Clubbing of income from gifted property applies where assets are transferred to minor children without adequate consideration under tax law.

A gift valid under Muslim personal law does not, by itself, determine the taxability of income arising from the gifted property. The decisive question is whether the transaction amounts to a transfer under the Income-tax Act. Where property is transferred to minor children without adequate consideration, the income derived from that property is includible in the transferor's total income under section 64(1)(v). Exemption under gift-tax law and any comparison with wealth-tax treatment do not displace the express clubbing rule in the Income-tax Act.

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Issues: Whether rental income from properties gifted by way of Hiba to minor sons was includible in the assessee's total income under the clubbing provisions of the Income-tax Act, despite the gifts being valid under Muslim personal law and exempt in gift-tax proceedings.

Analysis: A gift under Mohammedan law is relevant to its validity, but not to the taxability of income arising from the gifted property. The rule of decision under the Shariat Act does not govern questions of income-tax liability. For income-tax purposes, the decisive concept is the statutory definition of "transfer" in the Income-tax Act. Once the transaction amounted to a transfer of capital asset to minor children without adequate consideration, the income derived from those assets attracted the express language of section 64(1)(v). The exemption available under gift-tax law and any comparison with wealth-tax provisions did not control the operation of the Income-tax Act, which contains no corresponding proviso excluding such income.

Conclusion: The rental income from the gifted properties was rightly assessable in the hands of the assessee under section 64(1)(v) of the Income-tax Act, 1961, and the assessee's contention failed.

Final Conclusion: The clubbing addition was sustained and the Revenue's stand was accepted, with the result that the assessee's appeals did not succeed.

Ratio Decidendi: Validity of a gift under personal law does not prevent the operation of the Income-tax Act where assets are transferred to minor children without adequate consideration; income from such transferred assets is includible in the transferor's total income under the clubbing provision.

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