Direct Tax

1. Diversion of Income by an Overriding Title vs. Application of Income

1.1. This distinction is based on the principles enshrined in Section 4, i.e. tax is paid only on
real income.

1.2. If you prove that income is diverting, then it is not taxable in your hand, because it has
become the income of some other person, and is not your real income as envisaged
under Section 4.
1.3. You cannot claim application of income as a deduction (i.e. not taxable) unless it is
mentioned in the Income Tax Act.
1.4. For example, if you don’t pay your fee, then as per ruling of the court, charge will be
created on the source of your father’s income. This is an application of income, not
diversion of income. This is because, whether you apply it voluntarily, or in
pursuance of a self-imposed obligation, it amounts to an application not a diversion.
1.5. For example, you took a home loan, there is EMI, in case of default in payment, charge
is created on your income, and then the money is obtained by the lender. This is still an
application and not a diversion, because money is being spent in pursuance of a self-
imposed obligation.
1.6. There are three ways of diversion: (1) statutory obligation; (2) legal obligation, i.e.
because of the order of the court in some cases; (3) contractual obligations (most
controversial).
1.7. States are immune from transactions under Article 289 of the Constitution. Suppose a
company diverts income in the name of the state, for example, in the form of royalty or
license fees. For the license fee, State Government asks for 25% of annual net profit of
the company. Can this be claimed as a diversion of income? As per previous cases,
Supreme Court had held this to be a diversion. But now, Courts have established that
this is not diversion, because States are tax immune, and if it is treated as a diversion, it
would just be a way of avoiding tax, as no one would have to pay it.
1.8. For accounting purpose, you can claim tax as an expenditure, but tax is not deductible
under the Income Tax Act.
1.9. Some things are deductible because the Act specifies, for example, contributions to
Provident Fund. On the other hand, other things are deductible because they are
diversions.
1.10. Statutory Obligation:
 1.10.1. Can CSR be claimed as a diversion? Before 2013, all CSR expenditure was
allowed as a deduction under the IT Act as a ‘business expenditure’. Now, however,
after the amendment which has made CSR expenditure mandatory, no expenditure
made for CSR is deductible under the IT Act. However, after the 2019 amendment,
2% profits have to be spent on CSR – this is not a diversion. On the other hand, if
unspent CSR funds have to be transferred to Prime Minister’s Relief Fund, can this
amount be claimed as a diversion? Yes, this amount can be claimed as a diversion.
1.10.2. Statutory obligation can therefore be claimed as a diversion if the fund to
which the income is transferred is controlled by the Government or other
organisation.
1.11. Legal Obligations: something created by the court by decree. Court scrutinises
these to see if the performance of such obligation should be treated as a diversion or
not. For example, if you are not paying the amount of maintenance due to your wife,
and the court makes you pay it, you cannot claim this amount of payment as a diversion,
because it is a legal obligation.
1.12. Contractual Obligations: will be in the nature of self-imposed obligations.
Making a gift is not a diversion of income. Diversions can take place only when you
have undertaken an obligation. Court will scrutinise whether an obligation has been self-
imposed to avoid taxes, or whether it is a legitimate obligation.
1.12.1. In the case of CIT v. Kanchan Lal L. Tansania (1983 141 ITR 283 Bom HC),
ABCD is a partnership firm, before the retirement of a partner, this particular
partner has reserved some rights to receive profits from forward contracts. When
the firm realises the benefits of the forward contract, the firm has to pay that
particular partner, and this will amount to a diversion, because the firm has not
received ALL the income from this forward contract.
1.12.2. In the case of CIT v. Indramohan Sharma, (1982 138 ITR 696 Bom HC), there is a
HUF, there are 4 members, ABCD. HUF became partner in one firm through
Karta (D). There is a partition, in pursuance of which, they all agree that D will
continue to be a Karta. Whatever profits D receives from the partnership firm,
everyone is entitled to them, and this is a diversion of income, D has to redistribute
them, he is not liable for anything except his own share.
