MEANING of two words-

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Jyoti

Jyoti (Querist)
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06 February 2011 what is the meaning of diversion of income and application of income?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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06 February 2011 Diversion of income which income not used for the purpose of receipt

Application means the using the income for any purpose

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 February 2011 Diversion of Income:

Diversion of income means to divert income to other person(s) under a pre-existing title.

Suppose A & B are Co-owners of a house which is given on Rent to C for10000/ pm.

Now C issues a cheque for Rent payment for one month to A of10000/-, even though A is entitled for only5000/-. He has to give5000/- to B. So, in this case it can be said that A has to divert5000/ to B. The amount taxable in the hands of A will be only5000/-.

Application of Income:
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Now out of10000/ diversion of5000/ has been made to B. The amount left with A is his own income. He wants to give you a party and spends1000/- on it. This will be called application of income. As the income of Rs.5000/- has been once taxed so application of income will also not be taxable.

Jyoti

Jyoti (Querist)
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09 February 2011 Thanks Experts.

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