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CA Final · Direct Tax Laws & International Taxation · Income of Other Persons included in Assessee's Total Income

Mr. Ravi Menon, a resident individual, transferred a flat to his wife without adequate consideration. The rental income from the flat has been included in Ravi's total income under the clubbing provisions. The Assessing Officer wants to recover the tax attributable to this clubbed income from someone other than Ravi. Under section 100 of the Income-tax Act, 2025, which statement is correct?

The person in whose name the asset stands, here the wife, is liable to pay only the portion of tax attributable to the clubbed income, and only after the Assessing Officer serves a notice of demand on her. She is not liable automatically or for Ravi's entire tax.

  1. AOnly Ravi can ever be asked to pay, because the income is included in his total income
  2. BThe wife, in whose name the asset stands, is liable to pay the portion of tax attributable to the included income once a notice of demand is served on her by the Assessing OfficerCorrect
  3. CThe wife is liable automatically, without any notice of demand, from the date the flat was transferred
  4. DThe wife is liable for the whole tax levied on Ravi's total income, not just the portion attributable to the included income

Explanation

Section 100 provides that the person in whose name the asset stands is liable to pay that portion of the tax levied on the assessee which is attributable to the income included, upon service of a notice of demand by the Assessing Officer. Liability is limited to the attributable portion and is triggered by the notice, so the options with automatic liability or liability for the whole tax are wrong.

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