INTRODUCTION

According to the Shorter Oxford Dictionary, “income” means that which comes in as the periodical product of one’s work, business, lands, or investments (commonly expressed in terms of money); annual or periodical receipts accruing to a person or a corporation[1].

In CIT v. Shaw Wallace & Co.[2], Sir George Lowndes defined income as: income connotes a periodical return coming in with some sort of regularity or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall.

Anything which can be properly described as income is taxable under the Act, unless expressly exempted[3]. Income may not necessarily be recurring in nature, though it is generally of that character[4].

LEGISLATIVE HISTORY OF SECTION 2(24)

Income is a word of elastic import. It has to be construed in the widest possible terms, notwithstanding its inherent limitations. The Indian Income-tax (Amendment) Act, 1939 introduced for the first time an inclusive definition of the word ‘income’ as clause 6(c) of section 2 of the 1922 Act. The definition was substituted by the Finance Act, 1955 and its scope enlarged. The 1961 Act further enlarged the scope of this definition. The provision of the corresponding clause (6c) of section 2 of the Act 1922 reads as under:

(6C) Income includes-

1. Dividend;
2. The value of any perquisite or profit in lieu of salary under section 7;

• The value of any benefit or perquisite, whether convertible into money or not, obtained from company either by a director or by any other person who has a substantial interest in the company, who is concerned with the management of the business of the company, being the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty per cent of the voting power and any sum paid by any such company in respect of any obligation which but for such payment would have been by director or the person aforesaid;

1. Any sum deemed to be profits under the second proviso to clause (viii) of sub-section (2) of section 10 and any sum deemed to be profits and gains under sub-section (2A) of that section or under sub-section(5) of section 12;
2. Any sum deemed to be profits and gains of business, profession or vocation under sub-section (5A) of section 10;
3. Any capital chargeable under section 12B;

• The profits and gains of any business or insurance carried on by a mutual insurance association or by a co-operative society computed in accordance with rule 9 in the Schedule.

PRINCIPLES RELATED WITH THE CONCEPT OF INCOME:

• Regular and definite source: The term income connotes a periodical monetary return coming in with some sort of regularity or expected regularity from definite sources.
• Different forms of income: Income may be received in cash or in kind. When income is received in kind, its valuation is to be made according to the rules prescribed in the Income tax Rules. If, however, there is no prescribed rule, valuation thereof is made on the basis of market value.
• Receipt vs. Accrual: Income arises either on receipt basis or on accrual basis. Income may accrue to a taxpayer without its actual receipt. Moreover, in some cases, income is deemed to accrue or arise to a person without its actual accrual or receipt.
• Illegal income: The income-tax law does not make any distinction between income accrued or arisen from a legal source and income tainted with illegality[5]. By bringing the profits of an illegal business to tax, the State does not condone it or take part in crime nor does it become a party to the illegality. The assessee might be prosecuted for the offence and yet be taxed upon profits arising out of its commission[6]. However, any expense incurred by an assessee in carrying on such business is not deductible. Explanation to section 37(1) provides that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure[7]. However, explanation to section 37(1) is applicable only in case expenditure only in case expenditure pertaining to illegal business and not in the case of business loss[8].
• Disputed title: Income-tax assessment cannot be held up or postponed merely because of existence of a dispute regarding the title of income[9]. The recipient is, therefore, chargeable to tax, though there may be rival claims to the source of the income[10]. A mere claim, on the other hand, by a person against the recipient of income is not sufficient to make income accrue to the claimant and render him liable for tax[11].
• Relief or reimbursement of expenses not treated as income: Mere relief or reimbursement of expenses is not treated as income. For instance, reimbursement of actual travelling expenses to an employee is not an income.
• Diversion of income by overriding title vs. Application of income: There is a thin dividing line between line between diversion of income and application of income.

Diversion of income- Income is received by a person other than the person who is actually entitled for it. The recipient later on diverts the income under a pre-existing title to the person who is actually entitled for it. It is diversion of income by overriding title. Income is not taxable in the hands of the person who first receives it. Tax is payable by the person to whom income is diverted by overriding title[12].

Application of income- Income is received by the person who is actually entitled for it. He is chargeable to tax. Post-tax income is utilised for different purposes (like payment of salary). It is application of income.

