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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

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 4151/MUM/2024[2022-23]Status: DisposedITAT Mumbai03 Jul 2025AY 2022-23

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 4150/MUM/2024[2019-20]Status: DisposedITAT Mumbai03 Jul 2025AY 2019-20

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

Shri Bhadreshwar Education and Social Welfare Trust, Bengaluru vs. ITO, Ward-1, Bijapur

In the result, appeal filed by the assessee is allowed for statistical purposes

ITA 700/BANG/2025[2020-221]Status: DisposedITAT Bangalore13 Jun 2025AY 2020-221

Bench: Shri. Laxmi Prasad Sahu & Shri. Soundararajan Kassessment Year : 2020-21

For Appellant: Smt. Pratibha R, AdvocateFor Respondent: Shri. Subramanian S, JCIT(DR)(ITAT), Bangalore
Section 11Section 143(1)

provisions of the income tax Act. . The income should be considered in commercial theory and Page 4 of 4 real income theory should be considered for the income tax purpose. As per the provisions of the Income Tax Act, the income has been defined under section

Weir Minerals (India) Private Ltd, New Delhi vs. DCIT Circle-27(1), New Delhi

In the result, the appeal of the assessee is party allowed

ITA 4713/DEL/2019[2012-13]Status: DisposedITAT Delhi06 Jun 2025AY 2012-13

Bench: Ms. Madhumita Roy & Shri Khettra Mohan Roy[Assessment Year 2012-13]

Section 143(3)Section 234B

this regard, it is respectfully submitted that the concept of 'accrual of income' needs to be considered in the hue of the 'real income theory'. Where accrual of an income takes place but its realization becomes impossible, such hypothetical income cannot be charged to tax. In the case of mercantile

Dlf Home Developers Limited, New Delhi vs. Principal Commissioner of Income Tax, Delhi-1, New Delhi

In the result, the appeal of the assessee is allowed

ITA 2585/DEL/2024[2019-20]Status: DisposedITAT Delhi23 May 2025AY 2019-20

Bench: Shri Mahavir Singh & Shri Manish Agarwal[Assessment Year : 2019-20] Dlf Home Developers Limited, Vs Pr.Cit, 9Th Floor, Dlf Centre, Sansad Delhi-1, Marg, New Delhi-110001. New Delhi Pan-Aaccd0037H Appellant Respondent Appellant By Shri R.S.Singhvi, Ca & Shri Satyajeet Goel, Ca Respondent By Shri Surender Pal, Cit Dr Date Of Hearing 19.03.2025 Date Of Pronouncement 23.05.2025

Section 143(3)Section 263

allowed to the assessee, then it would result in double taxation of income for the assessee which would in turn impair the real income theory. 5. Now the ld PCIT by invoking his revision jurisdiction u/s 263 of the Act is trying to reconsider the very same issue with regard

Raju Suryanarayana Alluri, Usa vs. ITO (Int Taxn)-1, Hyderabad

In the result, the appeal of the assessee is allowed

ITA 505/HYD/2024[2016-17]Status: DisposedITAT Hyderabad19 May 2025AY 2016-17

Bench: Shri Vijay Pal Rao & Shri Madhusudan Sawdia

For Appellant: Shri K.C. Devdas, C.AFor Respondent: Shri B. Balakrishna, CIT-DR
Section 139Section 147Section 148Section 2(47)(v)Section 45

earned under the subsequent agreement dated 6.7.2002 was offered as capital gains in the subsequent years. Therefore, on the application of the real income theory, the Tribunal held that on these facts there would be neither accrual nor receipt of income to warrant bringing to tax to the constructed area

Rare Enterprises, Mumbai vs. DCIT Central Circle 7(1), Mumbai

In the result appeal of the Revenue as well as appeal filed by the assessee is dismissed

ITA 771/MUM/2024[2018-19]Status: DisposedITAT Mumbai29 Apr 2025AY 2018-19

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)

Section 143(3)

real accrual of the income. Whether an accrual has taken place or not is to be judged on the principles of real income theory. In determining the question whether it is hypothetical income or real income, the facts of the case in totality has to be examined. 10.5. Before ... actuality of the situation, whether an accrual has taken place or not must in appropriate cases be judged on the principles of real income theory. After accrual, non charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted

The Good Shepherd Education Society, Bengaluru vs. ITO, Exemptions Ward-2, Bengaluru

In the result, appeal filed by the assessee is allowed for statistical purpose

ITA 128/BANG/2025[2018-19]Status: DisposedITAT Bangalore25 Apr 2025AY 2018-19

Bench: Shri. Laxmi Prasad Sahu & Shri. Keshav Dubeyassessment Year : 2018-19

For Appellant: Shri. Gokul, AdvocateFor Respondent: Shri. Subramanian S, JCIT(DR)(ITAT), Bangalore
Section 249

Since in this case, the CPC while processing the return has considered the entire receipts as income within giving benefit of expenditure, the real income theory is absent in this case. Therefore, considering the totality of facts and in the interest of justice, we are remitting this issue back

Dhruvalkumar Sadhubhai Patel, Nadiad vs. The ACIT, Anand Circle, Anand

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

ITA 243/AHD/2024[2013-14]Status: DisposedITAT Ahmedabad23 Apr 2025AY 2013-14

Bench: Shri Siddhartha Nautiyal & Shri Narendra Prasad Sinha

For Appellant: Shri A. K. Khandelwal, A.RFor Respondent: Shri Prathvi Raj Meena, CIT-DR & Shri
Section 148Section 69A

deduction for purchase & other expenses (Debit side of bank statement) and hence, Hon’ble CIT(A) failed to estimate the income by applying “Real Income theory”. 5. The appellant craves to leave to add, alter, delete, amend or withdraw any grounds of appeal on or before hearing of appeal.” First ... deduction for purchase & other expenses (Debit side of bank statement) and hence, Hon’ble CIT(A) failed to estimate the income by applying “Real Income theory”. 5. The appellant craves to leave to add, alter, delete, amend or withdraw any grounds of appeal on or before hearing of appeal

Dhruvalkumar Sadhubhai Patel, Nadiad vs. The ACIT, Anand Circle, Anand

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

ITA 242/AHD/2024[2012-13]Status: DisposedITAT Ahmedabad23 Apr 2025AY 2012-13

Bench: Shri Siddhartha Nautiyal & Shri Narendra Prasad Sinha

For Appellant: Shri A. K. Khandelwal, A.RFor Respondent: Shri Prathvi Raj Meena, CIT-DR & Shri
Section 148Section 69A

deduction for purchase & other expenses (Debit side of bank statement) and hence, Hon’ble CIT(A) failed to estimate the income by applying “Real Income theory”. 5. The appellant craves to leave to add, alter, delete, amend or withdraw any grounds of appeal on or before hearing of appeal.” First ... deduction for purchase & other expenses (Debit side of bank statement) and hence, Hon’ble CIT(A) failed to estimate the income by applying “Real Income theory”. 5. The appellant craves to leave to add, alter, delete, amend or withdraw any grounds of appeal on or before hearing of appeal

Assam Infrastructure Financing Authority, Guwahati vs. The Deputy Commissioner of Income Tax, Circle - 2 (Exemption), Kolkata

The appeal of the assessee is allowed

ITA 1223/KOL/2024[2015-16]Status: DisposedITAT Kolkata22 Apr 2025AY 2015-16

Bench: Shri Sonjoy Sarma & Shri Sanjay Awasthii.T.A. No.1223/Kol/2024 Assessment Year: 2015-16 Assam Infrastructure Financing Authority……......………………....Appellant 3Rd Floor, Block F, Finance Department, Govt. Of Assam, Assam Sachivalaya, Assam – 781006. [Pan: Aacaa9405E] Vs. Dcit, Circle-2(Exemption), Kolkata......................................…..…..... Respondent Appearances By: Shri Ramesh Goeka, Ar, Appeared On Behalf Of The Appellant. Shri S. Datta, Cit-Dr, Appeared On Behalf Of The Respondent. Date Of Concluding The Hearing : April 17, 2025 Date Of Pronouncing The Order : April 22, 2025 आदेश / Order Per Sonjoy Sarma: The Present Appeal Has Been Preferred By The Assessee Against The Order Dated 31.03.2024 Of The National Faceless Appeal Centre [Hereinafter Referred To As ‘Cit(A)’] Passed U/S 250 Of The Income Tax Act (Hereinafter Referred To As The ‘Act’). 2. Brief Facts Of The Case Are That The Assessee Is A Society & Is Registered Under Indian Societies Act, 1860 Vide Certificate Dated 19.12.2009. The Society Was Incorporated With Cabinet Approval Of Govt. Of Assam Vide Notification No.Bw-10/2008/73 Dated 06.10.2009. The Society Is Registered U/S 12A Of The Act Vide Order For Provisional Registration Is Form 10Ac Issued By Income Tax Department On 06.04.2022 From The Period From A.Y 2022-23 To A.Y 2024-25. As Per The Memorandum Of Association, The Assessee Was Created For Implementation Of Major Infrastructure Projects In The State Of Assam.

