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“real income theory”

Judicial DoctrinesCIT vs Shoorji VallabhdasCIT vs Shoorji Vallabhdas205 judgments

The decision most relied on for real income theory is CIT v. Shoorji Vallabhdas & Co. (46 ITR 144), cited in 551 judgments on BharatTax.

Leading authorities on real income theory

CIT v. Shoorji Vallabhdas & Co.
46 ITR 144 · 1962 · Supreme Court
551
citing judgments

Income tax is levied only on real income that actually materializes, not on hypothetical or notional income, even if accounting entries suggest otherwise. If no income results, there is no tax liability.

Poona Electric Supply Co. Ltd. v. CIT
57 ITR 521 · 1965 · Supreme Court
126
citing judgments

Income tax is levied on real income, which represents profits determined by ordinary commercial principles after permissible deductions, considering the probability of realization. This principle distinguishes real profits from statutory profits specified for other purposes under the Income-tax Act.

CIT v. Vasisth Chay Vyapar Ltd.
330 ITR 440 · 2011 · High Court
125
citing judgments

Interest income is taxable under the mercantile system of accounting even if it is not actually recovered, provided there is a right to receive it. The decision also touches upon the treatment of bad debts and provisions for doubtful debts under Section 36(1)(viia).

CIT v. Birla Gwalior (P.) Ltd.
89 ITR 266 · 1973 · Supreme Court
83
citing judgments

The Supreme Court holds that income tax is levied on real income, not on hypothetical or notional accrual. For income to be taxable, it must genuinely accrue or be received, taking into account the realistic probability of its realization.

Judgments citing real income theory

Saket Agarwal, Delhi vs. Income Tax Officer, Ward -45(2), Delhi

In the result, appeal of the assessee is partly allowed

ITA 6116/DEL/2024[2017-18]Status: DisposedITAT Delhi24 Sept 2025AY 2017-18

Bench: Shri Anubhav Sharma & Shri Manish Agarwal[Assessment Year : 2017-18] Shri Saket Agrawal, Vs Ito, 392/1, 2Nd Floor, Ward-45(2), Sainik Vihar, Pitam Pura, Delhi Delhi-110085. Pan-Aavpa3410D Appellant Respondent Appellant By Dr. Rakesh Gupta, Adv., Shri Somil Aggarwal, Adv. & Shri Saksham Aggarwal, Ca Respondent By Shri Narpat Singh, Sr. Dr Date Of Hearing 26.06.2025 Date Of Pronouncement 24.09.2025 Order Per Manish Agarwal, Am : The Present Appeal Is Filed By Assessee Against The Order Dated 10.12.2024 Passed By Ld. Commissioner Of Income Tax (A), National Faceless Appeal Centre (“Nfac”), Delhi [“Ld. Cit(A)”] In Appeal No. Cit(A), Delhi-15/10489/2019-20 U/S 250 Of The Income Tax Act,1961 [“The Act”] Arising Out Of Assessment Order Dated 31.12.2019 Passed U/S 143(3) Of The Act Pertaining To Assessment Year 2017-18. 2. Brief Facts Of The Case Are That Assessee Is An Individual & Filed His Return Of Income On 26.03.2018, Declaring Total Income Of Inr 10,02,940/-. The Case Of The Assessee Was Selected For Complete Scrutiny For The Reason That Assessee Has Deposited Cash In Specified Bank Notes (Sbn) During Demonetization & Due To The Survey Carried Out At The Business Premises Of The Assessee.

Section 115BSection 143(3)Section 250Section 68Section 69C

making additions of credit transactions with these parties and Lastly taxing the income declared. This approach of the AO is contrary to the real income theory according to which tax is to be levied on the real income only. 23. In view of above facts and also admitted

Ramachandra Naveen, Bangalore vs. DCIT, Central Circle-1(1), Bengaluru

ITA 2152/BANG/2024[2014-15]Status: DisposedITAT Bangalore19 Sept 2025AY 2014-15

Bench: Shri. Laxmi Prasad Sahu & Shri. Soundararajan K

For Appellant: Shri. V. Srinivasan, AdvocateFor Respondent: Shri. Muthu Shankar, CIT(DR)(ITAT), Bangalore
Section 131Section 132(4)Section 153A

debited the corresponding figures under the fuel expenses accordingly, there is no impact on the profitability of the assessee. Applying the principle of real income theory. we noted that no reward points had reached the assessee by any other mode i.e. cash or bank credit except utilization for purchase

