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2020 (2) TMI 1483 - AAR - Income TaxDiversion of income by over- riding title - Taxability of Regulatory assets under approval [RAUA ] retained while transferring the generation, transmission and distribution (GTD) undertaking - Whether the regulatory assets under approval (RAUA) which will be recovered by Adani Electricity Mumbai Limited (AEML) in trust for and on behalf of Reliance Infrastructure Limited (RInfra) will not be considered as income of AEML as and when sanctioned/recovered by it ? - HELD THAT:- There is a difference between an amount which a person is obliged to apply out of this income and an amount which by the nature of obligation cannot be said to be part of the income of the assessee. Where by an obligation, income is diverted before it reached the assessee, it is deductible ; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. The second payment is merely an obligation to pay another a portion of one's income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. In our view the regulatory assets under approval (RAUA) received by AEML will not be liable to tax in the hands of AEML but will be taxable in the hands of RInfra of income by overriding title. The first question raised by the applicant is answered in the affirmative. In view of our stand on question No. 1, the question No. 2 is inconsequential. Accordingly, the questions raised are answered as under - Question No. 1. - The regulatory assets under approval (RAUA) received by AEML will not be liable to tax in the hands of AEML but will be taxable in the hands of RInfra on account of diversion of income by overriding title.
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