Meaning of “Income”

The meaning of income under section 2(24), 11, 15 of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which various courts tried to explain the meaning of income.

meaning of income

Meaning of Income

The phrase “income” used in section 2(24), 11, 15 of the Income Tax Act came up before various high courts as detailed under :

1. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in CIT Vs. Shaw Wallace & Co. 6 ITC 178 (Pc)/Padmaraje R. Kadambande Vs. Cit [1992] 195 ITR 877 (SC) as under :

Meaning : Income’ in this act connotes a periodical monetary return ‘coming in’ with some sort of regularity, or expected regularity, from definite sources.

2. Hon’ble Pondicherry High Court explained the meaning of “income” while delivering judgment in Maharajkumar Gopal Saran Narain Singh Vs. CIT [1935] 3 ITR 237 (PC) as under :

Meaning : The word ‘income’ is not limited by the words ‘profits’ and ‘gains’. Anything which can properly be described as ‘income’ is taxable under the act, unless expressly exempted.

3. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Raghuvanshi Mills Ltd. Vs. CIT [1952] 22 ITR 484 (SC) as under :

Meaning : No attempt has been made in the act to define ‘income’ except to say in section 6(6c) of the 1922 act that it includes certain things which would possibly not have been regarded as income but for the special definition. That, however, does not limit the generality of its natural meaning except as qualified in the section itself. There is, however, a distinction between ‘income’ and ‘taxable income’. The act does not purport to subject all sources of income to tax, for the liability is expressly made subject to the provisions of the act and among the provisions are a series of exceptions and limitations.

4. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Dooars Tea Co. Ltd. Vs. CAIT [1962] 44 ITR 6 (SC) as under :

Meaning : The word ‘income’ as it is used in the income-tax act has often been characterised by judicial decisions as formidably wide and vague and its extent and sweep are not controlled or limited by the use of the words ‘profits and gains’. As has been observed by sir george lowndes in cit v. Shaw wallace & co. [1932] 2 Comp. Cas. 276, The object of the [indian] income-tax act is to tax ‘income’, a term which it does not define. It is expanded, no doubt, into income, profits and gains, but the expansion is more a matter of words than of substance.

5. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Karanpura Development Co. Ltd. Vs. CIT [1962] 44 ITR 362 (SC) as under :

Section : 2(24)

Meaning : Whatever income may include or mean, it is, however, clear that it does not include fixed capital or the realising of fixed capital by turning it into some other form of capital or money.

6. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Bhagwan Dass Jain Vs. Union Of India [1981] 128 ITR 315 (SC) as under :

Section : 2(24)

Meaning : The expression ‘income’, according to the dictionary, means ‘a thing that comes in’. Income may also be defined as the gain derived from land, capital or labour or any two or more of them. Even in its ordinary economic sense, the expression ‘income’ includes not merely what is received or what comes in by exploiting the use of a property but also what one saves by using it oneself. That which can be converted into income can be reasonably regarded as giving rise to income.

7. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Universal Radiators Vs. CIT [1993] 68 TAXMAN 45/201 ITR 800 (SC) as under :

Section : 2(24)

Meaning : Liability to pay tax under the act arises on the income accruing to an assessee in a year. The word ‘income’, ordinarily in normal sense, connotes any earning of profit or gain periodically, regularly or even daily in whatever manner and from whatever source. Thus, it is a word of very wide import.

Clause (24) of section 2 is legislative recognition of its elasticity. Its scope has been widened from time-to-time by extending it to varied nature of income. Even before it was defined as including profits, gains, dividends and contributions received by a trust, it was held to be a words ‘of broadest connotation’ which could not be ‘understood in restricted or technical sense’.

8. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Cit Vs. G.R. Karthikeyan [1993] 68 TAXMAN 145/201 ITR 866 (SC) as under :

Section : 2(24)

Meaning : Since the definition of ‘income’ in section 2(24) is an inclusive one, its ambit should be the same as that of the word ‘income’ occurring in entry 82 of list i of the seventh schedule to the constitution.

9. Hon’ble Punjab High Court explained the meaning of “income” while delivering judgment in Punjab Distilling Industries Ltd. Vs. Cit [1963] 48 ITR 288 (PUNJ.) as under :

Section : 2(24)

Meaning : Income’, for purposes of taxation, has an element of gain or profit as distinguished from corpus or principal. It is sometimes called fruit born of capital, but mere conceivability or facility of fruition is not income. An important distinguishing feature which, however, cannot be overlooked is that income in the sense of tax laws is distinct from the capital or the stock. It is an increase of wealth out of which money may be taken to satisfy the tax demands of the government.