Ramachandra Naveen, Bangalore vs. DCIT, Central Cirlce-1(1), Benglauru

ITA 2151/BANG/2024[2013-14]Status: DisposedITAT Bangalore19 Sept 2025AY 2013-14

Bench: Shri. Laxmi Prasad Sahu & Shri. Soundararajan K

For Appellant: Shri. V. Srinivasan, AdvocateFor Respondent: Shri. Muthu Shankar, CIT(DR)(ITAT), Bangalore
Section 131Section 132(4)Section 153A

debited the corresponding figures under the fuel expenses accordingly, there is no impact on the profitability of the assessee. Applying the principle of real income theory. we noted that no reward points had reached the assessee by any other mode i.e. cash or bank credit except utilization for purchase

Sri Ramachandra Naveen, Bangalore vs. DCIT, Central Circle-1(1), Bengaluru

ITA 2150/BANG/2024[2012-13]Status: DisposedITAT Bangalore19 Sept 2025AY 2012-13

Bench: Shri. Laxmi Prasad Sahu & Shri. Soundararajan K

For Appellant: Shri. V. Srinivasan, AdvocateFor Respondent: Shri. Muthu Shankar, CIT(DR)(ITAT), Bangalore
Section 131Section 132(4)Section 153A

debited the corresponding figures under the fuel expenses accordingly, there is no impact on the profitability of the assessee. Applying the principle of real income theory. we noted that no reward points had reached the assessee by any other mode i.e. cash or bank credit except utilization for purchase

Sri. Ramachandra Naveen, Bangalore vs. DCIT, Central Cirlce-1(1), Bangalore

ITA 2149/BANG/2024[2011-12]Status: DisposedITAT Bangalore19 Sept 2025AY 2011-12

Bench: Shri. Laxmi Prasad Sahu & Shri. Soundararajan K

For Appellant: Shri. V. Srinivasan, AdvocateFor Respondent: Shri. Muthu Shankar, CIT(DR)(ITAT), Bangalore
Section 131Section 132(4)Section 153A

debited the corresponding figures under the fuel expenses accordingly, there is no impact on the profitability of the assessee. Applying the principle of real income theory. we noted that no reward points had reached the assessee by any other mode i.e. cash or bank credit except utilization for purchase

Sh. Mahendra Kumar Goyal, Sikar vs. ACIT, Central Circle-3, Jaipur

In the result of the appeal of the assessee are disposed off as under

ITA 495/JPR/2025[2016-17]Status: DisposedITAT Jaipur15 Sept 2025AY 2016-17
For Appellant: Shri P. C. Parwal, CA
Section 127Section 143(2)Section 143(3)Section 153ASection 69

SIGN attcity aferpenr, AYR =arals, TAGE IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR So Va. Mateeth, =r

Selina N. Sheth, Mumbai vs. Income Tax Officer -17(3)(1), Mumbai

In the result, the ground No

ITA 2352/MUM/2025[2017-18]Status: DisposedITAT Mumbai28 Aug 2025AY 2017-18

Bench: Shri Pawan Singh(Physical Hearing) Selina N. Sheth Ito, Ward – 17(3)(1), M/S. Kalyaniwalla & Mistry Llp, Vs Aayakar Bhawan, M.K. Road, Esplanade House, 2Nd Floor, Mumbai – 400020. 29 Hazarimal Somani Marg, Fort, Mumbai – 400001. [Pan: Aabps9851L] Appellant / Assessee Respondent / Revenue

Section 10(38)Section 148Section 2(14)Section 254(1)Section 57

taxed under the head “income from Other Sources”, the premium paid should be allowed as a deduction under section 57, following the ‘real income theory’. 2. The assessee vide application dated 14.07.2025 as raised following additional ground of appeal: “The assessing officer erred in not granting credit for tax deducted ... income from other sources, deduction was required to be allowed for a single premium of Rs. 20.00 lakhs in 2011, following the “real income” theory. To support such contention, he relied on the decision of Hon’ble Apex Court in Balbir Singh Maini

The Visnagar Nagrik Sahakari Bank Ltd., Mehsana vs. The ACIT, Circle-Gandhinagar (Previously DCIT, Patan Circle, Patan), Gandhinagar

In the result, the appeals filed by the assessee are allowed for statistical purposes

