“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

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

Asstt Commissioner of Income Tax-Circle 4-2-1, Mumbai vs. Synergy Tradevista Private Limited, Mumbai

ITA 4248/MUM/2023[2011-12]Status: DisposedITAT Mumbai16 Dec 2024AY 2011-12

Bench: Shri Amit Shukla, Jm & Ms Padmavathy S, Am

For Appellant: Shri Mehul Talera, ARFor Respondent: Shri Bhangepatil Pushkaraj

Section 143(1)Section 148Section 68

company. The deposits do not represent income of the appellant and hence the same should not have been taxed following the principle of real income theory. The appellant has cited the decision of the Hon'ble Gujarat High Court in case of Vijay Ramanlal Sanghvi v. ACIT

Nuevosol Energy Private Limited, Hyderabad vs. ACIT., Circle-16(1), Hyderabad

In the result, appeal filed by the assessee is allowed

ITA 958/HYD/2024[2018-19]Status: DisposedITAT Hyderabad27 Nov 2024AY 2018-19

Bench: Shri Manjunatha G. & Shri K. Narasimha Charyआ.अपी.सं /Ita No.958/Hyd/2024 (निर्धारण वर्ा/Assessment Year: 2018-19) Nuevosol Energy Private Vs. Assistant Commissioner Limited Of Income Tax Hyderabad Circle-16(1) [Pan : Aadcn7551K] Hyderabad (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee By: Shri Gvn Hari, Ar रधजस् व द्वधरध/Revenue By:: Shri Srinath Sadanala, Dr सुिवधई की तधरीख/Date Of Hearing: 26/11/2024 घोर्णध की तधरीख/Date Of 27/11/2024 Pronouncement: आदेश / Order Per. Manjunatha G., A.M: This Appeal Filed By The Assessee Is Directed Against The Order Dated 25/07/2024 Of The Learned Commissioner Of Income Tax (Appeals) [Learned Cit(A)], National Faceless Appeal Centre (Nfac), Delhi, Relating To A.Y.2018-19 On The Following Grounds : 1. The Order Of The Learned Commissioner Of Income Tax (Appeals) Is Contrary To The Facts & Also The Law Applicable To The Facts Of The Case. 2. The Learned Commissioner Of Income Tax (Appeals) Is Not Justified In Sustaining The Addition Of Rs.2,65,80,027

For Appellant: Shri GVN Hari, ARFor Respondent: : Shri Srinath Sadanala, DR

Section 36(1)(vii)

excluded from section 36(1)(vii), then such a provision cannot claim deduction u/s 37 of the Act, even on the basis of real income theory as explained above. Therefore, submitted that the order of the Ld.CIT(A) should be set aside and additions made by the Assessing Officer towards

Bhagini Mandal, Hydeabad vs. ITO., Exemption Circle-1(1), Hyderabad

In the result, the appeal of assessee in ITA No

ITA 952/HYD/2024[2014-15]Status: DisposedITAT Hyderabad15 Oct 2024AY 2014-15

Bench: Shri Laliet Kumar

For Appellant: Shri Vijay N Kale, CAFor Respondent: Shri U. Mini Chandran, Sr.AR

Section 1Section 10Section 11Section 12ASection 143(1)

cancelled. 7. The CIT appeals erred in confirming the assessment of gross income of appellant, in complete disregard of the real income theory which states that the expenditure incurred for earning income has to be allowed as deduction from the gross income earned to arrive at real income, as without

Bhagini Mandal, Hyderabad vs. ITO., Exemption Circle-1(1), Hyderabad

In the result, the appeal of assessee in ITA No

ITA 951/HYD/2024[2015-16]Status: DisposedITAT Hyderabad15 Oct 2024AY 2015-16

Bench: Shri Laliet Kumar

For Appellant: Shri Vijay N Kale, CAFor Respondent: Shri U. Mini Chandran, Sr.AR

Section 1Section 10Section 11Section 12ASection 143(1)

