If it is done for inadequate consideration, then clubbing is applicable and Income is taxable in the hands of transferor
Mrs. Kasturi transferred her immovable property to ABC Co. Ltd. subject to a condition that out of the rental income, a sum of Rs 36,000 per annum shall be utilized for the benefit of her son‟s wife. Mrs. Kasturi claims that the amount of Rs 36,000 (utilized by her son‟s wife) should not be included in her total income as she no longer owned the property. State with reasons whether the contention of Mrs. Kasturi is valid in law.
If transfer of property was for inadequate consideration,then income will be clubbed
If transfer was for adequate consideration,then no clubbing
Hence,contention of kasturi will be valid only if she transferred the property for adequate consideration