ITA 738/AHD/2025[2013-14]Status: DisposedITAT Ahmedabad26 Aug 2025AY 2013-14

Bench: Shri Sanjay Garg & Shri Makarand V. Mahadeokarआयकर अपील सं /Ita Nos.738, 1414 & 1415/Ahd/2025 िनधा"रण वष" /Assessment Years : (2013-14, 2014-15 & 2015-16) The Visnagar Nagarik Sahakari The Assistant Commissioner Bank Ltd.,(Under Liquidation) बनाम Of Income Tax, / Market Yard, Circle Gandhinagar. V/S. Visnagar, (Previously Dcit, Mehsana-384315, Patan Circle, Patan) "थायी लेखा सं./Pan: Aaaft8764C अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri A P Nanavaty, Ar Revenue By : Shri Rignesh Das, Cit-Dr सुनवाई की तारीख/Date Of Hearing : 19/08/2025 घोषणा की तारीख /Date Of Pronouncement: 26/08/2025 आदेश/O R D E R Per Makarand V. Mahadeokar, Am: ] ] These Three Appeals By The Assessee Are Directed Against The Separate Orders Of The Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [Hereinafter Referred To As “The Cit(A)”], All Passed Under Section 250 Of The Income-Tax Act, 1961 [Hereinafter Referred To As “The Act”], Arising From The Assessments Framed By The Assistant / Deputy Commissioner Of Income-Tax, Circle, Patan [Hereinafter Referred To As “The Assessing Officer Or Ao”] Under Section 143(3) Of The Act.

For Appellant: Shri A P Nanavaty, ARFor Respondent: Shri Rignesh Das, CIT-DR
Section 142(1)Section 143(1)Section 143(2)Section 143(3)Section 250Section 80PSection 80P(4)

operative Societies Act, requires proper verification and fresh adjudication. The determination of taxable income has to be made on the touchstone of real income theory. 23. Accordingly, in the interest of justice, we deem it appropriate to set aside the impugned orders of the ld. CIT(A) for all three

The Visnagar Nagrik Sahakari Bank Ltd (Under Liquidation), Mehsana vs. The ACIT, Circle-Gandhinagar (Previously DCIT, Patan Circle, Patan), Gandhinagar

In the result, the appeals filed by the assessee are allowed for statistical purposes

ITA 1414/AHD/2025[2014-15]Status: DisposedITAT Ahmedabad26 Aug 2025AY 2014-15

Bench: Shri Sanjay Garg & Shri Makarand V. Mahadeokarआयकर अपील सं /Ita Nos.738, 1414 & 1415/Ahd/2025 िनधा"रण वष" /Assessment Years : (2013-14, 2014-15 & 2015-16) The Visnagar Nagarik Sahakari The Assistant Commissioner Bank Ltd.,(Under Liquidation) बनाम Of Income Tax, / Market Yard, Circle Gandhinagar. V/S. Visnagar, (Previously Dcit, Mehsana-384315, Patan Circle, Patan) "थायी लेखा सं./Pan: Aaaft8764C अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri A P Nanavaty, Ar Revenue By : Shri Rignesh Das, Cit-Dr सुनवाई की तारीख/Date Of Hearing : 19/08/2025 घोषणा की तारीख /Date Of Pronouncement: 26/08/2025 आदेश/O R D E R Per Makarand V. Mahadeokar, Am: ] ] These Three Appeals By The Assessee Are Directed Against The Separate Orders Of The Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [Hereinafter Referred To As “The Cit(A)”], All Passed Under Section 250 Of The Income-Tax Act, 1961 [Hereinafter Referred To As “The Act”], Arising From The Assessments Framed By The Assistant / Deputy Commissioner Of Income-Tax, Circle, Patan [Hereinafter Referred To As “The Assessing Officer Or Ao”] Under Section 143(3) Of The Act.

For Appellant: Shri A P Nanavaty, ARFor Respondent: Shri Rignesh Das, CIT-DR
Section 142(1)Section 143(1)Section 143(2)Section 143(3)Section 250Section 80PSection 80P(4)

operative Societies Act, requires proper verification and fresh adjudication. The determination of taxable income has to be made on the touchstone of real income theory. 23. Accordingly, in the interest of justice, we deem it appropriate to set aside the impugned orders of the ld. CIT(A) for all three

K T G Educational Trust, Bengaluru vs. Income Tax Officer (Exemptions) Ward-1, Bengaluru