Section 12ASection 139Section 143(2)Section 148Section 148ASection 250

specific funds. The income was incidental and utilized for achieving the objective of the trust/society and following the principles of consistency and real income theory should applied. He stated that in the subsequent assessment years i.e. A.Y 2017-18 and A.Y 2020-21, assessments were completed u/s 147 r.w.s. 144B

ITO, Ward-1(1), Hyderabad vs. Arka Properties Private Limited, Hyderabad

In the result, appeal of the Revenue is dismissed

ITA 58/HYD/2024[2015-16]Status: DisposedITAT Hyderabad17 Apr 2025AY 2015-16

Bench: Shri Vijay Pal Rao, Vice-A N D Shri Manjunatha, G.आ.अपी.सं /Ita No.58/Hyd/2024 (िनधा"रण वष"/Assessment Year: 2015-16) Income Tax Officer Vs. Arka Properties (P) Ltd Ward 1 (1) Hyderabad Hyderabad Pan:Aafca7411H (Appellant) (Respondent) राज" व "ारा/Revenue By:: Smt. M. Narmada, Cit(Dr) िनधा""रती "ारा/Assessee By: Advocate H Srinivasulu, सुनवाई की तारीख/Date Of Hearing: 27/03/2025 घोषणा की तारीख/Pronouncement: 17/04/2025 आदेश/Order Per Vijay Pal Raothis Appeal By The Revenue Is Directed Against The Order Dated, 23/11/2023 Of The Learned Cit (A)-Nfac Delhi, For The A.Y. 2015-16. 2. There Is A Delay Of 1 Day By The Revenue In Filing The Appeal Before The Tribunal & The Revenue Has Filed An Affidavit Explaining The Cause Of Delay. We Have Heard The Learned Dr As Well As The Learned Ar On The Condonation Of Delay. The Learned Ar Has Not Objected For Condonation Of Delay Of One Day In Filing

For Appellant: Advocate H SrinivasuluFor Respondent: : Smt. M. Narmada, CIT(DR)
Section 148Section 45

this expenditure is wholly and exclusively in connection with the transfer. He has further submitted that even as per the real income theory, the said amount of Rs.50 crores cannot be considered as income of the assessee when it was directly applied by the Bank towards the recovery/repayment of loan ... No.826 of 2023 (Gujarat High Court). 9) Shroff Eye Centre (ITA No.1560/Del/2012) ITAT Delhi 10) Balbir Singh Maini (398 ITR 531) (S.C) Real Income Theory 11) RSM & Co. (125 ITFD 243) 12) Sunil J. Kinariwala (259 ITR 10) (S.C) 13) Nariman Bhurncha

Bses Yamuna Power Ltd, Delhi vs. ACIT, Circle-5(1), New Del;Hi

The appeal of the assessee is allowed on legal issues

ITA 4853/DEL/2017[2008-09]Status: DisposedITAT Delhi16 Apr 2025AY 2008-09

Bench: Shri Anubhav Sharma & Shri Manish Agarwalbses Rajdhani Power Ltd., Dy. Cit, Bses Bhawan, Cicle-5(1), Nehru Place, Vs. New Delhi. New Delhi-110019 Pan-Aagcs3187H (Appellant) (Respondent) Bses Rajdhani Power Ltd., Asst. Cit, Bses Bhawan, Cicle-5(1), Nehru Place, Vs. New Delhi. New Delhi-110019 Pan-Aagcs3187H (Appellant) (Respondent) Bses Yamuna Power Dy. Cit, Limited, Cicle-5(1), Shakti Kiran Building, Vs. New Delhi. Karkardoooma, Delhi-110092 Pan-Aagcs3187H (Appellant) (Respondent) Bses Rajdhani Power Ltd. & Ors Vs. Acit Bses Yamuna Power Asst. Cit, Limited, Cicle-5(1), Shakti Kiran Building, Vs. New Delhi. Karkardoooma, Delhi-110092 Pan-Aagcs3187H (Appellant) (Respondent) Assessee By Shri Rohit Jain, Adv., Sh. Deepesh Jain, Adv. & Sh. Shivam Gupta, Ca Department By Mr. Javed Akhtar, Cit-Dr Date Of Hearing 20/02/2025 Date Of Pronouncement 16/04/2025 O R D E R