How to find out whether it is diversion or application- In order to decide whether a particular payment is a diversion of income or application of income, it has to be determined whether amount sought to be diverted reaches the assessee as his own income or not. To put it differently, it has to be seen whether the disbursement of income made by the assessee is a result of fulfilment of an obligation on him or whether income has been applied to discharge an obligation after it reaches the assessee. Where by an obligation income is diverted before it reaches the assessee, it is not taxable. Where, however, 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 and it is taxable. It is the first kind of payment which can truly be excused and not the second one. The second payment is merely an obligation to pay another portion of one’s income, which has been received and is since applied. The first is the case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of income, but for and on behalf of the person to whom it is payable[13][14].

Example: X and Y prepared an article or a publication in Taxman, a tax and corporate law weekly magazine, on the understanding that remuneration will be shared equally. The article is published in August 5, 2012 issue of Taxman. On September 7, 2012 X receives the entire remuneration of Rs. 9,000 (as per practice of the magazine, the remuneration is paid to the first author), a half of which is later on paid by X to Y. The payment of Rs. 4,500 (being 50 percent of Rs. 9000) by X to Y is diversion of income by overriding title. The taxable income of X will be Rs. 4,500 (payment of Rs. 4,500 to Y will not be treated as income of X as it is diverted by an overriding title). Any expenditure or investment by X out of his income of Rs. 4,500 will be an ‘application of income’[15].

• Surplus from mutual activity: A person cannot make taxable profit out of transaction with himself. Income must, therefore, come from outside. A surplus arising to a mutual concern cannot be regarded as income chargeable to tax. A body of individuals, raising contribution to a common fund for the mutual benefit of members, cannot be said to have earned an income when it finds that it has overcharged members and some portion of contribution raised may safely be refunded. The fact whether such body of individuals is incorporated or not, is wholly irrelevant, so long as there is a complete identity between the contributors as a class and the participants of the benefits and surplus as a class. In other words, all the participators in the surplus/benefits must be contributors to the common fund[16]. But that does not mean that each member should contribute to common fund or that each member should participate in surplus or get back from surplus precisely what he has paid; what is required is that members as a class should contribute to common fund and participators as a class must be able to participate in surplus[17].

Where the members of assessee association of cement manufacturers were contributors to a common fund and had the right to participate in surplus, the surplus would not be assessable as the assessee’s income on the ground of mutuality[18]. Rent receipts from the members to whom the rooms were let out by the assessee-club, along with other facilities, would not be assessable to income-tax on the doctrine of mutuality[19]. Where, however, the assessee fund/trust created for the benefit of its employees, receives contribute from members, management and donations from others also and the assessee deposits the said amount in a bank and earns interest, such interest income earned by it cannot be said to be exempt on the principle of mutuality[20].

The principle of mutuality can be confined in respect of the income earned by the club out of the contributions received by the club from its members, but it will have no application in respect of the interest earned from the deposits of surplus funds in the banks by way of income[21].

The concept of mutuality is applicable to group co-operative housing societies, provided contributions and the participators to funds are the same[22]. Any part of transfer fees received by co-operative housing societies, governed by provisions of Maharashtra Co-operative Societies Act, 1960 and Maharashtra Co-operative Societies Rules, 1960 whether from outgoing or from incoming members, is not liable to tax on ground of principle of mutuality[23]

Example: X Ltd. has 50 employees. Employees have formed a tea club in the office. Each one of them contributes Rs. 80 per month to the club. Club provides tea in tea breaks. During the financial year 2012-2013, the excess of receipt over expenditure of the club is Rs. 470. It cannot be taken as taxable income of the club as it is surplus arising to a mutual activity for the mutual benefit of the members[24].