In the result, appeal filed by the assessee isallowed for statistical purposes

ITA 596/BANG/2025[2017-18]Status: DisposedITAT Bangalore26 Aug 2025AY 2017-18

Bench: Shri Laxmi Prasad Sahu & Shri Keshav Dubeyassessment Year : 2017-18 K T G Educational Trust, Vs. Ito (Exemptions), Sy No.93, Sreegangadakaval, Hegganahalli Ward – 1, Cross Vishwneedam Post Bangalore. Bangalore – 560 091, Karnataka. Pan : Aabtk 0016 D Appellant Respondent Assessee By : Shri. Ankur Pai Dhugat, Advocate Revenue By : Shri. Balusamy N, Jcit(Dr)(Itat), Bangalore. Date Of Hearing : 24.07.2025 Date Of Pronouncement : 26.08.2025

For Appellant: Shri. Ankur Pai Dhugat, AdvocateFor Respondent: Shri. Balusamy N, JCIT(DR)(ITAT), Bangalore
Section 143(2)

prosecution by the assessee and AO has considered the entire receipts as income. The principal theory to bring to tax of income is real income theory. However, in this case considering the prayer of the assessee and in the interest of justice we are remitting this issue back

Addl CIT Ltu, Mumbai vs. Bajaj Holding & Investment Ltd ( Foremerly Known As Bajaj Auto Ltd), Mumbai

In the result, appeal filed by the revenue is dismissed and appeal filed by the assessee stands partly allowed as indicated hereinabove

ITA 5510/MUM/2012[2007-08]Status: DisposedITAT Mumbai26 Aug 2025AY 2007-08

Bench: Smt. Beena Pillai () & Shri Renu Jauhri ()

Section 14ASection 80

DEPB as the case may be. The Ld. AO is directed to consider the claim of the assessee based on the real income theory as observed by Hon’ble Supreme Court in case of CIT(A) V. Excel industries Ltd. reported in (2013) 38 taxmann.com 100. For the sake

Najeeb Charitable Trust, Mumbai vs. Exem. Ward 2(1), Mumbai

In the result, appeal of the assessee trust is allowed for statistical

ITA 3194/MUM/2025[2020-21]Status: DisposedITAT Mumbai21 Aug 2025AY 2020-21

Bench: Shri Amit Shukla & Shri Arun Khodpiaआयकर अपील सं. / Ita No.3194/Mum/2025 "नधा"रण वष" / Assessment Year :2020-21 Najeeb Charitable Trust A-28, Everest Apartment, J.P Road, Jogeshwari (West) Mumbai- 400 053 Pan : Aaatn0425G

For Appellant: Shri Dipesh Ruparelia (Virtually present)For Respondent: Shri Aditya Rai, Sr. DR
Section 12ASection 143(1)Section 5

scope of section 143(1) of the Act. It is submitted that such action of the revenue is contrary to the principles of real income theory and hence, the intimation u/s. 143(1) of the Act is liable to be quashed. 7. The Ld. Counsel further drew our attention ... exemption u/s. 12AAwas not granted to the assessee by the CPC/A.O while issuing intimation u/s. 143(1) of the Act, however as per real income theory the expenditure incurred by the assessee trust would be allowed subject to verification, while determining its taxable income, therefore, such crucial aspect needs verification

Assistant Commissioner of Income Tax, Chennai vs. Tamilnadu Arya Samaj Educational Society, Chennai

In the result, the appeal of the Revenue is allowed for statistical purposes

ITA 1261/CHNY/2025[2020-21]Status: DisposedITAT Chennai20 Aug 2025AY 2020-21

Bench: Shri Aby T Varkey & Shri Amitabh Shuklaआयकर अपील सं./Ita No.1261/Chny/2025 Assessment Years: 2020-21 Assistant Commissioner Of Income Tamil Nadu Arya Samaj Educational Tax(Exemption), Society, Chennai No.182, Avvai Shanmugam Salai, Gopalapuram, Chennai-600 086, [Pan: Aaaat0081F]

For Appellant: Mr.A.Satyaseelan, AdvocateFor Respondent: Ms.R.Anitha, Addl.CIT
Section 133ASection 5

Jurisdictional High Court on the same principle though on the issue of AMC transactions. It argued in favour of the real income theory propounded by the Ld.AO. 4.0 We have heard rival submissions in the light of the material available on records. We have noted that the Ld.CIT

Council of Architecture, New Delhi vs. ITO (Exemption), Ward-1(3), New Delhi

In the result, the appeal of the assessee for Assessment Year 2012-

ITA 955/DEL/2019[2012-13]Status: DisposedITAT Delhi13 Aug 2025AY 2012-13

Bench: Shri M. Balaganesh & Shri Vimal Kumar

For Appellant: Shri Sushil Kumar, AdvFor Respondent: Ms. Harpreet Kaur Hansra, Sr. DR
Section 11Section 12ASection 143(3)

addition is required to be made. While doing so, the Hon‟ble Supreme Court had duly taken cognizance of the principles of real income theory and proposed consistency in the treatment of a particular transaction. The decisions rendered by the Hon‟ble Supreme Court in the case of Excel Industries

