Definition and Meaning of Income Flashcards
What is a deemed assessee
In cases of minor, lunatic or person of unsound mind, guardian or caretaker is the deemed assessee.
In case of person outside india doing activity through india, the agent is assessee.
In case a person dies, their successors or legal heirs are the deemed assessee.
Assessment Year
Section 2(9), period of 12 months commencing on april 1 every year. It is the year after the financial year in which the prior year’s revenue is assessed, tax is collected and ITR is filed.
Previous Year
Financial Year immediately preceding the assessment year.
Income, broadly defined
money an individual receives in compensation for work, services or investments. For business, it’s the revenue you get by selling goods and services
CIT v G.R. Karthikeyan
Income is defined in an inclusive manner in section 2 of the ITA. it is of the widest amplitude and it must be given its natural and grammatical meaning. The purpose of the definition is not to limit the meaning of income but to widen its net. The clauses in the definition are not exhaustive of the meaning of income. (Winnings from a motor rally can be income)
Logitronics Pvt. Ltd. v. CIT
Whether waiver of loan is income depends on the purpose of it. If the purpose is to acquire capital assets then the waiver is not taxable, but if it is a revenue receipt, taken for business or trading purposes, then it is taxable.
Gopal Saran Narain Singh v. CIT
Privy Council Case. Income has no fixed or absolute meaning, must be understood in proper context. Income includes both the profits and gains earned through exercise of a taxpayers professional skills as well as income derived from property. Anything that can properly be called income is income.
Navinchandra Mafatlal v. CIT
Income includes capital gains, which arise from the transfer of capital assets. The cost of acquisition and the cost of improvement of the asset should be deducted from the sale considerations received.
Bhagwandas Jain v. Union of India
The core challenge was whether the government could levy income tax on the notional (deemed) income from a house property that the owner occupied for their own residence. Back then, for a house of the assessee’s own residence, the lower of a fixed sum of Rs. 1800 or half the rent value would be charged on the house. The supreme court held that it was not just what is received in the definition of income but also that which can be converted into income.
SK’s definition of income
Anything of value in the eyes of the law which comes to you, which did not previously belong to you, but now is yours, and which one is not under a legal obligation to restore. This would include windfall gains, does not have to be regular/frequent.
Is loan income
No, because there’s an obligation to repay
Is loan waiver income
Yes, there’s no requirement to pay. Also, it is dependent on purpose. If the loan was taken for running business or trade as a revenue receipt, then it is treated as such from the beginning. the waiver constitutes income.
Are subsidies considered income?
Direct subsidies are considered income for the consumers since money is directly transferred to their accounts without any requirement for return, while indirect subsidies would not be considered income [for the consumer]. Indirect subsidies are income for the distributor.
Settlement money?
Yes, income, there is no obligation to return/restore
Illegally acquired income
If the recipient individuals are benefitting from the income, then the government has a right to benefit via tax. the legality of the source of income makes no difference to the question of taxability.