• Temporary and permanent income: For the purpose of income-tax, there is no distinction between temporary and permanent income. Even temporary income is taxable.
• Lump sum receipt: Income, whether received in lump sum or in instalments, is liable to tax. For instance, arrears of bonus, received in lump sum, is income and is taxable as salary.
• Tax-free income: If a person receives tax-free income on which tax is paid by the person making payment on behalf of the recipient, it has to be grossed up for inclusion in his total income. Example: X pays Rs. 25,000 per month to Y as tax-free salary (tax of Rs. 3,000 per month is borne by X and directly paid to the government). In this case, the amount taxable in the hands of Y is Rs. 28,000 per month.
• Receipt on account of dharmada etc: Receipt on account of dharmada, gaushala and pathshala is not income and therefore, not liable to tax.
• Devaluation of currency: If any assessee receives extra money on account of devaluation of currency it is taxable.
• Income includes loss: Income includes loss. While income, profits and gains represent ‘plus income’, losses represent ‘minus income’.
• Appropriation of payment between capital and interest: Where interest is due on a capital sum and the creditor gets an open payment from the debtor, the creditor is at liberty to appropriate the payment towards principal. If, however, neither the debtor nor the creditor makes any appropriation of payment as between capital and interest, the Income-tax department is entitled to treat the payment as applicable to the outstanding interest and assess it as income.
• Same income cannot be taxed twice: It is a fundamental rule of law of taxation that, unless otherwise expressly provided, the same income cannot be taxed twice.
• Income should be real and not fictional: Income means real income and not fictional income. A person cannot make a profit by trading with himself or out of transfer of funds/assets from one pocket to another pocket. Similarly, income does not arise in a transaction between head office and branch office even if goods are invoiced at a price higher than the cost price. Likewise, income does not accrue or arise at the time of revaluation of assets.
• Charge on person: Income of previous year is taxable in the hands of a person. Income cannot be taxed in vacuo[25].
• Source of income need not exist in the assessment year: It is not necessary that a source of income should exist in the assessment year. If there is an income during the previous year, it is chargeable to tax for the following assessment year even if the source of income does not exist during the assessment year.
• Pin money: Pin money received by wife for her dress/personal expenses and small savings made by a woman out of money received from her husband for meeting household expenses is not treated as her income.
• Award received by a sportsman: In case of a sportsman, who is a professional, the award received by him is in the nature of a benefit in exercise of his profession and therefore, it is chargeable to tax.

In the case of non-professional sportsman, however, the award received is in the nature of gift and/or personal testimonial. Gift received by an individual during a financial year is chargeable to tax in some cases [if aggregate amount of gift received from different persons (other than relatives) is more than 50,000].

The question whether a sportsman is a professional or not depends upon the facts and circumstances of each case to be decided by the Assessing officer- Circular No. 447, dated January 22, 1986.

• Revenue receipt v. Capital receipt: A revenue receipt is taxable as income unless it is expressly exempt under the Act. On the other hand, a capital receipt is generally exempt from tax unless it is expressly taxable.
• Voluntary payment: A voluntary payment made entirely without consideration and is not traceable to any source which a practical man may regard as a real source of income, but depends entirely on the whim of the donor, cannot be treated as income[26]. However, nowadays, in some cases, a sum of money received without consideration is chargeable to tax.
• Prize on winning a motor rally: The prize on winning a motor rally is income[27].
• Burden of proof: In all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision. Where, however, a receipt is in the nature of income, the burden of proving that it is not taxable, because it falls within an exemption provided by the Act, lies upon the assessee[28].

MEANING OF INCOME UNDER SECTION 2(24)

The meaning of term ‘income’ is inclusive and not exhaustive in nature. Therefore, the scope is not limited to those categories which are specified in section 2(24) but also includes such things which the term signifies, according to its general and natural meaning.

Under section 2(24), the term ‘income’ specifically includes the following:

• PROFITS AND GAINS:

Income includes profits and gains. For instance, profit generated by a businessman is taxable as income. Similarly, profits from medical or legal profession are also taxable as income.

‘Gains’ is really the equivalent of ‘profits’. The profit of a trade or business is the surplus by which the receipts from the trade or business exceed the expenditure necessary for the purpose of earning those receipts. The tax is upon income, profits or gains; it is not a tax on the gross receipts. The expression ‘profits’ or ‘gains’ is not limited to business only, but is used in the Act with reference to other sources of income as well[29].

