Urgent...................?

Hello Viru,

You have got answer of 1st question,

In case of 2nd,now there is no need to revise SM again,Better is give more time to practical problems of COST/FM & Taxation.It will reduce chances of silly mistakes in exam.So if now you are confident abt SM then don't spend much time on it.

But please tell me why clubbing is done?for saving tax?

Clubbing is done NOT to SAVE tax but to EVADE tax. In short clubbing can b summed up in- 1) transferring an asset to anthr prsn without adequate consideration. 2)transfering income to another person except under transfer by way of overriding title(i.e. where it is mandatory under law). For details refer section 60-65 of ITA. RegArds Roopak Girotra

Clubbing provision in IT act is inserted to avoid tax evasion/avoidance

For eg. a person transfers some shares to his spouse (Income below the taxable limit) and sells it, the gain prima facie is taxable in the hands of his spouse. But by the virtue of the clubbing provision, it can be taxed in the hands of the person who transferred the shares to his spouse.

This is simple example, the act gives various other provisions, where income of Minor, unmarried daughter etc. can be clubbed.

Suppose Mr. X is having income of 8,00,000 so it will be taxed in higher slab @ 30%.Out of this, income of 2,00,000 is from investments.Now suppose income of Mrs. X is only 1,00,000.In such case  Mr X would transfer all the investments to his spouse so 2,00,000 will be taxable in the hands of Mrs. X at 1o% tax rate only.So by such transfer Mr X would evade tax of  40,000,To restrict such unfair activities clubbing provisions are inserted.