Section 5(2) of the Income Tax Act

Income-tax Act, 2025: s.5

Section 5(2) falls under section 5 of the Income-tax Act, 1961, which corresponds to section 5 (Scope of total income) of the Income-tax Act, 2025.

Read section 5 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 5(2) is Commissioner of Income Tax v. Nova Promoters and Finlease (P) Ltd. (342 ITR 169), cited in 658 of the 430 judgments on BharatTax that turn on this section.

Leading authorities on Section 5(2)

Commissioner of Income Tax v. Nova Promoters and Finlease (P) Ltd.
342 ITR 169 · 2012 · High Court
658
citing judgments

To make an addition under Section 68 for unexplained cash credits, the Assessing Officer must conduct proper inquiry into the identity, genuineness, and creditworthiness of the creditor, especially concerning share application money. The assessee's initial discharge of burden by providing necessary details shifts the onus back to the AO for further investigation, including the source of source.

Parimisetti Seetharamamma v. CIT
57 ITR 532 · 1965 · Supreme Court
142
citing judgments

Not all receipts constitute income chargeable to tax. An Assessing Officer cannot reject a prima facie reasonable explanation on mere probabilities or arbitrary grounds, but must disprove facts.

Carborandum Co. v. CIT
108 ITR 335 · 1977 · Supreme Court
87
citing judgments
J.S. Parkar v. V.B. Palekar
94 ITR 616 · 1974 · High Court
58
citing judgments

An assessee found to be the owner of bullion, etc., must explain its source. The Income Tax Officer must find the assessee to be the owner, not merely in possession.

CIT v. Avtar Singh Wadhwan
247 ITR 260 · 2001 · High Court
53
citing judgments

Salary received by a non-resident for services rendered outside India accrues outside India and is not taxable in India. Only salary earned for work performed in India is regarded as income arising in India and is taxable.

ACIT v. Clough Engineering Ltd.
130 ITD 137 · 2011 · ITAT
52
citing judgments

Interest income, such as on income-tax refunds or fixed deposits, derived by a foreign entity with a Permanent Establishment (PE) in India is taxable under DTAA if the debt-claim is effectively connected or attributable to the PE. For DTAA purposes, the terms 'attributable' and 'effectively connected' are considered to have the same meaning.

New India Insurance v. ACIT
18 SOT 51 · 2007 · ITAT
43
citing judgments
DIT (International Taxation) v. PrahladVijendra Rao
198 Taxmann 551 · 2011 · High Court
42
citing judgments
Som Nath Maini v. CIT
306 ITR 414 · 2008 · High Court
38
citing judgments

An Assessing Officer may reject the genuineness of a transaction if the evidence provided by the assessee is not trustworthy, even if the transaction appears to be conducted through cheques or other formal means. The burden of proving the genuineness of a transaction lies primarily on the assessee.

UPS SCS Asia Ltd. v. Asstt. DIT, (International Taxation)
50 SOT 268 · 2012 · ITAT
37
citing judgments

Managerial services require both planning and execution; mere execution of directions from another party does not qualify as managerial services.

Judgments on Section 5(2)

Mahalaxmi Industries, Mehsana vs. The DCIT, Mehsana

In the result, the appeal of the assessee is dismissed as withdrawn

ITA 728/AHD/2019[2015-16]Status: DisposedITAT Ahmedabad21 Dec 2021AY 2015-16

Bench: Shri Rajpal Yadav & Shri Waseem Ahmedassessment Years : 2015-16 Mahalaxmi Industries, The Dcit, Plot No.108/1 & 2, Ravi Indl. Vs Mehsana Estate, B/H. Prestige Hotel, At. Bileshwarpura, Post: Chhatral, Dist: Mehsana Pan : Aacfm 9429 M अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Withdrawal Application On Record Revenue By : Shri Mukesh Kumar Sharma, Sr Dr सुनवाई क" तार"ख/Date Of Hearing : 20/12/2021 घोषणा क" तार"ख /Date Of Pronouncement: 21/12/2021 आदेश/O R D E R Per Rajpal Yadav: The Assessee Is In Appeal Before The Tribunal Against The Order Of The Learned Commissioner Of Income-Tax (Appeals), Gandhinagar, Ahmedabad Dated 28.02.2019 Passed For Assessment Year 2015-16. 2. At The Time Of Hearing Before Us, None Appeared On Behalf The Assessee. However, Vide Application Dated 06.04.2021, The Assessee Submitted That The Assessee Has Opted To Avail The Benefits Of “Vivad Se Vishwas Scheme 2020” & Also Submitted That The Assessee Has Already Received Form No.5, Being The Order For Full & Final Settlement Of Tax Arrears Under The Said Scheme, Issued By The Principal Commissioner Of Income Tax, Ahmedabad-3 In This Regard, Which Is Placed On Record.

For Appellant: Withdrawal Application on recordFor Respondent: Shri Mukesh Kumar Sharma, Sr DR
Section 5(2)Section 6