From the charging provisions of the Act, it is discernible that the words ‘income’ or ‘profits and gains’ should be understood as including losses also, so that, in one sense ‘profits and gains’ represent ‘plus income’ whereas losses represent ‘minus income’. In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Although section 6 of the 1922 Act classifies income under six heads, the  main charging provision is section 3 of the 1922 Act which levies income-tax, as only one tax, on the ‘total income’ of the assessee as defined in section 2(15). An income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the ‘total amount of income, profits and gains referred to in section 4(1)’. Secondly, it must be ‘computed in the manner laid down in the Act’. If either of those conditions fails, the income will not be a part of the total income that can be brought to charge[30].

• DIVIDEND:

Dividend declared or paid by a company to a shareholder is taxable as income. Depending upon whether dividend is declared by an Indian company or foreign company, it can of following two types[31]:

1. Dividend declared by an Indian Company: Dividend declared, distributed and paid by a domestic company on or after April 1, 2013 except deemed dividend under Section 2(22)(e) is exempted in the hands of shareholders under Section 10(34). On such dividends, dividend tax shall be paid by company declaring and paying such dividend under section 115-O. However, deemed dividend under Section 2(22)(e) is taxable in the hands of shareholders under section 56(2)(i).
2. Dividend declared by a foreign company: Dividend declared, distributed and paid by a foreign company is not exempted under section 10(34) and hence, taxable in the hands of shareholders.

The purpose of present definition is, however, to include as income distributions or payments falling within the definition of this expression in section 2(22).

• VOLUNTARY CONTRIBUTIONS RECEIVED BY A TRUST:

Taxable income of a trust includes voluntary contribution if:

1. Received by a trust, wholly or partly for charitable purposes; or
2. Received by a scientific research association; or
3. Received by any fund or institution, university or other educational institution or hospital or any other medical institution mentioned under section 10(23C).

This definition, introduced with effect from 1 April, 1973 has to be read with section 12, also simultaneously introduced, which deems such income to be income derived from property held under trust or other legal obligation for the religious and charitable purposes unless received with a specific direction that it should form part of the corpus cannot be treated as income of trust[32]. Section 12 appears to fortify this proposition. The constitutionality of sub-clause (iia) was upheld in  Amara Kondaiah v. ITO[33].

• PERQUISITES IN THE HANDS OF EMPLOYEE:

Any benefit or amenity [section 17(2)] or profit in lieu of salary. Section 17(3) is treated as income in the hands of an employee.

The words ‘benefit or perquisite obtained’ from a company would take in only such benefit or perquisite which the company had agreed to provide and which the person concerned could claim as of right based on such agreement and a mere advantage derived from the company without its authority or knowledge will not amount to a benefit or perquisite obtained[34].

The intention of the Legislature seems to be very clear that the expression ‘benefit’ did not include the enjoyment of loan or credit free of interest or at a concessional rate[35]. The ‘benefit or perquisite’ cannot be money itself. The benefit or perquisite contemplated by this section should be other than money[36].  Merely because the inclusive definition of ‘income’ to be found in section 2(24) provides only for the two heads of income, viz., ‘Salaries’ dealt with in section 17 and ‘Profits and gains of business or profession’ dealt with in section 28, it would not follow that the benefits or perquisites which are not covered by these two heads of income would not be assessable if they can be fairly regarded as income of the assessee. Perquisites not falling under ‘business’ or ‘salary’ can be taxed under head ‘Income from other sources’[37].

• ANY SPECIAL ALLOWANCE/BENEFIT:

Any allowance granted to an assessee to meet expenditure wholly, necessarily and exclusively for performance of the duties of an office or employment is treated as income.

• CITY COMPENSATORY ALLOWANCE/DEARNESS ALLOWANCE:

Any allowance granted to an assessee either to meet his personal expenses at the place where the duties of his office or employment omit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for increased cost of living is income of the employee[38]. In the light of these provisions, the allowance given to the assessee for meeting the refreshment expenses during office hours is taxable as income[39].

• ANY BENEFIT OR PERQUISITE TO A DIRECTOR:

Value of any benefit or perquisite whether convertible into money or not, obtained from a company either by a director[40] or by a person who has substantial interest in the company or by a relative of the director or such person and any sum paid by any such company in respect of any obligation of the director or other person mentioned above is taxable income of such director of such director or such other person.

