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)

Manab Chandra Ghosh, Kolkata vs. ACIT, Cir. 1(2), It, Kolkata

The appeal of the assessee is allowed

ITA 40/KOL/2024[2016-17]Status: DisposedITAT Kolkata27 Nov 2024AY 2016-17

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarmai.T.A. No.40/Kol/2024 Assessment Year: 2016-17 Manab Chandra Ghosh………………..……………………………….…..……Appellant 5A, Banerjee Para, Behala, Kol-700060. [Pan: Ahspg9975H] Vs. Acit, Circle-1(2), It-Kolkata..........…..….…..….........……........……...…..…..Respondent Appearances By: Shri Nageswar Rao, Advocate, Appeared On Behalf Of The Appellant. Shri Pradip Kr. Biswas, Addl. Cit, Appeared On Behalf Of The Respondent. Date Of Concluding The Hearing : November 19, 2024 Date Of Pronouncing The Order : November 27, 2024 Order Per Sonjoy Sarma: The Present Appeal Is Filed By The Assessee Against The Order Dated 21.11.2022 Of The Commissioner Of Income Tax (Appeals)-22, Kolkata [Hereinafter Referred To As ‘Cit(A)’] Passed U/S 250 Of The Income Tax Act (Hereinafter Referred To As The ‘Act’) For Assessment Year 2016-17. 2. The Brief Facts Of The Case Are That The Assessee Is An Employee Of Ibm India Pvt. Ltd. (An Indian Company With Registered Office In Bangalore) & Was Undergone A Short-Term Assignment To Indonesia During The Relevant Assessment Year. During The Financial Year 2015-16, The Stayed 61 Days In India As Evident By The Passport Details Submitted Before The Assessing Officer. Consequently, The Assessee Claimed To Be A Non-Resident For The Assessment Year 2016-17 As Per The Provisions Of The Income Tax Act. During The Assessment Year In Question, The Assessee Received Salary Amounting To Rs.29,57,760/- In India, On Which Rs.7,06,207/- Was Deducted As Tax At Source As Per Form No.16 Filed By The Assessee. During The Relevant Assessment Year, The Assessee Also

Section 143(2)Section 250Section 5(2)Section 5(2)(b)