1.12.3. In CIT v. Sunil J. Kinariwala (2003 1 SCC 660), Mr. Kinariwala was a partner in a
partnership firm, having right/title/interest over 10% of profits. He created a Trust
through a settlement deed, and he assigned 50% of 10% in favour of that Trust (his
 brother, brother’s wife, and mother were the beneficiaries). The Trust received 50%
of that, and Mr. Kinariwala wants to claim this 50% as a diversion of income,
because it was directly transferred by partnership firm to the Trust (this is
essentially a transfer of source of income). ITO held, not a diversion. Next
appellate stage, Commissioner: reversed ITO’s decision. Next appellate stage,
Commissioner’s order upheld, HC also said it is a diversion, finally, Supreme Court
said it was an application and not a diversion. They arrived at this conclusion by
comparing the rights of assignee and rights of partner. It was held that rights of
assignee were not equal to the rights of partner, were simply limited to the right to
receive income. If a sub-partnership had been created, then it would have been a
diversion, but just assignment is an application, since money belonged to you first,
and then you are just applying it.
1.12.4. See, K.A. Ramachan v. CIT (1961 42 ITR 25 SC), CIT v. Sital Das Tirath Das (1961
41 ITR 367).
1.12.5. There are always ‘obligations to pay’, but this does not necessarily mean it can be
claimed as a diversion. It is the nature of the obligation that is important. Basically,
the income should not reach the assessee as his own.
1.12.6. Rajkot District Gopalak Sangh v. CIT, 1993 (204 ITR 590) (Guj HC): In 1969, the
assessee approached the Guj Government to hand over a Mill Conservation Project
which was running into losses. Government passed a resolution fixing the terms
and conditions, as per which, the Government handed over the Mill Project to the
assesee for 12 months, nominal license fee of 1 Rs license fee. The terms and
conditions specified that all the assets and property of the Project belonged to the
Government itself, any property added was to belong to the assesee. Additionally,
the assessee could decide the price etc. for sale of Mill Products, but in the event of
any problems in decision making, the decision of Government Nominees in the
Managing Committee would prevail. Lastly, whatever profit accrued over 12
months would have to be used to set off the earlier losses of Rs 78,000, and the rest
would go to the assessee. In that year, the assessee society earned 1 lakh 25,000
rupees as profit. They gave 78,000 to the government to set off, and claimed this as
a diversion of income by an overriding title. As per Sir, the Income Tax allows
for set off of a different kind, but setting off this kind of loss cannot be
deducted, and will not be treated as a diversion. However, the court in this case
did treat it as a diversion.
1.12.7. Bhumi Sudhar Nigam v. CIT, 2.005 (144 Taxman Page 94 Allahabad HC): The UP
Government provided grant in aid to various corporations including Bhumi Sudhar
Nigam, with the stipulation that they have to deposit the grant in aid with an
account of the Government (government treasury), and can withdraw for whatever
use they have. However, if this grant in aid amount is deposited in a commercial
bank, whatever interest accrues will belong to the government. However, the
corporation used the interest for its own purposes (saying that we are using it as a
grant, and grant is not income), but claimed it as a diversion of income. The court
decided that this is an application of income, not diversion, so you cannot claim it
as a deduction.
1.12.8. For example, Landlord says pay me 10,000 rupees, and the rest 10,000 rupees you
owe me as a rent, you use for repair and maintenance. So, is the Landlord taxable
for 10,000 or 20,000? He is taxable for 20,000. There is no diversion, so you cannot
claim it as a deduction.
1.12.9. For example, you take a Home Loan, SBI says: I will give you 50 lakh rupees as a
loan for construction of house, now you can deposit this money in your account.
Suppose the bank says that the 50 lakhs will be deposited in SBI account, whenever
you require, you apply, and take the money (interest will belong to SBI). But, if it is
deposited in your account, interest will belong to you, will not be a diversion, so
you cannot claim it as a deduction.