Section 2(24)(iv) merely provides that if any relation of a director derives the benefit or perquisite from a company, it will be deemed to be his income. It does not state that the income should be derived by a relation in any particular capacity[41]. In the case of a person having substantial interest as statutorily defined, the capacity in which he was given the benefit or perquisite would be immaterial. Thus, share allotted to director pursuant to an agreement with promoters, constitutes a ‘benefit’ assessable to tax in director’s hands[42]. The value of any benefit or perquisite derived by a director from a company has to be quantified at the estimated figure of what the director would have spent otherwise, having regard to his personal or family needs[43]. Even if the benefit received by the director of the company is of capital in nature, it can also be brought under the term value of any benefit as contemplated under section 2(24)(iv). In order to tax the benefit received by a director from the company, it is not necessary that the director should be an employee[44].

• ANY BENEFIT OR PERQUISITE TO A REPRESENTATIVE ASSESSEE:

Value of any benefit or perquisite obtained by any representative assessee:

1. Mentioned under section 160(1)(iii)(iv); or
2. By any person on whose behalf or for whose benefit any income is receivable assessee (hereinafter mentioned as beneficiary) and any sum paid by representative assessee in respect of any obligation payable by the beneficiary.

• ANY SUM CHARGEABLE UNDER SECTIONS 28,41 AND 59:

The following receipts are treated as income:

1. Compensation or other payments due to or received by any person specified in section 28(ii). Example: Mr. A is an agent of X & Co. He gets a compensation of Rs. 2 lakhs at the time of termination of his agency from X & Co. This Rs. 2 lakhs is treated as income of A.
2. Income derived from profession or alike under section 28(iii).
3. Profits on sale of a licence granted under the Imports (Control) Order, 1955 under section 28(iiia). Example: A profit under the Imports (Control) Order, 1955. Rs. 2 lakhs is treated as income of X & Co.
4. Cash assistance received by any person against exports under any scheme of the Government of India under section 28(iiib). Example: A sum of Rs. 50,000 is received by X & Co. As cash assistance against exports from the Government of India. It is treated as income of X & Co.
5. Any duty of customs or excise re-paid as drawback to any person against exports under section 28(iiic).
6. The value of any non-monetary benefit or perquisite arising from business or the exercise of a profession under section 28(iv).
7. Any interest, salary, bonus, commission or remuneration received by a partner from a firm under section 28(v).
8. Any sum received for not carrying out any activity in relation to any business or not to share any knowhow, patent, copyright, trademark etc. under section 28(va).
9. Deemed profit taxable under section 41or 59.

• CAPITAL GAINS:

Any profit arising from transfer of capital asset is taxable income (section 45). This does not mean that the capital gain chargeable under section 46(2) is not assessable as income. The definition of income in section 2(24) is inclusive and not exhaustive[45].

• INSURANCE PROFIT:

Any insurance profit computed under section 44 is treated as income.

• BANKING INCOME OF A CO-OPERATIVE SOCIETY:

Profit from banking (including providing credit facilities) business carried on by a co-operative society with its members is regarded as income.

• WINNING FROM LOTTERY:

The following are treated as income [Section 56(2)]:

1. Winnings from lottery (it includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner).
2. Winnings from crossword puzzles.
3. Winnings from races including horse races.
4. Winnings from card game and other games of any sort (it includes any game show, an entertainment programme on television or electronic mode; in which people compete to win prizes or any other similar game).
5. Winnings from gambling.
6. Winnings from betting.

All crosswords puzzles are not of gambling nature. Some are; some are not. Even in card games, there are some games which are of skill without an element of gamble. The words ‘other games of any sort’ are of wide amplitude. Their meaning is not confined to the games of gambling nature alone. It, thus, appears that sub-clause (ix) is not confined to mere gambling or betting activities[46]

The term ‘lottery’ has been defined in the Corpus Juris Secundum which says that ‘pooling the proceeds derived from chances or tickets taken or purchased and then allotting such proceeds or a part of them or their equivalent by chance to one or more such takers or purchasers are indicia of a lottery’. Hence, it is necessary that the winner must be not only a contributor to the prize amount, but must also be a participant in the lottery. All the ingredients which are set out in the definition in Corpus Juris Secundum must be present to identify the winner and the winnings of the lottery[47].