Section 143(3)Section 147Section 148Section 154Section 250

hence the same is recognized as receipt basis considering the Accountant Standards, (ii) the same cannot be considered as income as per real income theory; and (iii) covered by judgements in the case of ACIT vs. Dakshin Haryana Bijli Vitran Nigam Ltd: [2013] 35 taxmann.com 486 as affirmed

Bses Yamuna Power Ltd., New Delhi vs. DCIT, Circle- 5(1), New Delhi

The appeal of the assessee is allowed on legal issues

ITA 4852/DEL/2017[2007-08]Status: DisposedITAT Delhi16 Apr 2025AY 2007-08

Bench: Shri Anubhav Sharma & Shri Manish Agarwalbses Rajdhani Power Ltd., Dy. Cit, Bses Bhawan, Cicle-5(1), Nehru Place, Vs. New Delhi. New Delhi-110019 Pan-Aagcs3187H (Appellant) (Respondent) Bses Rajdhani Power Ltd., Asst. Cit, Bses Bhawan, Cicle-5(1), Nehru Place, Vs. New Delhi. New Delhi-110019 Pan-Aagcs3187H (Appellant) (Respondent) Bses Yamuna Power Dy. Cit, Limited, Cicle-5(1), Shakti Kiran Building, Vs. New Delhi. Karkardoooma, Delhi-110092 Pan-Aagcs3187H (Appellant) (Respondent) Bses Rajdhani Power Ltd. & Ors Vs. Acit Bses Yamuna Power Asst. Cit, Limited, Cicle-5(1), Shakti Kiran Building, Vs. New Delhi. Karkardoooma, Delhi-110092 Pan-Aagcs3187H (Appellant) (Respondent) Assessee By Shri Rohit Jain, Adv., Sh. Deepesh Jain, Adv. & Sh. Shivam Gupta, Ca Department By Mr. Javed Akhtar, Cit-Dr Date Of Hearing 20/02/2025 Date Of Pronouncement 16/04/2025 O R D E R

Section 143(3)Section 147Section 148Section 154Section 250

hence the same is recognized as receipt basis considering the Accountant Standards, (ii) the same cannot be considered as income as per real income theory; and (iii) covered by judgements in the case of ACIT vs. Dakshin Haryana Bijli Vitran Nigam Ltd: [2013] 35 taxmann.com 486 as affirmed

Om Shanti Motors, Bhopal vs. ACIT Central-1, Bhopal, Aayakar Bhawan, Hoshangabad Road, Arera Hills, Bhopal - (Front of Mailda Mill)

Appeals are allowed for statistical purpose

ITA 624/IND/2024[2014-15]Status: HeardITAT Indore04 Apr 2025AY 2014-15

Bench: Shri B.M. Biyani & Shri Paresh M. Joshiit(Ss)A Nos.73 To 79/Ind/2024 (Ays: 2009-10 To 2015-16) &

Section 132Section 153ASection 271(1)(c)Section 271ASection 271D

That, the assessment and penalty orders passed in our firm's case are very high pitched and are not based on Principles of real income theory and in no manner justifies our true Income. Place: Indore Date 24/03/2025 14575/2019 OVT OF INDIA * NOTARY *NOTARY ASHAILESH YADAV ※GOVT OF INDIA ARLA

Om Shanti Motors, Bhopal vs. ACIT Central-1, Bhopal, Aayakar Bhawan, Hoshangabad Road, Arera Hills, Bhopal - (Front of Mailda Mill)

ITA 620/IND/2024[2015-16]Status: HeardITAT Indore04 Apr 2025AY 2015-16

Bench: Shri B.M. Biyani & Shri Paresh M. Joshiit(Ss)A Nos.73 To 79/Ind/2024 (Ays: 2009-10 To 2015-16) &

