Section 98 is the substantive equivalent of 1961 s. 63 — the definitional anchor for ss. 96-97. (a) 'Transfer' is defined BROADLY to include any settlement, trust, covenant, agreement or arrangement — far wider than the 'transfer' in s.…
98
ITA 2025 · Section 98
Section 98 — DEFINITIONS FOR CHAPTER V
Section 98 is the substantive equivalent of 1961 s. 63 — the definitional anchor for ss. 96-97. (a) 'Transfer' is defined BROADLY to include any settlement, trust, covenant, agreement or arrangement — far wider than the 'transfer' in s. 67 (Capital Gains). (b) 'Revocable transfer' is defined functionally — any transfer with provisions for direct/indirect re-transfer of income/assets to transferor OR providing the transferor a right to RE-ASSUME power directly or indirectly over the income/assets.
STATUTORY ARCHITECTURE
Section 98 is a deeming-provisions section critical to s. 96 / 97 application. 'Transfer' is materially BROADER than s. 67 transfer (which essentially mirrors s. 2(47)). The s. 98 definition CAPTURES non-conveyance arrangements: trust deeds, family settlements, oral agreements, even informal arrangements showing intent to transfer income/asset character. 'Revocable transfer' is the substantive trigger for s. 97 clubbing — defined functionally, not formally. ANY mechanism (express clause OR implied right) for re-transfer/re-assumption of power makes the transfer revocable.
CASE LAW
CIT v. Tej Bhan Tilakraj (Del HC) — informal family arrangement evidenced by entries in books = 'transfer' under broad s. 63 definition. T. Saraswathi Achi v. CIT (Mad HC) — settlement deed with reverter clause for transferor's lifetime is 'revocable' even if revocation cannot be exercised practically. ITAT (various) — discretionary-trust mechanism where settlor remains potential beneficiary = revocable for s. 63 purposes.
PLANNING NOTES
(i) Document family/estate transfers in writing — but do NOT include reverter / re-assumption clauses if avoiding clubbing is intended. (ii) For trust planning, eliminate ALL transferor-benefit potential — exclude transferor from beneficiary class explicitly. (iii) ORAL family arrangements may be 'transfers' under s. 98(a) — book entries, joint-property documents may evidence the transfer. (iv) Discretionary-trust drafting requires careful exclusion of settlor / spouse from discretionary-beneficiary list.
CROSS-REFERENCES