Diversion of Income

Nice question..Diversion of income is opposite of application of income.. Suppose you are running a cloth shop and you are earning 100 rs as profit..Now you are buying pizzas for 50 rs. For your consumption,so that is application of income..And the amount taxable to you will remain 100 as your will not get any deduction for 50. Now if you give another 50 to your employee that will be diversion of your income and you will get deduction of 50..And amount taxable will be 50..The 50 which your employer is getting will charge to him under head salaries..

Thanks kanveer! i got it.