1.12.10. In the case of CIT v. Mathubhai C Patel (1999 238 ITR 403 SC), the
assessee’s father died, and the assessee inherited assets valued at Rs. 12 lakh 88,000
(shares on which dividend is received) and liabilities in respect of borrowings by
father from Bank of India valued at Rs. 2 lakhs under an overdraft facility. Son
said, dividend accrues on the shares I have inherited, and I have to pay to you
interest, so set off the dividend amount against interest payable. Set off was done.
Son said – I have not received dividend, this is a diversion, so therefore it is not my
income. Supreme Court held that this is not diversion but application of income.
Supreme Court: “If a man incurs a debt, he will have to pay the debt until the debt is paid in
full. He may have to pay interest but whether the interest is allowable as deduction or not depends
on IT Act. No question of diversion of income arises in a case like this”.
1.12.11. For example, a son inherited shares in a private company. In the AoA, it
says that out of whatever dividend accrues to the son, certain portion will go to the
daughter of the deceased. This is a case of diversion, because it is not self-imposed.
2. Treatment of Agricultural Income under the Income Tax Act

2.1. Section 2(1A) defines Agricultural Income read with Section 10(1). This definition was
borrowed from the 1922 Act. Under the 1860 Act, Agricultural Income was taxable. It
became tax deductible from 1914 onwards. This exemption is available only to persons
who have ONLY agricultural income i.e. if a person has agricultural + business income
then the exemption cannot be availed (As per the Amendment of Finance Act 1972).1
2.2. The definition under Section 2(1A) is applicable to every legislation in India (as provided
under the Indian Constitution). For example, if Rajasthan Legislature wants to define
agricultural income, they will have to use the definition in Section 2(1A). Section 2(1A)
is an exhaustive definition.
2.3. For example, if I have given my land on rent to a person who is using it for dairy
farming (sale of milk, milk products and cattle). Does this rent qualify as agricultural
income? No. This is because dairy farming does not necessarily have to be done on
agricultural land.
2.4. Constituents of definition in Section 2(1)(A)(a): agricultural income means (i) any
rent/revenue (ii) derived from land (iii) which is situated in India (iv) used for
agricultural purposes. The land in question may be commercial land or agricultural (e.g.
can even be a university campus), it just has to be land. The USE of the land has to be
for agricultural purposes. However, ‘agricultural purpose’ has not been defined in the IT
Act.
2.5. For example, I grow crops and then sell the standing crop to someone (crop ready to
harvest) to do the harvesting/pruning etc. From sale of standing crop, I get a certain
income (Rs. 1 lakh). The person who sells the final produce also gets a certain income.
For both these people, is the income received classifiable as agricultural income? For the
person who sells the final produce, it is not agricultural income as harvesting is not
agricultural purpose.
2.6. In CIT vs. Benoy Kumar Sahas Roy (AIR 1957 SC 768) Justice Bhagwati specifically defined
‘agricultural purpose’, which has limited the scope of agricultural income to only those
activities that are intrinsic to the agricultural process. In this case, a Jamindar with 6,000
acres of forest land was involved. There were some spontaneous grown trees, but
Jamindar had performed some operations to preserve the trees such as irrigation etc.,
even though he hadn’t planted the trees initially. From sale of trees he earned 51,000
and wanted to claim it as agricultural income. The Calcutta HC held that it is agricultural

1
Income Tax Rates are subject to the Finance Act, that’s why its mentioned in the Finance Act.
 income exempted under IT Act. Supreme Court said no it is not AI, as AP has not been
performed. There are two things required for AP: (i) basic operation, i.e. preparation of
land for cultivation, i.e. tilling, irrigation and sowing of seeds, and (ii) subsequent
operation i.e. preservation of produce that has grown/sprouted, i.e. spraying of
insecticides, pesticides, etc. Supreme Court said ‘basic operation is a must, if you are not
doing the basic operation, you are not doing agriculture’.
2.7. For example, some trees have grown on your land automatically without any of your
effort, if you sell the fruits from these trees, the income you receive is not your
agricultural income.
