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CA Final · Direct Tax Laws & International Taxation · Non Resident Taxation

Anita, a resident, transferred assets abroad. Income arising from them became payable to a non-resident trust, and under section 174 of the Income-tax Act, 2025 Rs 8,00,000 of that income was deemed to be Anita's income and was taxed in her hands. In a later year, Anita herself received that Rs 8,00,000 from the trust, in the form of a distribution. Which statement is correct as per section 174?

The Rs 8,00,000 is not taxed again. Section 174(4) says that once income deemed to be a person's has been charged and is later received by her, whether as income or in any other form, it is not again deemed to form part of her income.

  1. AThe Rs 8,00,000 is not deemed again to form part of her income when subsequently received, since it was already chargedCorrect
  2. BThe Rs 8,00,000 is taxed again in the year of receipt because receipt is a separate event
  3. COnly half of the amount is excluded from the second charge
  4. DThe amount is excluded only if received as income and not in any other form

Explanation

Section 174(4) provides that where a person has been charged on income deemed to be his and that income is subsequently received by him, whether as income or in any other form, it shall not again be deemed part of his income. Hence no second charge arises. The option limiting relief to receipt as income ignores the words 'in any other form'.

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