10. Hon’ble Allahabad High Court explained the meaning of “income” while delivering judgment in Cit Vs. Smt. Shanti Meattle [1973] 90 ITR 385 (ALL.) as under :

Section : 2(24)

Meaning : The word ‘income’ as used in the income-tax act has often been characterised by judicial decisions as formidably wide and vague in its scope. It is a word of elastic import and its extent is not controlled and is not governed by the words ‘profits and gains’ in section 10 of the 1922 act. Every receipt generally may be described as income unless it is expressly exempt.

11. Hon’ble Punjab & Hariyana High Court explained the meaning of “income” while delivering judgment in Raja Ragavendra Singh Vs. State Of Punjab [1976] 102 ITR 40 (PUNJ. & HAR.) as under :

Meaning : Section 2(6c) of the 1922 act and section 2(24) of the 1961 act give inclusive definition of the word ‘income’. Whenever a term is given such a definition in a statute, it means not only the things mentioned therein but also includes in its ambit the meaning of the term as generally understood.

12. Hon’ble Gauhati High Court explained the meaning of “income” while delivering judgment in Lachit Films Vs. Cit [1992] 195 ITR 402 (GAUHATI) as under :

Section : 2(24)

Meaning : Considering the use of the word ‘include’ in section 2(24), the word ‘income’ shall be construed as is comprehending not only those which section 2(24) declares that they shall include but also such things as it signifies according to its natural import.

13. Hon’ble Madhya Pradesh High Court explained the meaning of “income” while delivering judgment in Keshkal Co-Operative Marketing Society Ltd. Vs. Cit [1986] 55 CTR (MP) 229 as under :

Section : 2(24)

Meaning : Under section 2(24) ‘income’ is defined which postulates that the word ‘income’ has to be given a very wide meaning, but certainly it does not mean to cover mere production or receipt of a commodity which may be converted into money. It certainly cannot be construed to be an income in its normal connotation of the term ‘income’ as envisaged under section 2(24).

14. Hon’ble Rajasthan High Court explained the meaning of “income” while delivering judgment in Cit Vs. Ramdeo Samadhi [1986] 29 TAXMAN 360/160 ITR 179 (RAJ.) as under :

Section : 2(24)

Meaning : The word ‘income’ is an expression of elastic ambit and definition given in section 2(24) is not exhaustive. In such circumstances, one may consider common parlance meaning of the word ‘income’

15. Hon’ble Patna High Court explained the meaning of “income” while delivering judgment in Cit V. Bokaro Steel Ltd. (No. 1) [1988] 170 ITR 522 (PAT.) as under :

Section : 2(24)

Meaning : The definition of ‘income’ in clause (24) of section 2 is not exhaustive. It is inclusive and fictionally covers things which this clause declares to include, but includes also such things as the word signifies according to its natural import. This clause merely brings in artificial categories to the natural connotation of ‘income’. The object of the act is to tax ‘income’, a term of formidably wide and vague import.

The word ‘income’ is an expression of elastic ambit. The word ‘income’ is a more general term than ‘profits’ or ‘gains’. A receipt may be taxable as income, although it may contain no element of profit or gain. ‘Profits’ or ‘gains’ means something which is in the nature of interest or fruit, as opposed to the principal or tree.

16. Hon’ble Madhya Pradesh High Court explained the meaning of “income” while delivering judgment in Kaluram Ganeshram (Huf) V. Cit [1988] 37 TAXMAN 167/172 ITR 154 (MP) as under :

Section : 2(24)

Meaning : When section 2(24) defines the term ‘income’, it does not make any distinction between the gross income and taxable income for the purposes of taxation. However, there is no doubt that it is not the gross income, but it is the taxable income which constitutes the basis of determination of the amount of tax payable.

17. Hon’ble Kerala High Court explained the meaning of “income” while delivering judgment in Father Epharam Vs. Cit [1989] 43 TAXMAN 128/176 ITR 78 (KER.) as under :

Section : 2(24)

Meaning : As per section 2(24), the word ‘income’ is an inclusive definition. It is not exhaustive. It has a wide import. It has got a legal concept. The scheme of section 2(24) read with sections 4 and 10, seems to be that, given its ordinary and natural meaning, the word ‘income’ will take in any monetary return ‘coming in’. It will take in voluntary and gratuitous payments which are connected or linked with the office, vocation or occupation.

