Proximate nexus required for clubbing minor's partnership income; remote gifted capital was insufficient under section 16(3)(a)(iv).

Section 16(3)(a)(iv) applies only where a minor child's income arises directly or indirectly from assets transferred by the assessee, and the transfer must have a proximate rather than remote nexus with that income. Where the father's gifts to the minors were only the remote source of the capital later introduced into the firm, the minors' income was treated as arising from their admission to partnership benefits, not from the transferred assets. The income was therefore not includible in the assessee's total income.

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Issues: Whether the income of minor children admitted to the benefits of a partnership could be included in the assessee's total income under section 16(3)(a)(iv) where the capital contributed by the minors was traceable to gifts made by the assessee.

Analysis: The provision applied only if the income in question arose directly or indirectly from assets transferred by the assessee to the minor children. The gifts made by the father to the minors were only a remote source of the capital subsequently introduced into the firm. The minors' income arose from their admission to the partnership benefits, and the required nexus between the transfer of assets and the income was absent. As section 16(3) created an artificial attribution of income, it had to be strictly construed and the connection between transfer and income had to be proximate.

Conclusion: The income of the minor sons was not includible in the assessee's total income under section 16(3)(a)(iv); the question was answered in favour of the assessee.

Ratio Decidendi: For section 16(3)(a)(iv) to apply, the income must arise directly or indirectly from the transferred assets, and the transfer must have a proximate, not merely remote, connection with the income.

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