Search Results For: application of income


PCIT vs. M/s. Chamundi Winery and Distillery (Karnataka High Court)

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DATE: (Date of pronouncement)
DATE: September 26, 2018 (Date of publication)
AY: 2010-11
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CITATION:
Entire law on "real income theory" and distinction between "application of income" vs. "diversion of income by overriding title" explained with reference to case laws. Law on whether if an amount is not treated as "diversion of income", it can be allowed as "business expenditure" u/s 37(1) or as a "trading loss" u/s 29 also explained. Issue of “Base Erosion and Profit Shifting” (BEPS) also raised in the context of "tax avoidance vs. tax evasion" and diversion of income by a MNC

Courts and the Tax Authorities can look into the real purpose of the commercial arrangements and transactions to reach the truth and the transactions having the sole purpose of tax avoidance may be held to be having no effect on the actual tax liability of the tax payer. Book entries and Method of Accounting is not determinative and conclusive for deciding the computation of ‘taxable income’ in the hands of the Assessee though they may be relevant to be considered. “Diversion of income by transfer of overriding title at source” should normally have the support of the statutory requirements or some decretal binding character of Courts of law and even though the private contractual obligations can also bring about such “diversion of income at source” but in this last sphere of private contractual obligations, the Courts and the Income Tax Authorities have to examine such aspects carefully in comparison to the above two other categories of statutory requirements and the Court decrees and then examine the real purport and object of such private arrangements and Contracts

The A. P. Mahesh Coop. Urban Bank Ltd vs. DCIT (ITAT Hyderabad)

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DATE: December 31, 2014 (Date of pronouncement)
DATE: January 8, 2015 (Date of publication)
AY: 2010-11
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CITATION:
Distinction between 'diversion of income by over-riding title' and 'application of income' explained. Contribution of 1% of net profit to the Cooperative Education Fund maintained by National Cooperative Union is an application of income

Diversion of income has multi-facets. Diversion arises where income is applied in a particular manner under statutory or contractual obligation or under the provisions of a document under which the company is constituted viz., memorandum of article of association or a firm has come into existence. In these circumstances, the principle that has emerged is that if a person has alienated or assigned the source of his income so that it is no longer remains his income, he cannot be taxed upon the income arising after the assignment of the source. In such event, it is not income of the assessee at all

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