A lottery is a chance for a prize against a price and, therefore, the element of purchase of a lottery ticket must be present and, secondly, the purchaser of a lottery ticket must have a right to participate in the draw. Undoubtedly, it is a sale of goods and lastly it is an income liable to tax[48]. Where the assessee-lottery agent was entitled to receive a bonus equivalent to 10 per cent of the prize amount won on a ticket sold by it, and for this purpose the agent retained the counterfoil of the ticket, it could not be said that the agent was not participating in the lottery. The bonus amount received by the assessee was winnings from lottery under section 2(24)(ix) of the Act[49]. However, distribution of prizes under the District Level Gift Linked Savings Mobilisation Scheme does not constitute ‘lottery’[50].

• EMPLOYEES’ CONTRIBUTION TOWARDS PROVIDENT FUND:

Any sum received by an employer from his employees as employees’ contribution to the following is treated as ‘income’ of the employer:

1. Employees’ contribution to any provident fund (recognised or unrecognised).
2. Employees’ contribution to the superannuation fund.
3. Employees’ contribution to any fund set up under the provisions of the Employees’ State Insurance Act, 1948.
4. Employees’ contribution to any other fund for the welfare of the employees.

Example: Net profit of X Ltd. for the previous year 2010-2011 is Rs. 1,86,000. It is calculated after debiting salary to employees; Rs. 5 lakh. Out of Rs. 5 lakh, Rs. 50,000 is employees’ contribution is towards provident fund. Rs. 50,000 is transferred by X Ltd. to the provident fund account of the employees as follows- Rs. 30,000 before the due date of making such payment and Rs. 20,000 after the due date of such payment. Income of X Ltd. shall be Rs. 2,06,000[51].

• AMOUNT RECEIVED UNDER KEYMAN INSURANCE POLICY:

Any sum received under a Keyman insurance policy (including bonus) is treated as ‘income’ in the hands of recipient.

• AMOUNT EXCEEDING RS. 50,000 BY WAY OF GIFT:

Gift exceeding Rs. 50,000 received without consideration is taxable as income in a few cases.

• CONSIDERATION FOR ISSUE OF SHARES:

Consideration received for issue of shares [as exceeds fair market value of shares referred to in section 56(2)(viib)] is taxable as income.

ASSESMENT YEAR

It is the twelve-month period 1^st April to 31^st March immediately following the previous year. Income of previous year of an assessee is taxed during the next following assessment year at the rates prescribed by the relevant Finance Act. In the Assessment year a person files his return for the income earned in the previous year. For example for FY: 2006-07 the AY is 2007-08.

PREVIOUS YEAR

Income earned in a year is taxable in the next year. The year in which income is earned is known as previous year and the next year in which income is taxable is known as assessment year. In other words, previous year is the financial year immediately preceding the assessment year. Example: For the assessment year 2006-07, the immediately preceding financial year (i.e., 2005-06) is the previous year. Income earned by an individual during the previous year 2005-06 is taxable in the immediately following assessment year 2006-07 at the rates applicable for the assessment year 2006-07.

Similarly, income earned during the previous year 2006-07 by a company will be taxable in the assessment year 2007-08 at the rates applicable for the assessment year 2007-08.

When Income Of Previous Year Is Not Taxable In The Immediately Following Assessment Year: The rule that the income of the previous year is taxable as the income of the immediately following assessment year has certain exceptions. These are:

1. Income of non-residents from shipping;
2. Income of persons leaving India either permanently or for a long period of time;
3. Income of bodies formed for short duration;
4. Income of a person trying to alienate his assets with a view to avoiding payment of tax; and
5. Income of a discontinued business.

In these cases, income of a previous year may be taxed as the income of the assessment year immediately preceding the normal assessment year. These exceptions have been incorporated in order to ensure smooth collection of income tax from the aforesaid taxpayers who may not be traceable if tax assessment procedure is postponed till the commencement of the normal assessment.

Previous year in case of a newly set up business:  In the case, a newly set up business or profession is the source of income, the previous year commences on the date of setting up of the business/profession or on the date when the new source of income comes into existence and ends with March 31 of the financial year. The duration of previous year is 12 months or less. Example:  X joins an Indian Company on December 18, 2010. Prior to this, he is not in employment. Also, he does not have any other source of income. In such a case, previous years for the assessment year 2011-2012 will be from December 18, 2010 to March 31, 2011 and for the assessment year 2012-2013 his previous year will be from April 1, 2011 to March 31, 2012.

