Section 5 of the Income Tax Act

Income-tax Act, 2025: s.5

Section 5 of the Income-tax Act, 1961 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 is Balakrishnan v. M. Krishnamurthy (7 SCC 123), cited in 368 of the 847 judgments on BharatTax that turn on this section.

Leading authorities on Section 5

Balakrishnan v. M. Krishnamurthy
7 SCC 123 · 1998 · Supreme Court
368
citing judgments

The Supreme Court outlines the principles for condoning delay in filing appeals, stating that a litigant's lapse is not always a bar if the explanation is bona fide and not a dilatory strategy. Courts should show utmost consideration to suitors and prioritize substantial justice unless the delay is deliberately to gain time.

DIT v. Morgan Stanley & Co.
292 ITR 416 · 2007 · Supreme Court
360
citing judgments

A Permanent Establishment (PE) signifies a foreign enterprise's virtual projection into another country, with a fixed place PE existing where an MNE's business is wholly or partly carried on. A dependent agent PE requires the agent to act as such and/or have the authority to conclude contracts for the foreign enterprise under DTAA provisions.

Smt. Tarulata Shyam v. CIT
108 ITR 345 · 1977 · Supreme Court
209
citing judgments

Taxing statutes must be interpreted strictly, assuming that the law-making authority does not commit a mistake or make an omission. There is no room for purposive interpretation under direct tax laws.

CIT v. Lakhani Marketing Inc.
49 Taxmann.com 257 · 2014 · High Court
145
citing judgments

Disallowance under Section 14A of the Income Tax Act, 1961, cannot exceed the actual tax-exempt income earned by the assessee during the relevant year. If no tax-exempt income is earned, no disallowance under Section 14A is warranted.

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.

CIT v. Holcim India (P.) Ltd.
57 Taxmann.com 28 · 2015 · High Court
138
citing judgments

Disallowance under Section 14A applies only when exempt income is actually received or receivable during the relevant previous year. The provision does not trigger merely upon incurring expenditure if no exempt income materialized in that year.

CIT v. Maharashtra Sugar Mills Ltd.
82 ITR 452 · 1971 · Supreme Court
109
citing judgments

Expenditure incurred by an assessee carrying on a composite business giving rise to both taxable and non-taxable income is allowable in its entirety without apportionment. This principle led to the subsequent introduction of Section 14A of the Income-tax Act.

Keshav Mills Ltd. v. CIT
23 ITR 230 · 1953 · Supreme Court
86
citing judgments

Income taxability depends on the real nature of the receipt and actual or constructive receipt of income, not merely on book entries. An amount is only "deemed to be received" if explicitly provided by the Income Tax Act, not by an assessee's unilateral intention.

Vaijayantabai Baburao Patil v. Shantaram Baburao Patil
122 Taxmann 114 · 2002 · Supreme Court
63
citing judgments
Nortel Networks India International Inc. v. DIT
386 ITR 353 · 2016 · High Court
61
citing judgments

The burden of proving the existence of a Permanent Establishment (PE) under a Double Taxation Avoidance Agreement (DTAA) rests squarely on the Income Tax Department.

Judgments on Section 5

Sharmanji Yarns Private Limited, Ludhiana vs. Deputy Commissioner of Income Tax Circle 1 Ludhiana, Ludhiana

In the result, appeal of the Revenue is dismissed whereas appeal of the assessee is allowed

ITA 1510/CHANDI/2025[2022-23]Status: DisposedITAT Chandigarh22 Apr 2026AY 2022-23

Bench: Shri Rajpal Yadav & Shri Manoj Kumar Aggarwalआयकर अपील सं./ Ita No. 1339/Chd/2025 "नधा"रण वष" / Assessment Year : 2022-23 The Acit, बनाम Sharmanji Yarns Pvt. Ltd., Circle-1, Village – Lakhowal, Kohara Road, Vs Ludhiana. Ludhiana. "थायी लेखा सं./Pan /Tan No: Aahcs6629R अपीलाथ"/Appellant ""यथ"/Respondent & आयकर अपील सं./ Ita No. 1510/Chd/2025 "नधा"रण वष" / Assessment Year : 2022-23 Sharmanji Yarns Pvt. Ltd., बना The Dcit, Village – Lakhowal, Kohara Road, Circle-1, म Jandiali, B.O. Kohara,Ludhiana. Ludhiana. Vs "थायी लेखा सं./Pan /Tan No: Aahcs6629R अपीलाथ"/Appellant ""यथ"/Respondent राज"व क" ओर से/ Revenue By : Smt. Kusum Bansal, Cit Dr & Dr. Ranjit Kaur, Addl. Cit, Sr. Dr "नधा"रती क" ओर से/Assessee By : Shri Tej Mohan Singh, Advocate तार"ख/Date Of Hearing : 16.04.2026 उदघोषणा क" तार"ख/Date Of Pronouncement : 22.04.2026 Hybrid Hearing आदेश/Order Per Rajpal Yadav, Vp

For Appellant: Shri Tej Mohan Singh, AdvocateFor Respondent: Smt. Kusum Bansal, CIT DR &
Section 249Section 253Section 3Section 5

Asstt. Commissioner of Income Tax, Circle-I, Ludhiana vs. Sharmanji Yarns Private Limited, Ludhiana

In the result, appeal of the Revenue is dismissed whereas appeal of the assessee is allowed

ITA 1339/CHANDI/2025[2022-23]Status: DisposedITAT Chandigarh22 Apr 2026AY 2022-23

Bench: Shri Rajpal Yadav & Shri Manoj Kumar Aggarwalआयकर अपील सं./ Ita No. 1339/Chd/2025 "नधा"रण वष" / Assessment Year : 2022-23 The Acit, बनाम Sharmanji Yarns Pvt. Ltd., Circle-1, Village – Lakhowal, Kohara Road, Vs Ludhiana. Ludhiana. "थायी लेखा सं./Pan /Tan No: Aahcs6629R अपीलाथ"/Appellant ""यथ"/Respondent & आयकर अपील सं./ Ita No. 1510/Chd/2025 "नधा"रण वष" / Assessment Year : 2022-23 Sharmanji Yarns Pvt. Ltd., बना The Dcit, Village – Lakhowal, Kohara Road, Circle-1, म Jandiali, B.O. Kohara,Ludhiana. Ludhiana. Vs "थायी लेखा सं./Pan /Tan No: Aahcs6629R अपीलाथ"/Appellant ""यथ"/Respondent राज"व क" ओर से/ Revenue By : Smt. Kusum Bansal, Cit Dr & Dr. Ranjit Kaur, Addl. Cit, Sr. Dr "नधा"रती क" ओर से/Assessee By : Shri Tej Mohan Singh, Advocate तार"ख/Date Of Hearing : 16.04.2026 उदघोषणा क" तार"ख/Date Of Pronouncement : 22.04.2026 Hybrid Hearing आदेश/Order Per Rajpal Yadav, Vp

For Appellant: Shri Tej Mohan Singh, AdvocateFor Respondent: Smt. Kusum Bansal, CIT DR &
Section 249Section 253Section 3Section 5