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CA Intermediate · Taxation · Income of Other Persons included in Total Income of Assessee

Mr. Deshmukh gifted Rs 10,00,000 to his daughter-in-law, Priya, who invested it in a boutique she runs as a proprietor, along with Rs 5,00,000 of her own savings. The capital employed in the business was thus Rs 15,00,000 throughout the tax year 2026-27. The business profit for the year was Rs 3,00,000. Priya's own capital was entirely from her savings and she did not use the gifted funds elsewhere. What amount will be clubbed in Mr. Deshmukh's total income?

Rs 2,00,000 is clubbed with Mr. Deshmukh. The gift to the daughter-in-law was invested in her business along with her own funds, so only income proportionate to the gifted capital is clubbed. The gifted part is Rs 10 lakh of Rs 15 lakh, which is two-thirds of the Rs 3,00,000 profit.

  1. ARs 3,00,000
  2. BRs 1,00,000
  3. CRs 2,00,000Correct
  4. DNil, because the business profit arises from Priya's personal efforts

Explanation

Income arising from assets transferred without adequate consideration to a son's wife is clubbed, including income from a business in which the gifted funds are invested. When the gifted funds are mixed with own funds, only the part of income proportionate to the gifted capital is clubbed. Here the gifted share is 10/15 of the capital, so 10/15 of Rs 3,00,000 = Rs 2,00,000. Rs 3,00,000 ignores the apportionment and Rs 1,00,000 uses the share of her own funds.

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