Section 10 — the law in short
What the courts have decided on section 10, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Tuticorin Alkali Chemicals and Fertilizers Ltd v CIT
Supreme CourtHelps department
My company is still building its plant. It parked the unused part of its term loans in short-term bank deposits. Can I set the interest earned off against the interest I am paying, or must I pay tax on it?
You must pay tax on it, under the head income from other sources. Interest earned on surplus borrowed funds parked in deposits before business commences is income the moment it accrues, and it cannot be adjusted against the interest payable on the term loans, because s.57 sets out exhaustively what may be deducted from income assessable under s.56 and interest on term loans taken to build the plant is not in that list.
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Statutory position — s.10(2): a member's receipt out of family income is exempt, but the clause is subject to s.64(2) and is overridden by s.171(4)(b)
CBDT Circulars & InstructionsCuts both ways
My client received money from his family HUF during the year. The Assessing Officer wants to tax it in his hands. Is it exempt, and if so is there anything that can take the exemption away?
Section 10(2) exempts, in computing the total income of a previous year of any person, "any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family". Two qualifications sit on the face of the Act and both are routinely missed. The clause opens with the words "subject to the provisions of sub-section (2) of section 64", so where the family's income is itself income the individual is deemed to derive under the conversion rules of s.64(2), the exemption gives him nothing. And s.171(4)(b) imposes joint and several liability on members for tax on the family's income up to the date of a recorded partition expressly "notwithstanding anything contained in clause (2) of section 10".
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.