Clubbing of income from bonus shares fails where the dividend does not arise from an asset transferred by the assessee.

Dividend from bonus shares allotted to a minor child was held not to be clubbed in the transferor's income under section 64(iv) because the provision applies only where income arises from an asset transferred, directly or indirectly, by the assessee. The bonus shares were issued by the company and were not an asset that the assessee had owned or transferred. As no transferred asset gave rise to the dividend, the clubbing provision could not operate, and the dividend on the bonus shares was excluded from the assessee's total income.

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Issues: Whether dividend income from bonus shares allotted to a minor child could be included in the transferor's total income under section 64(iv) of the Income-tax Act, 1961, when the original shares had been gifted but the bonus shares were not derived from any asset transferred by the assessee.

Analysis: Section 64(iv) applies only where there is a transfer, direct or indirect, of assets to a minor child and income arises from such transferred asset in the hands of the transferor. Bonus shares are not themselves assets transferred by the assessee where she never owned any right or interest in them and therefore could not have transferred them. Since the bonus shares arose by reason of the company's issue and not from any asset that had been transferred by the assessee, the clubbing provision could not be attracted.

Conclusion: The dividend on the bonus shares was not includible in the assessee's total income and the answer is in favour of the assessee.

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