2.8. For example, A is a landlord who lets out his land to B for 5,000 rupees per month. B is
doing all basic operations + subsequent operations and then selling the produce. For A,
5,000 income will be agricultural income. For B as well, the income received will be
agricultural income.
2.9. For example, A is a landlord and B is a tenant. A has done all the basic operations, when
the produce sprouts, he lets out the land to B, and B is doing subsequent operations
(harvesting, pruning, etc) and selling the produce in the market. For A it will be
agricultural income (because the character of the land has not changed) but not for B.
Alternatively, if B denuded the land and used it for some other purpose, then A’s
income will also not be agricultural income (therefore there has to be basic +
subsequent, not only subsequent, and not only basic). If X has done basic and
other person is doing subsequent, then for X it is still agricultural income but for the
other person it is not (based on this, we can say Basic is more important than
Subsequent).
2.10. Up to the level of sale of sugarcane/mulberry leaves etc. – it is agriculture. After
that whatever happens is not agriculture.
2.11. ‘Derived from land’ means the land should be immediate and direct source of
income not remote and indirect. Before the explanation was added by the Amendment
1989 to the Act, some High Courts said that even Sale of Land was ‘revenue’ and
therefore agricultural income, while others said it was not. This explanation was inserted
with retrospective effect (1970) to nullify the effect of those particular High Court
judgments.
2.12. CIT v. Kamakhiya Narain Singh (1948 16 ITR 325): A let out land to B for
5,000/per month. B (doing agricultural activity) stops paying rent. After months he has
to pay in the form of arrears with interest. Rent received in arrears would be agricultural
 income. But interest received would not be agricultural income, given that the land is
not the immediate and direct source of income.
2.13. Bacha F Guzdar v. CIT (AIR 1955 SC 74): Assessee wanted to claim dividend as
agricultural income because the company as involved in agriculture. However, Court
held that dividend was obviously not exempted, as dividend is not derived from land,
and its source is shareholding.
2.14. CIT v. RM Chidambaram Pillai (AIR 1977 SC 489): If it was a partnership firm
engaged in agricultural activity, then it would be agricultural income for the partners
who share the profits from the partnership firm, because it is not a separate legal entity.
2.15. Read, 49th Report of the Law Commission of India (1972) on Integration Scheme.
2.16. If the land is situated outside India (Nepal or Pakistan etc), then there are no
exemptions. If we have a DTAA with a particular country where the land is situated,
then your income will be taxable only in the country where the immovable property
situates. Otherwise, without DTAA, it will be taxed in both the countries.
2.17. Section 2(1)(A)(b): How do we define ‘any process ordinarily employed’?
Further, what is the meaning of ‘market’? For example, buyers are in Saharanpur, Sugar
Mills are in Jodhpur, will anyone come all this way for Sugar Cane? No. Suppose if I
produce Sugar Cane in Jodhpur, and there is no market for Sugar Cane here, then what
happens? Anything which renders the produce ‘fit to be taken to market’ is an ordinary
process. Market is a very subjective criteria, even one person can be a market. So if there
is no market, and then you have to convert, say, sugarcane to jaggery, then that is also an
ordinary process. Similarly, conversion of mulberry leaves to silk or eucalyptus to
essential oils is also an ordinary process if there is no market for mulberry leaves or
eucalyptus. Market has to be well within the reach of the producer. On the other hand,
if there is a market for mulberry/sugarcane/eucalyptus, and you add value and change
the nature of the product, then income received from this is not agricultural income.
Conversion of paddy to rice is very normal and so this is ordinary, but if you change the
nature of rice or do something else to make it commercial, then there is a business intent
making it different from ordinary process.
2.18. See, Brihan Maharashtra Sugar Syndicate Limited v. CIT (1946 14 ITR 611 Bom);
Thiruarooran Sugar Limited v. CIT (1997 227 ITR 432); K. Lakshmanan & Company v. CIT
(1999 239 ITR 597 SC).
