The AAR held that in determining whether there has been diversion of income by overriding title, it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of this income and an amount which a person is obliged to apply out of this income and an amount which by obligation cannot be said to be part of the income of the assessee. Where an obligation, income is diverted     ruled that the regulatory assets under approval received by the assessee would not be taxable in its hands but in the hands of RI on account of diversion of income by overriding before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. The second payment is merely an obligation to pay another a portion of one’s income, which has been received and since applied. The first is a case in which the  income reaches to the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom, it is payable.  Accordingly the regulatory assets under approval (RAUA) received by AEML will not be liable to tax in the hands of AEML but will be taxable in the hands of RInfra of income by overriding title. (AAR No 2 of 2018 dt.11-2-2020)