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CA Final · Direct Tax Laws & International Taxation · Taxation of Digital Transactions

Mr. Arjun Rao transferred licensing rights in his mobile-app platform to a Singapore company. Because of this, the company's income became payable to a non-resident, and Arjun could control its application. Under section 174 of the Income-tax Act, 2025, ₹40 lakh of that income was deemed to be his income in tax year 2025-26 and was taxed. In tax year 2026-27 the company remitted ₹40 lakh to him as a loan. His other income in 2026-27 is ₹10 lakh. How much of the remittance is again deemed to form part of his income for 2026-27 under section 174?

Nothing is deemed his income again. Section 174(4) provides that income already charged as his deemed income, when later received by him as income or in any other form, such as a loan, is not deemed his income again.

  1. A₹40 lakh, because a loan is a capital sum taxed again
  2. B₹20 lakh, being half to avoid double taxation
  3. C₹50 lakh, being the remittance plus his other income
  4. DNil, because income already charged as deemed income and subsequently received, in any form, is not deemed his income againCorrect

Explanation

Section 174(4) says 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 is not again deemed part of his income. The ₹40 lakh was already charged in 2025-26, so receiving it as a loan adds nothing under this section. The capital sum route in sub-section (3) does not override sub-section (4) for the same income.

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