Clubbing of income under section 64 does not extend to outright gifts of property to a Hindu undivided family.

Section 64 of the Income-tax Act, 1961 was held inapplicable to income arising from property outright gifted by an individual to a Hindu undivided family. The deeming fiction under the clubbing provision was confined to conversion of individual property into joint family property, which is treated as a transfer for clubbing purposes. An outright gift to an HUF was treated as a different transaction, and in the absence of express statutory language, the income from such gifted property could not be added back in the donor's hands. The addition was therefore not sustainable.

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Issues: Whether income derived from property outright gifted by an individual to a Hindu undivided family could be added back in the individual's hands under section 64 of the Income-tax Act, 1961.

Analysis: The deeming fiction in section 64 was held to apply to conversion of individual property into joint family property, where such conversion is treated as a transfer for clubbing purposes. An outright gift to the Hindu undivided family was distinguished from such conversion. The provision contained no specific basis for adding the income from gifted property to the transferor's total income merely because the recipient was a Hindu undivided family.

Conclusion: Section 64 did not apply to the outright gift in question, and the addition in the assessee's hands was not sustainable. The issue was decided in favour of the assessee.

Ratio Decidendi: The clubbing provision in section 64 cannot be extended to income from property outright gifted to a Hindu undivided family in the absence of an express statutory provision covering such a transfer.

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