Diversion of income by overriding title means:
AIncome is applied after receipt
BIncome is diverted before reaching the assessee
CIncome is transferred to a relative (per relevant Section)
DIncome is exempt under Section 10
Answer & Solution
Correct answer: B. Income is diverted before reaching the assessee
1. Diversion occurs when, by reason of an overriding title (charge, obligation, decree), income is diverted at source before reaching the assessee.
2. Diverted income is not taxable in the assessee's hands; only the residual is.
3. Different from application of income (income received and then applied — application is taxable).
_Source: ICAI BoS CA Final Paper 7, Ch 1 "Basic Concepts"_
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