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The clubbing provisions have application when:
a) there is transfer of asset by the assessee to his wife;
b) the transfer in favour of wife by the assessee must be otherwise than for adequate consideration; and
c) the income in question should have arisen or accrued to the wife directly or indirectly from the asset transferred to her by her husband.

In the case of Damodar K Shah v. CIT (119TAX882) the assessee made payments of premium on policy taken in the name of his wife. The maturity proceeds were invested and income earned thereon in the name of his wife. The assessing officer clubbed such income in the hands of the assessee. The Gujarat High Court upheld such action in the ultimate. Following the judicial pronouncements the Court held that proximity between asset and income has to be considered irrespective of time lag between transfer of asset and actual income derived.

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