BIBLIOGRAPHY

1. Girish Ahuja & Dr. Ravi Gupta, Bharat’s Systematic Approach to Income Tax, Service Tax and VAT, New Delhi, Bharat Law House Pvt. Ltd., 26^th edition, 2011.
2. C. Sampath Iyengar, The Law of Income Tax, New Delhi, Bharat Law House Pvt. Ltd., 18^th edition, Vol. I, 2005.
3. Vinod K. Singhania & Dr. Kapil Singhania, Taxmann’s Direct Taxes Law and Practice, New Delhi, Taxmann Publications (P.) Ltd, 46^th edition, 2011-12.
4. Pradeep S. Shah & Pajesh S. Kadakia, Taxmann’s Master Guide to Income Tax Act with Commentary on Finance Act, 2007, New Delhi, Taxmann Publications (P.) Ltd, 17^th edition, 2007.
5. CA Arvind Tuli, Conceptual clarity on Income Tax Act and Central Sales Tax, New Delhi, Kalyan Publishers, 2^nd revised edition.
6. Vinod K. Singhania & Dr. Monica Singhania, Taxmann Students’ Guide to Income Tax Act including Service Tax/ VAT, New Delhi, Taxmann Publications (P.) Ltd, 39^th edition, 2008-2009.
7. Rakesh Bhargava, Taxmann’s Supreme Court Digest on Direct Taxes with Judicial Analysis & SLP decided by Supreme Court, New Delhi, Taxmann Allied Services (P.) Ltd, Vol. I, 1998.
8. Satya Dev, Income Tax Problems and Solutions in the form of Questions and Answers, Allahabad, Modern Law House, 4^th edition, 2006.
9. Taxmann’s Direct Tax Manual, New Delhi, Taxmann Publications (P.) Ltd, 41^st edition, Vol. 3, 2011.

WEBOGRAPHY

1. http://www.caclub.in/2011/09/definition-of-income-section-224-of.html
2. http://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2001ITAct/Act2001/..%5CW&P%5Cwpsec2%2824%29.htm
3. http://www.taxmann.com/TaxmannFlashes/Articles/flashart13-1-11_5.htm
4. http://www.taxmanagementindia.com/site-map/income_tax/list_case_laws_sections.asp?Prov=002%2824%29
5. http://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2001ITAct/Act2001/..%5CW&P%5Cwpsec2%2824%29.htm

[1] Dr. Vinod K. Singhania & Dr. Monica Singhania, Taxmann Students’ Guide to Income Tax Act including Service Tax/ VAT, New Delhi, Taxmann Publications (P.) Ltd, 39^th edition, 2008-2009, p.7

[2] 6 ITC 178 (PC)

[3] Gopal Saran Narain Singh v. CIT, [1953] 3 ITR 237 (PC)

[4] Kamakshya Narain Singh of Ramgarh v. CIT, [1943] 11 ITR 513 (PC)

[5] Chotti singhania

[6] Mann v. Nash, [1932] 1 KB 752

[7] Dr. Vinod K. Singhania & Dr. Monica Singhania, Taxmann Students’ Guide to Income Tax Act including Service Tax/ VAT, New Delhi, Taxmann Publications (P.) Ltd, 39^th edition, 2008-2009, p. 9

[8] T.A. Quereshi v. CIT, [2006] 157 Taxman 514 (SC)

[9] Chotti singhania

[10] Franklin v. IRC [1930] 15 TC 464

[11] Dr. Vinod K. Singhania & Dr. Monica Singhania, Taxmann Students’ Guide to Income Tax Act including Service Tax/ VAT, New Delhi, Taxmann Publications (P.) Ltd, 39^th edition, 2008-2009, p.10

[12] Ibid

[13] CIT v. Sitaldas Tirathdas, [1961] 41 ITR 367 (SC)

[14] Dr. Vinod K. Singhania & Dr. Monica Singhania, Taxmann Students’ Guide to Income Tax Act including Service Tax/ VAT, New Delhi, Taxmann Publications (P.) Ltd, 39^th edition, 2008-2009, p.10

[15] Chotti singhania

[16] CIT v. Bankipur Club Ltd., [1981] 6 Taxman 47 (Pat.)

