries On Controversial Issues

Clubbing of income -Clubbing of income u/s. 64 and Deduction u/s. 54F

QUERY: Mr. X owns more than one residential house property. He makes a gift of ` 80 lakhs to Mrs. X who does not own any house property. She buys a commercial property using the gift amount and sells it after 4 years. She then purchases a residential house in her name and claims deduction u/s. 54F of the Act.
Even if clubbing provisions are applicable it appears the net income i.e. amount of Capital Gain after claiming deduction u/s. 54F, only could be clubbed with the income of Mr. X. Is it correct?
ANSWER: Yes, the income will have to be computed as if it is being assessed in the hands of the spouse or minor child and then translated into the hands of other spouse or parent, as the case may be.
In CIT v. Lalji Agarwal [234 ITR 820 (All.)] it has been held that where the salary payment is genuine, but all the same, is required to be clubbed with the income of husband, because wife does not have technical or professional qualification, the income that should be clubbed, is only net income after standard deduction.
On this principle, it would seem that, if the income in question is exempt from inclusion in the hands of the spouse or child, either by reason of general exemption for a category of income i.e. agricultural income or by reason of limit up to which it is exempt, it cannot be assessed in the hands of other spouse or parent either.

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