Shree Swaminarayan Charitable Trust, Ahmedabad vs. The ITO, Ward-2 (Exemption), Ahmedabad

ITA 1106/AHD/2024[2016-17]Status: DisposedITAT Ahmedabad09 Oct 2024AY 2016-17

Bench: Dr. Brr Kumarasstt.Year : 2016-17 Shree Swaminarayan Charitable Trust Ito, Ward-2 20, Pushpak Bungalows Vs (Exemption) Nr.Dipak School Ahmedabad. New Nikol, Ahmedabad. Pan : Aafs 8164 H (Applicant) (Responent) Assessee By : Shri Parin Shah, Ca Revenue By : Shri Ravindra, Sr.Dr सुनवाई क" तारीख/Date Of Hearing : 09/10/2024 घोषणा क" तारीख /Date Of Pronouncement: 09/10/2024 आदेश आदेश/O R D E R आदेश आदेश

For Appellant: Shri Parin Shah, CAFor Respondent: Shri Ravindra, SR.DR

Section 10Section 11Section 11(1)Section 234ASection 250

section. Without prejudice to the above and in alternative, Ld. NFAC ought to have give direction to compute income on commercial principle and real income theory. Charging of Interest u/s 234A,234B,234C are unjustified.” 3. The issue before me pertains to delayed submission of Form no.10B which ld.counsel

Mega Engineers & Builders, Port Blair vs. DCIT, Cir. 3(2), Port Blair

In the result, the appeal of assessee is allowed

ITA 312/KOL/2024[2017-18]Status: DisposedITAT Kolkata09 Oct 2024AY 2017-18

Bench: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]

Section 194C

shareholders but paying nil tax or lesser tax under the IT act due to various exemptions/deductions like sections 10A/10B/80IA/80IB. To justify the imposition, real income theory was stressed and it was held that the companies cannot be allowed to have two faces, one for shareholder and another for taxman. Section

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

In the result, appeal of the Revenue is partly allowed

ITA 1442/MUM/2024[2018-19]Status: HeardITAT Mumbai27 Sept 2024AY 2018-19

Bench: Shri Satbeer Singh Godara & Shri Girish Agrawal

Section 143(3)

undisputed. Revenue is aggrieved by the deletion of Rs.3.60 Crores towards interest income receivable by the assessee which has been deleted by applying real income theory. We have perused the observations and findings arrived by ld. CIT(A) in this respect which has been already narrated above. Facts being undisputed

Sunil J. Jagtap, Income Tax Officer(Exemptions)-1(2), Mumbai vs. Centre for the Study of Social Change, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 3941/MUM/2024[2015-16]Status: DisposedITAT Mumbai25 Sept 2024AY 2015-16

Bench: SHRI B R BASKARAN, ACCOUNTANT MEMBER, SHRI SUNIL KUMAR SINGH (Judicial Member)

Section 11Section 12ASection 13(3)Section 14Section 143(3)Section 250Section 263

were not tenable in law/ (ii) the proposed addition on account of notional rental was contrary to the real income theory as expounded by the Hon’ble Courts (iii) section 14 does not have any role to play since the assessee is a charitable entity and the income

Sunil J. Jagtap, Income Tax Officer (Exemptions)-1(2), Mumbai vs. Centre for the Study of Social Change, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 3940/MUM/2024[2016-17]Status: DisposedITAT Mumbai25 Sept 2024AY 2016-17

Section 11Section 12ASection 13(3)Section 14Section 143(3)Section 250Section 263

were not tenable in law/ (ii) the proposed addition on account of notional rental was contrary to the real income theory as expounded by the Hon’ble Courts ITA NO. 3940 & 3941/Mum/2024 Centre for the Study of Social Change (iii)section 14 does not have any role to play since

Gates India Pvt Ltd, Delhi vs. ACIT, Circle-10(1), Delhi

In the result, the appeal of the assessee is allowed

ITA 2379/DEL/2022[2018-19]Status: DisposedITAT Delhi22 Aug 2024AY 2018-19

Bench: Shri Saktijit Dey & Shri Pradip Kumar Kedia

For Appellant: Shri M.P. Rastogi, AdvFor Respondent: Shri Rajesh Kumar, CIT-(DR)

Section 143(3)Section 144CSection 144C(13)Section 144C(5)Section 92CSection 92C(1)

were outstanding receivables from AEs a part of which were realized beyond the period of 60 days. The TPO thus observed that the real income theory is not applicable in the context of Chapter X of IT Act. It was assumed that the assessee has provided benefits

Akshay Infrasys Industries Pvt. Ltd., Jaipur vs. ITO, Ward-4(1), Jaipur

In the result, the appeal of the assessee is allowed

ITA 613/JPR/2024[2017-18]Status: DisposedITAT Jaipur20 Aug 2024AY 2017-18

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)

For Appellant: Shri P.C. Parwal (C.A.)For Respondent: Shri Anoop Singh (Addl.CIT)

Section 143(2)Section 143(3)

real. Even in the Income Tax Act wherever intention is to charge the deemed income as real is specified. Thus, the Real Income Theory in Income Tax Law, a court-made concept emphasizing taxation of actual income, not hypothetical earnings. Even the provision of section

The Venus Parkland Co.Operatgive Housing Service Society Ltd., Ahmedabad vs. The Income Tax Officer, Ward-3(3)(5), Ahmedabad

In the result, the appeal filed by the Assessee is partly allowed

ITA 1039/AHD/2023[2018-19]Status: DisposedITAT Ahmedabad07 Aug 2024AY 2018-19

Bench: Shri T.R. Senthil Kumar (Judicial Member), Shri Narendra Prasad Sinha (Accountant Member)

Section 143(3)Section 56Section 57Section 80PSection 80P(2)(c)

1039/Ahd/2023 A.Y. 2018-19 Page No 5 The Venus Parkland Co.Op. Housing Service Society Ltd. . vs. ITO assessed income applying principles of real income theory. The income under any circumstances ought not to have assessed on and above Rs.4,64,486/- in the hands of the assessee qua assessment year

Income Tax Officer Ward-1, Gondia vs. Shri Satishkumar Madanlal Gupta, Gondia

In the result, appeal filed by the assessee for the ay 2009–10 stands dismissed

ITA 29/NAG/2020[2011-12]Status: DisposedITAT Nagpur01 Aug 2024AY 2011-12

Bench: Shri V. Durga Rao & Shri K.M. Roy, Accountant, Member

For Appellant: Shri M.K.M. AgrawalFor Respondent: Shri Kailash C. Kanojiya

Section 69A

actuality of the situation. Whether an accrual has taken place or not must, in appropriate cases, be judged on the principles of the real income theory." 6.7 In any case, in view of the unwillingness of the Assessing Officer to examine the books of accounts and documentary evidences, the issue

Income Tax Officer Ward-1, Gondia vs. Shri Satishkumar Madanlal Gupta, Gondia

In the result, appeal filed by the assessee for the ay 2009–10 stands dismissed

ITA 28/NAG/2020[2009-10]Status: DisposedITAT Nagpur01 Aug 2024AY 2009-10

Bench: Shri V. Durga Rao & Shri K.M. Roy, Accountant, Member

For Appellant: Shri M.K.M. AgrawalFor Respondent: Shri Kailash C. Kanojiya

Section 69A

Satish Kumar Madanlal Gupta, Gondia vs. Income Tax Officer Ward -1, Gondia

In the result, appeal filed by the assessee for the ay 2009–10 stands dismissed

ITA 24/NAG/2020[2011-12]Status: DisposedITAT Nagpur01 Aug 2024AY 2011-12

Bench: Shri V. Durga Rao & Shri K.M. Roy, Accountant, Member

For Appellant: Shri M.K.M. AgrawalFor Respondent: Shri Kailash C. Kanojiya

Section 69A

Satish Kumar Madanlal Gupta, Gondia vs. Income Tax Officer Ward -1, Gondia

In the result, appeal filed by the assessee for the ay 2009–10 stands dismissed

ITA 23/NAG/2020[2010-11]Status: DisposedITAT Nagpur01 Aug 2024AY 2010-11

Bench: Shri V. Durga Rao & Shri K.M. Roy, Accountant, Member

For Appellant: Shri M.K.M. AgrawalFor Respondent: Shri Kailash C. Kanojiya

Section 69A

Satish Kumar Madanlal Gupta, Gondia vs. Income Tax Officer Ward -1, Gondia

In the result, appeal filed by the assessee for the ay 2009–10 stands dismissed

ITA 22/NAG/2020[2009-10]Status: DisposedITAT Nagpur01 Aug 2024AY 2009-10

Bench: Shri V. Durga Rao & Shri K.M. Roy, Accountant, Member

For Appellant: Shri M.K.M. AgrawalFor Respondent: Shri Kailash C. Kanojiya

Section 69A

JCIT (OSD), CC-4(4), Mumbai vs. M/S. Shri Renukamata Multi-State Cooperative Urban Credit Society Ltd., Ahamednagar

ITA 2078/MUM/2023[2018-2019]Status: DisposedITAT Mumbai30 Jul 2024AY 2018-2019

Bench: Shri B.R. Baskaran & Shri Sandeep Singh Karhail

For Appellant: Shri Dharmendra KansaraFor Respondent: Ms. Mahita Nair

Section 142Section 153DSection 250Section 68

No.1613/M/21 dated 05-09-2022. 18. However, as evident from the record, the learned CIT(A) by applying the real income theory made the addition on account of commission by considering the commission charged by the assessee for cash deposits in remote branches. In this regard, it is pertinent ... record to show usage of money by the assessee for itself or siphoning off the same for its benefit, then by applying the real income theory only the income from the activities of the assessee as a co-operative society can be brought to tax, which undisputedly has already been

JCIT (OSD), CC-4(4), Mumbai vs. M/S. Shri Renukamata Multi-State Cooperative Urban Credit Society Ltd., Ahamednagar

ITA 2077/MUM/2023[2017-2018]Status: DisposedITAT Mumbai30 Jul 2024AY 2017-2018

Bench: Shri B.R. Baskaran & Shri Sandeep Singh Karhail

For Appellant: Shri Dharmendra KansaraFor Respondent: Ms. Mahita Nair

Section 142Section 153DSection 250Section 68

No.1613/M/21 dated 05-09-2022. 18. However, as evident from the record, the learned CIT(A) by applying the real income theory made the addition on account of commission by considering Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys ... record to show usage of money by the assessee for itself or siphoning off the same for its benefit, then by applying the real income theory only the income from the activities of the assessee as a co-operative society can be brought to tax, which undisputedly has already been

JCIT (OSD), CC-4(4), Mumbai vs. M/S. Shri Renukamata Multi-State Cooperative Urban Credit Society Ltd., Ahamednagar

ITA 2076/MUM/2023[2016-2017]Status: DisposedITAT Mumbai30 Jul 2024AY 2016-2017

Bench: Shri B.R. Baskaran & Shri Sandeep Singh Karhail

For Appellant: Shri Dharmendra KansaraFor Respondent: Ms. Mahita Nair

Section 142Section 153DSection 250Section 68

No.1613/M/21 dated 05-09-2022. 18. However, as evident from the record, the learned CIT(A) by applying the real income theory made the addition on account of commission by considering Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys ... record to show usage of money by the assessee for itself or siphoning off the same for its benefit, then by applying the real income theory only the income from the activities of the assessee as a co-operative society can be brought to tax, which undisputedly has already been