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CMA Intermediate · Direct and Indirect Taxation · Clubbing of Income

Mr. Chopra's minor son earned Rs 25,000 as a fee for acting in a television advertisement and Rs 18,000 as interest on a deposit funded by gifts. Mr. Chopra's total income before clubbing is higher than his wife's. What amount of the son's income is included in Mr. Chopra's total income for the tax year (before any exemption)?

Only Rs 18,000 is included in Mr. Chopra's income. The Rs 25,000 acting fee arises from the child's own skill and talent and is excluded from clubbing, while the Rs 18,000 interest on a deposit arises from an asset and is clubbed with the parent's income.

  1. ARs 43,000
  2. BRs 25,000
  3. CRs 18,000Correct
  4. DNil

Explanation

The acting fee arises from an activity where the child's skill and talent are applied, so section 99(1)(c)(ii) excludes it from clubbing. The interest of Rs 18,000 arises from an asset and is clubbed. Thus only Rs 18,000 is included. Rs 43,000 wrongly clubs both items.

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