[17] U.P. State Nagariya Sahakari Bank Ltd. v. ITO, [2007] 108 ITD 332 (Luck.)

[18] CIT v. Cement Allocation & Co-ordinating Org., [1999] 236 ITR 553 (Bom.)

[19] Chelmsford Club v. CIT, [2000]  109 Taxman 215 (SC)

[20] CIT v. I.T.I. Employees Death & Superannuation Relief Fund, [1998] 101 Taxman 315 (Kar.)

[21] Madras Gymkhana Club v. CIT, [2009] 183 Taxman 333 (Mad.)

[22] Maker Tower  A&B Co-op. Hsg. Society Ltd. v. ITO, [2008] 20 SOT 253 (Mum.)

[23] Sind Co-op. Hsg. Society v. ITO, [2009] 182 Taxman 346 (Bom.)

[24] Chotti singhania

[25] CIT v. Indian Bank Ltd., 1965 (56) ITR 77 (SC)

[26] CIT v. M.K.S. Ranjit Singh, [1998] 232 ITR 140 (Guj.)

[27] CIT v. G.R. Karthikeyan, [1993] 68 Taxman 145 (SC)

[28] Parimisetti Seetharamamma v. CIT, [1965] 57 ITR 532 (SC)

[29] CIT v. Bokaro Steel Ltd. (No. 1) [1988] 170 ITR 522 (Pat.)

[30] CIT v. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (SC)

[31] Dr. Jyoti Rattan, Bharat’s Taxation Laws, New Delhi, Bharat Law House Pvt. Ltd., 3^rd edition, 2011, p.10.

[32] Mersey Docks and Harbour Board v. Lucas, 2 TC 25 (HL)

[33] (1977) 106 ITR 73(AP)

[34] CIT v. A.R. Adaikappa Chettiar, [1973] 91 ITR 90 (Mad.)

[35] CIT v. P.R.S. Oberoi [1990] 52 Taxman 267/183 ITR 103 (Cal.)

[36] CIT v. G. Venkataraman [1978] 111 ITR 444 (Mad.)

[37] Emil Webber v. CIT [1978] 114 ITR 515 (Bom.)

[38] Dr. Jyoti Rattan, Bharat’s Taxation Laws, New Delhi, Bharat Law House Pvt. Ltd., 3^rd edition, 2011, p. 10.

[39] CIT v. M.R. Kini, [1991] 190 ITR 282 (Ker.)

[40] Director need not to be a person having substantial interest- Diwan Rahul Nanda v. CIT, [2008] 25 SOT 455 (Mum.)

[41] Lala Lakshmipat Singhania v. CIT [1976] 104 ITR 466 (All.)

[42] D.M. Neterwalla v. CIT [1980] 122 ITR 880 (Bom.)

[43] CIT v. P.R. Ramakrishnan [1980] 124 ITR 545 (Mad.)

[44] CIT v. S. Varadarajan [1996] 89 Taxman 457 (Mad.)

[45] Addl. CIT v. Uma Devi Budhia, [1986] 157 ITR 478 (Pat.)/CIT v. M.A. Alagappan, [1977] 108 ITR 1000 (Mad.)

[46] CIT v. G.R. Karthikeyan, [1983] 68 Taxman 145/201 ITR 866(SC)

[47] Visveswaraiah Lucky Centre v. CIT, [1991] 56 Taxman 80/189 ITR 698 (Kar.)

[48] Commercial Corpn. of India Ltd. v. ITO [1993] 201 ITR 348 (Bom.)

[49] CIT v. G. Krishnan [1997] 141 CTR (Mad.) 475

[50] CIT v. Dy. Director of Small Savings [2004] 266 ITR 27/136 Taxman 261 (Mad.)

[51] Dr. Vinod K. Singhania & Dr. Monica Singhania, Taxmann Students’ Guide to Income Tax Act including Service Tax/ VAT, New Delhi, Taxmann Publications (P.) Ltd, 39^th edition, 2008-2009,p.11.

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