Section 132Section 153ASection 271(1)(c)Section 271D

आयकर अपीलीय अधिकरण, इंदौर न्यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI B.M. BIYANI, ACCOUNTANT

Om Shanti Motors, Bhopal vs. ACIT Central-1, Bhopal, Aayakar Bhawan, Hoshangabad Road, Arera Hills, Bhopal - (Front of Mailda Mill)

Appeals are allowed for statistical purpose

ITA 618/IND/2024[2013-14]Status: HeardITAT Indore04 Apr 2025AY 2013-14

Bench: Shri B.M. Biyani & Shri Paresh M. Joshiit(Ss)A Nos.73 To 79/Ind/2024 (Ays: 2009-10 To 2015-16) &

Section 132Section 153ASection 271(1)(c)Section 271ASection 271D

That, the assessment and penalty orders passed in our firm's case are very high pitched and are not based on Principles of real income theory and in no manner justifies our true Income. Place: Indore Date 24/03/2025 14575/2019 OVT OF INDIA * NOTARY *NOTARY * ASHAILESH YADAV GOVT OF INDIA ARLA

Om Shanti Motors, Bhopal vs. ACIT Central-1, Bhopal, Aayakar Bhawan, Hoshangabad Road, Arera Hills, Bhopal - (Front of Mailda Mill)

Appeals are allowed for statistical purpose

ITA 612/IND/2024[2013-14]Status: HeardITAT Indore04 Apr 2025AY 2013-14

Bench: Shri B.M. Biyani & Shri Paresh M. Joshiit(Ss)A Nos.73 To 79/Ind/2024 (Ays: 2009-10 To 2015-16) &

Section 132Section 153ASection 3Section 7

That, the assessment and penalty orders passed in our firm's case are very high pitched and are not based on Principles of real income theory and in no manner justifies our true Income. Place: Indore Date 24/03/2025 14575/2019 OVT OF INDIA * NOTARY *NOTARY *SHAILESH YADAV ※GOVT OF INDIA ARLA

Karnataka Cashew Development Corporation Ltd Employees Gratuity Fund Trust, Mangalore vs. Income Tax Officer, Ward-1 (Exemptions), Mangalore

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

ITA 139/BANG/2025[2021-22]Status: DisposedITAT Bangalore28 Mar 2025AY 2021-22

Bench: Shri Laxmi Prasad Sahu & Shri Keshav Dubeyassessment Year : 2021-22

For Appellant: Shri R. Chandrashekar, AdvocateFor Respondent: Ms. Neha Sahay, Jt.CIT(DR)(ITAT), Bengaluru
Section 10(12)Section 10(25)Section 11Section 12ASection 143(1)Section 143(1)(a)Section 234ASection 234C

approval before us. In the income tax proceedings while calculating income tax of the assessee there is a fundamental rule of law that real income theory should be considered. But in this case this principle is missing. Considering the facts of the case, we remit this issue

M/S.Kalyan Jewellers India Ltd, Thrissur vs. The ACIT Circle-1(1), Thrissur

In the result, appeal filed by the assessee stands allowed

ITA 363/COCH/2023[2015-16]Status: DisposedITAT Cochin21 Mar 2025AY 2015-16

Bench: Shri Inturi Rama Rao, Am & Shri Soundararajan K., Jm Assessment Year: 2015-16 Kalyan Jewellers India Ltd. .......... Appellant Tc/32/204/1, Sitaram Mill Road Punkunnam, Thrissur 680002 [Pan: Aadck6079K] Vs. Asst. Commissioner Of Income Tax .......... Respondent Circle -1(1), Thrissur Appellant By: Ms. Krishna K., Advocate Respondent By: Shri Suresh Sivanandan, Cit-Dr Date Of Hearing: 13.03.2025 Date Of Pronouncement: 21.03.2025

For Appellant: Ms. Krishna K., AdvocateFor Respondent: Shri Suresh Sivanandan, CIT-DR
Section 143(3)Section 263Section 80G

same would be offered to tax on realisation. The unrealised gain is in the nature of notional gain which is not taxable on real income theory. However, the AO was of the view that the mark to market gains are to be taxed on accrual basis and accordingly brought