18. Hon’ble Karnataka High Court explained the meaning of “income” while delivering judgment in Karnataka Electricity Board Employees Union Vs. Union Of India [1989] 46 TAXMAN 45/179 ITR 521 (KAR.) as under :

Section : 2(24)

Meaning : The term ‘income’ is very wide in its import. All allowances received by the salaried persons are taxable under the act unless expressly exempted. These payments made in the form of allowances and special allowances accrue and are received by the salaried person by virtue of his office and employment.

19. Hon’ble Delhi High Court explained the meaning of “income” while delivering judgment in Cit Vs. Quantas Airways Ltd. [2002] 122 TAXMAN 935/256 ITR 84 (DELHI) as under :

Section : 2(24)

Meaning : The expression ‘income’ as occurring in section 2(24) would include profits and gains and any capital gains chargeable under section 45 but in case of a non-resident, capital gain can be considered as an ‘income’ only if transaction takes place either in india or through or from any property in india or from any asset or source of income in india or through transfer of capital asset situate in india—see also quantas airways case digested under section 9.

20. Hon’ble Bombay High Court explained the meaning of “income” while delivering judgment in Cit Vs. Jamnalal Bajaj Sewa Trust [1988] 171 ITR 568 (BOM.) as under :

Section : 13

Meaning : Section 2(24) defining income, includes capital gains which are chargeable under section 45. The word ‘income’ in section 13 must, therefore, be read as inclusive of income arising from such capital gains.

21. Hon’ble Bombay High Court explained the meaning of “income” while delivering judgment in Cit V. Gopal Krishna Suri [2000] 113 TAXMAN 707 (BOM.) as under :

Section : 15

Meaning : The word ‘income’ in section 15 does not mean income which is net of expenses incurred to earn that income.

22. Hon’ble Kolkata High Court explained the meaning of “income” while delivering judgment in Director Of Income-Tax V. Girdharilal Shewnarain Tantia Trust [1993] 199 ITR 15 (CAL.) as under :

Section : 11

Meaning : The ‘income’ contemplated by the provisions of section 11 is the real income and not the income as assessed or assessable.

23. Hon’ble Bangalore High Court explained the meaning of “income” while delivering judgment in Dy. Dit (Exemptions) Vs. Cutchi Memon Union [2013] 38 TAXMANN.COM 276/60 SOT 260 (BANG.) as under :

Section : 11

Meaning : While section 2(45) specifically defines ‘total income’, the expression used in section 11(1) is ‘only income’. Accordingly, it would be incorrect to assign to the word ‘income’ used in section 11(1)(a), the same meaning as has been specifically assigned to the expression ‘total income’ in section 2(45).

The cbdt in circular no. 5P (lxx-6), dated 19-6-1968 has also adopted the same approach. Even in interpreting the several provisions of the act, wherever the expression ‘income’ occurs, there has been some divergence in the meaning given to that expression on account of the particular context involved. In the context of section 11, which contemplates application or accumulation of income for charitable or religious purpose, it has necessarily to be the income as accounted for in the accounts and not a computed under the act.

Hence, for the purpose of section 11(1) the expression ‘income’ has to be understood in the popular or general sense, i.E., In the sense what is actually available in the hands of the assessee subject, of course, to any adjustment for expenses extraneous to the trust. It is only the income as available to the assessee and, over which the assessee has power to enjoy which can be applied or accumulated for charitable purposes. Moreover, wherever the statute contemplated the income being computed in the manner set out in the provisions of the act, appropriate words are used. Such is not the case with section 11(1).

Hence, income from the properties held under trust would have to be arrived at in the normal commercial manner without reference to the provisions which are attracted by section 14.

24. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Navinchandra Mafatlal Vs. Cit [1954] 26 ITR 758 (SC) as under :

Section : 2(24)

Meaning : The word ‘income’ in list i of the seventh schedule to the government of india act, 1935 should be given its widest connotation in view of the fact that it occurs in a legislative head conferring legislative power and it includes a capital gain. It will be wrong to interpret the word in the light of any supposed english legislative practice.

25. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Navnit Lal C. Javeri Vs. K.K. Sen, Aac [1965] 56 ITR 198 (SC) as under :

Section : 2(24)

Meaning : The word ‘income’ in entry 82, list i of the seventh schedule to the constitution, must receive a wide interpretation; how wide it should be is unnecessary to consider, because such an enquiry would be hypothetical. The question must be decided on the facts of each case. There must no doubt be some rational connection between the item taxed and the concept of income liberally construed.

26. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Elel Hotels & Investments Ltd. V. Union Of India [1989] 178 ITR 140/44 TAXMAN 304 (SC) as under :

Section : 2(24)

Meaning : The word ‘income’ is of elastic import. In interpreting expressions in the legislative lists a very wide meaning should be given to the entries. In understanding the scope and amplitude of the expression ‘income’ in entry 82, list i, any meaning which fails to accord with the plenitude of the concept of ‘income’ in all its width and comprehensiveness should be avoided.

The cardinal rule of interpretation is that the entries in the legislative lists are not to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. The widest possible construction, according to the ordinary meaning of the words in the entry, must be put upon them. Reference to legislative practice may be admissible in reconciling two conflicting provisions in rival legislative lists.

In construing the words in a constitutional document conferring legislative power, the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude. The expression ‘income’ in entry 82, list i, cannot, therefore, be subjected, by implication, to any restriction by the way in which last term might have been deployed in a fiscal statute.

A particular statute enacted under the entry might, as a matter of fiscal policy, seek to tax same species of income alone. The definitions would, therefore, be limited by the consideration of fiscal policy of a particular statute. But expression ‘income’ in the legislative entry has always been understood in a wide and comprehensive connotation to embrace within it every kind of receipt or gain either of a capital nature or of a revenue nature.

The ‘taxable receipts’ as defined in the statute cannot be held to fall outside such a ‘wider connotation’ of income in the wider constitutional meaning and sense of the term as understood in entry 82, list i. Note : the above case is on hotel receipts tax act, 1980.

27. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Punjab Distilling Industries Ltd. Vs. CIT [1965] 57 ITR 1 (SC) as under :

Section : 2(24)

Meaning : The expression ‘income’ in entry 54 of list i of the seventh schedule to the government of india act, 1935, and the corresponding entry 82 of list i of the seventh schedule to the constitution of india, shall be widely and liberally construed so as to enable a legislature to provide by law for the prevention of evasion of income-tax.

28. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Bhagwan Dass Jain V. Union Of India [1981] 28 ITR 315 (SC) as under :

Section : 2(24)

Meaning : It would not be wrong to construe the word ‘income’ in entry 82 of list i of the seventh schedule to the constitution as including all items which were taxable under the contemporaneous law relating to tax on income which was in force at the time when the constitution was enacted.

29. Hon’ble Supreme Court explained the meaning of “income” while delivering judgment in Chuharmal V. Cit [1988] 38 TAXMAN 190/172 ITR 250 (SC) as under :

Section : 68 & 69A

Meaning : The expression ‘income’ as used in section 69a, has wide meaning which means anything which comes in or results in gain.

30. Hon’ble AAR explained the meaning of “income” while delivering judgment in Dana Corporation, In Re [2009] 227 CTR 441 as under :

Meaning : The expression ‘income’ in section 92 is not used in a sense wider than or different from its scope and connotation elsewhere in the act.

31. Hon’ble AAR explained the meaning of “income” while delivering judgment in Castleton Investment Ltd., In Re [2012] 24 TAXMANN.COM 150/211 TAXMAN 282/348 ITR 537/252 CTR 131 (AAR – NEW DELHI) as under :

Section : 92

Meaning : Going by its general meaning and by its defined meaning under the act, there is no warrant for restricting the scope of the expression ‘income’ occurring in section 92.

32. Hon’ble ITAT-Delhi explained the meaning of “income” while delivering judgment in Ito VS. Kuldeep Jain [2002] 81 ITD 379 (DELHI – TRIB.) as under :

Section : 64

Meaning : When the object of introducting provision of section 64(1a) is to check evasion of tax, it would not be fair and reasonable to infer that the term ‘income’ used in the said section does not refer to the ‘gross total income‘ i.E., Income before allowing deduction under chapter via, but refers to ‘total income’ as defined in section 2(45).

Updated up to Finance Act 2021.

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