Council of Architecture, New Delhi vs. ITO (Exemption), Ward-1(3), New Delhi

In the result, the appeal of the assessee for Assessment Year 2012-

ITA 952/DEL/2019[2014-15]Status: DisposedITAT Delhi13 Aug 2025AY 2014-15

Bench: Shri M. Balaganesh & Shri Vimal Kumar

For Appellant: Shri Sushil Kumar, AdvFor Respondent: Ms. Harpreet Kaur Hansra, Sr. DR
Section 11Section 12ASection 143(3)

addition is required to be made. While doing so, the Hon‟ble Supreme Court had duly taken cognizance of the principles of real income theory and proposed consistency in the treatment of a particular transaction. The decisions rendered by the Hon‟ble Supreme Court in the case of Excel Industries

Vinod Mongia, Wast Azad Nagar, Delhi vs. Income Tax Officer, Vikas Bhawan, Delhi

In the result, the appeal of the assessee is allowed

ITA 1844/DEL/2024[2012-2013]Status: DisposedITAT Delhi31 Jul 2025AY 2012-2013

Bench: Shri Mahavir Singh & Shri Manish Agarwal[Assessment Year : 2012-13] Vinod Mongia, Vs Ito, C-40, Street No.1A, West Ward-58(7), Azad Nagar, Delhi-110005. Vikas Bhawan, Pan-Akhpm6218R Delhi Appellant Respondent Appellant By Shri Shivam Jain, Adv. & Shri Nitin Kanwar, Adv. Respondent By Shri Om Parkash, Sr. Dr Date Of Hearing 14.05.2025 Date Of Pronouncement 31.07.2025

Section 143Section 143(2)Section 147Section 148Section 250Section 68

facts, by passing impugned assessment order in violation of constitutional provisions of Art. 14 and Art. 265 and is against Real Income theory, thus assessment was bad in both law and procedure. 7. That the jurisdictional LD.AO has erred, both in law and in facts, by not following the "Rule ... Consistency uniformity, predictability and certainty" and against "Real Income Theory", thus whole assessment was bad in law and in procedure is void-ab-initio and liable to be quashed. 8. That the jurisdictional LD.AO has erred, both in law and in facts to made the addition, in totally perverse manner

Ulka Madhukar Shinde, Panvel vs. Assistant Commissioner of Income Tax Panvel, Panvel

In the result, the appeal of the assessee is allowed for statistical

ITA 600/PUN/2025[2013-2014]Status: DisposedITAT Pune09 Jul 2025AY 2013-2014
For Appellant: Shri Anthony DsonzaFor Respondent: Shri Akhilesh Srivastava
Section 147Section 271

income of the appellant is not tenable under the law because additions are made in gross ignorance and in violation of real income theory of taxation which states that no income could be earned without incurring expenses for the same. 5. In the facts and circumstances of the case

DCIT, Mumbai vs. J Kumar Infraprojects Limited, Mumbai

The Appeal of the Assessee is partly allowed and that of the department is dismissed

ITA 4593/MUM/2024[2017-18]Status: DisposedITAT Mumbai03 Jul 2025AY 2017-18

Bench: Hon’Ble Shri Sandeep Gosain & Shri Prabhash Shankar

Section 250Section 69A

1 J Kumar Infraprojects Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN

DCIT CC 5-1, Mumbai vs. J Kumar Infraprojects Limited, Mumbai

The Appeal of the Assessee is partly allowed and that of the department is dismissed

ITA 4591/MUM/2024[2018-19]Status: DisposedITAT Mumbai03 Jul 2025AY 2018-19

Bench: Hon’Ble Shri Sandeep Gosain & Shri Prabhash Shankar

Section 250Section 69A

1 J Kumar Infraprojects Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN

J Kumar Infraprojects Limited, Mumbai vs. The Dy Commissioner of Income Tax Central Circle -5(1), Mumbai

The Appeal of the Assessee is partly allowed and that of the department is dismissed

ITA 4153/MUM/2024[2020-21]Status: DisposedITAT Mumbai03 Jul 2025AY 2020-21

Bench: Hon’Ble Shri Sandeep Gosain & Shri Prabhash Shankar

Section 250Section 69A

1 J Kumar Infraprojects Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN