“diversion by overriding title”

Judicial DoctrinesSitaldas TirathdasSitaldas Tirathdas25 judgments

The decision most relied on for diversion by overriding title is Siddheshwar Sahakari Sakhar Karkhana Limited v. CIT (270 ITR 1), cited in 166 judgments on BharatTax.

Leading authorities on diversion by overriding title

Siddheshwar Sahakari Sakhar Karkhana Limited v. CIT

270 ITR 1 · 2004 · Supreme Court

166

citing judgments

Amounts collected by an assessee as an agent or for a predefined purpose are diverted by an overriding title and do not form part of the assessee's income. Such amounts, even if refundable on contingencies, are not considered uncertain and create a ripening obligation.

Somaiya Organo Chemicals Ltd. v. CIT

216 ITR 291 · 1995 · High Court

citing judgments

Amounts transferred to a separate fund for building storage facilities under a statutory obligation are diverted at source by overriding title and do not form part of the assessee's income.

Moti Lal Chhadami Lal Jain v. Commissioner of Income Tax, Delhi and Ors.

190 ITR 1 · 1991 · Supreme Court

citing judgments

Income diverted at source by an overriding title, such as for R&R plans of mining areas, is not taxable as the assessee's income.

CIT v. New Morrisson Sugar Mills Ltd.

269 ITR 398 · 2004 · Supreme Court

citing judgments

Amounts set apart towards a molasses reserve fund are considered a diversion of income by overriding title and are therefore excludible from the assessee's total income.

CIT v. Travancore Sugars & Chemicals Ltd.

88 ITR 1 · 1973 · Supreme Court

citing judgments

The Supreme Court's decision in CIT v. Travancore Sugars & Chemicals Ltd. is cited for the principle of diversion of income by overriding title, distinguishing it from issues related to the deductibility of certain taxes like education cess.

Raja Bejoy Singh Budhuria v. CIT

1 ITR 135 · 1933 · Supreme Court

citing judgments

Income is diverted by overriding title before it reaches the assessee if the nature of the obligation means the amount cannot be considered part of the assessee's income.

Provat Kumar Mitter v. CIT

41 ITR 624 · 1961 · Supreme Court

citing judgments

Receipts stand diverted by an overriding title where an obligation to pay an amount is attached to the very source of income, rather than being a mere application of income.

CIT v. Mulla & Mulla & Craigie Blunt & Caroe

190 ITR 198 · 1991 · High Court

citing judgments

Income diverted at source by an overriding title, such as a legal obligation to pay erstwhile partners for work done, is not taxable in the hands of the firm.

Judgments citing diversion by overriding title

M/S. Century Bangalore City Centre Private Limited, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle- 1(3), Bangalore

In the result, the appeals of the assessee are partly allowed

ITA 352/BANG/2020[2009-10]Status: DisposedITAT Bangalore21 Jun 2022AY 2009-10

Bench: Shri N.V. Vasudevanand Ms. Padmavathy S

For Appellant: Shri. R. Ramakrishnan, CAFor Respondent: Shri. Praveen Karanth, CIT(DR)(ITAT), Bengaluru

Section 131Section 132Section 153C

same to the land lords The interest amount was paid to the land lords not as a result of "Diversion By overriding Title" but as a mere application of income received by the appellant The additions made by the AO in the impugned assessment year on this count is therefore

M/S Mysore Race Club Limited, Mysuru vs. The Deputy Commissioner of Income Tax Circle-1(2), Mysuru

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

ITA 1480/BANG/2017[2011-12]Status: DisposedITAT Bangalore14 Mar 2022AY 2011-12

Bench: Shri. B.R. Baskaran & Smt. Beena Pillaiassessment Year : 2011-12 M/S. Mysore Race Club The Deputy Ltd., Commissioner Of Income Post Box No. 11, Tax, Race Course Road, Vs. Circle – 1 [2], Mysuru – 570 010. Mysuru. Pan: Aabcm5167G Appellant Respondent Assessee By : Shri S.V. Ravishankar, Advocate Revenue By : Shri Janardhan, Addl. Cit (Dr) Date Of Hearing : 04-03-2022 Date Of Pronouncement : 14-03-2022 Order Per Beena Pillaipresent Appeal Is Filed By Assessee Against The Order Dated 28/10/2016 Passed By Ld.Cit(A), Mysore For Assessment Year 2011- 12 On Following Grounds Of Appeal: “1. The Order Of The Learned Commissioner Of Income-Tax [Appeals] In So Far As They Are Against The Appellant Is Opposed To Law, Equity & Weight Of Evidence, Probabilities, Facts & Circumstance Of The Case. 2. The Appellant Denies Itself Liable To Be Assessed Over & Above The Returned Income By It On The Facts & Circumstances Of The Case. 3. The Learned Commissioner Of Income-Tax [Appeals] Failed To Appreciate That The Amount Collected From Punters For Disbursement As Dividend To Punters Stands Diverted At Source By Virtue Of Overriding Title On The Facts & Circumstances Of The Case. [I]. The Learned Commissioner Of Income-Tax [Appeals] Failed To Appreciate That The Totalizator Collection From The Punters Stands Diverted At Source For Disbursement To Dividend To Punters On The Facts & Circumstances Of The Case. [Ii]. The Learned Commissioner Of Income-Tax [Appeals] Failed To Appreciate That Method Of Accounting Adopted By The Appellant Were Accepted By The Revenue From Past

For Appellant: Shri S.V. Ravishankar, AdvocateFor Respondent: Shri Janardhan, Addl. CIT (DR)

Section 40Section 40A

partly allowed the claim of assessee by considering the amount paid to the punters on winning as application of income as against diversion by overriding titles and submitted by assessee’s however upholding the disallowance of the amount paid other than by way of a county checks that exceeded

Mysore Minerals Limited (Now Known As Karnataka State Minerals Corporation Limited), Bengaluru vs. Deputy Commissioner of Income Tax, Circle- 4(1)(2), Bengaluru

In the result, both the appeals are allowed

ITA 465/BANG/2020[2014-15]Status: DisposedITAT Bangalore07 Mar 2022AY 2014-15

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Narendra Sharma, AdvocateFor Respondent: Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 147Section 148

original return of income and excluded the same from Sales revenue in the revised return of income contending that the same is diversion by overriding title. 8.12.3. Ld.CIT.D.R placed his reliance on certain observations made by Hon'ble Supreme Court in M/s Samaj Parivartana Samudaya and Oth. Vs. State

Mysore Minerals Limited (Now Known As Karnataka State Minerals Corporation Limited), Bengaluru vs. Assistant Commissioner of Income Tax, Circle- 4(1)(2), Bengaluru

In the result, both the appeals are allowed

ITA 464/BANG/2020[2013-14]Status: DisposedITAT Bangalore07 Mar 2022AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Narendra Sharma, AdvocateFor Respondent: Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 147Section 148

Perfect Thread Mills Ltd, Mumbai vs. ITO WD 8(2)(4), Mumbai

In the result, appeal filed by the assessee is allowed

ITA 349/MUM/2011[2007-08]Status: DisposedITAT Mumbai24 Feb 2022AY 2007-08

Bench: S. Rifaur Rahman, Hon'Ble & Shri Amarjit Singh, Hon'Ble&

For Appellant: Department by Shri Mehul Jain

submissions and dismissed the appeal filed by the assessee with the following observations:- “(i) It is argued that the payment to banks was diversion by overriding title and hence should be allowed. It has been held in CIT vs. Attili N. Rao (2001) [252 ITR 880] (SC), that where