Clubbing under section 64(1) requires a proximate nexus, and unsupported tea expense disallowance cannot stand.

For clubbing under section 64(1), a proximate nexus must exist between the assessee's transfer and the income sought to be taxed; where the minor son's interest arose only after policy moneys were transferred through the wife and placed in fixed deposit, the link was too remote and the addition failed. A disallowance for tea expenses as personal expenditure also required supporting material; in the absence of evidence of any personal element, the disallowance was deleted. Both additions were therefore removed and the assessee succeeded on both issues.

---

---

Issues: (i) Whether interest income earned by the minor son from fixed deposit out of policy moneys assigned through the assessee's wife was liable to be clubbed in the assessee's hands under section 64(1) of the Income-tax Act, 1961; (ii) Whether the tea expenses could be disallowed as personal expenditure without material to support such inference.

Issue (i): Whether interest income earned by the minor son from fixed deposit out of policy moneys assigned through the assessee's wife was liable to be clubbed in the assessee's hands under section 64(1) of the Income-tax Act, 1961.

Analysis: The rights under the life insurance policy were treated as transferred by the assessee to his wife and thereafter to the minor son. The income in question arose only after the son received the moneys and placed them in fixed deposit. The link between the assessee's funds and the interest income was held to be too remote, and the necessary proximate relationship for applying the clubbing provision was absent.

Conclusion: The addition of Rs. 560 under section 64(1) was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the disallowance of Rs. 500 out of tea expenses as personal expenditure was justified.

Analysis: No material was brought on record to show that the expenditure contained any personal element.

Conclusion: The disallowance was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The assessee succeeded on both additions, and the appeal stood allowed in full.

Ratio Decidendi: For clubbing under section 64(1), a proximate and not merely remote nexus must exist between the assessee's transfer and the income sought to be taxed in the assessee's hands.

---