2.19. Section 2(1)(A)(c): income from storehouse/dwelling house/outbuilding. But
if I am both the landlord and the cultivator, then what would be my income from such a
 building? Income would be on a notional basis, i.e. the rent you would have received
had you given it to someone on rent (imputed rent basically). On the other hand, if I am
just a landlord who has given it to a tenant who is a cultivator, then the actual/real rent
would be excluded. However, there are conditions: (i) building should be in the
immediate vicinity of the land used for agricultural purposes; (ii) building should be
occupied by the cultivator or receiver of rent in kind; (iii) building should be assessed to
land revenue or local rates or if not it should be outside the jurisdiction of urban local
bodies. The logic behind this is if it is in the urban area it should be subjected to local
rates because house property tax etc is levied, else, it should be in a rural area where no
such rates are applied. Explanation 2 provides that income derived from any building or
land arising from the use of such building or land for any purpose (including letting for
residential purpose or for the purpose of any business or profession) other than
agriculture falling under sub- shall not be agricultural income.
2.20. Some commercial crops are called partly agricultural and partly non-agricultural,
i.e. rubber, coffee and tea. See, Rule 7A, 7B and Rule 8 of the Income Tax Rules 1962.
If you produce rubber and sell it as latex etc. then 65% is agricultural income and 35% is
non-agricultural income. In case of coffee, for coffee grown and cured, it is 75%
(agriculture) and 25% (non-agriculture). In case of coffee grown and cured, and then
roasted and blended, it is 65% (agriculture) and 35% (non-agriculture). In case of tea, it
is 60% (agriculture) and 40% (non-agriculture). This calculation is done by determining
the profits. In other cases, except these three, the general rule is Rule 7, containing
general principles of accounts. For example, it would apply to conversion of sugarcane
into jaggery/mulberry leaves into silk/potatoes into wafers.
2.21. Whether ‘nursery business’ is agricultural income: Vibhuti Narayan Singh v. State of
UP 1967 65 ITR: Income from nursery is not agricultural income because it does not fall
in the category of rent/revenue derived from land, and so there is no agricultural
purpose.
2.22. CIT v. Sundarya Nursery (2000 241 ITR Page 530): Income from nursery is
agricultural income, because the definition of land is not defined in the IT Act, so
anything I produce on the rooftop or kitchen garden etc. can also be land. What is more
important, that agricultural purpose is performed, or land? It is that agricultural purpose
should be performed. Agricultural purpose is clearly performed in case of maintaining a
nursery. The scope of the word ‘land’ was therefore extended. In 2008, Explanation 3
was added in the Income Tax Act, which reads as follows: For the purposes of this
 clause, any income derived from saplings or seedlings grown in a nursery shall be
deemed to be agricultural income.

3. Partial Integration Scheme of Agricultural and Non-Agricultural Income

3.1. The Scheme is under the Finance Act.

3.2. Integration Scheme is applicable if the following conditions are satisfied: (1) only to
individuals, HUF, association of persons/body of individuals and artificial/juridical
person (it does not apply to firms, local authorities and companies) (2) if your non-
agricultural income exceeds the exemption limit (currently this is 2.5 lakhs, in some
cases it is 3/5 lakhs also) (3) your net (gross – expenditures) agricultural income exceeds
5,000.
3.3. Issues: most farmers don’t maintain receipts and expenditure accounts. Additionally,
maximum receipts are cash.
3.4. The method of calculation under the scheme is as follows:
3.4.1.Add your net agricultural income with non-agricultural income (Net Agricultural +
Non-Agricultural).
3.4.2. Add your net agricultural income to your maximum exemptions limit (Net
Agricultural + Maximum Exemption Limit).
3.4.3. (Net Agricultural + Non-Agricultural) – (Net Agricultural + Maximum
Exemption) Limit) = Total Tax Liability.
3.5. Less than 2.5 lakhs = No Tax Liability, 2.5 – 5 = 5% Tax Liability, 5 to 10 lakhs = 20%,
10 Above = 30% Tax Liability.
3.6. Suppose you are an employee with 12 lakhs as total taxable income. 2.5 of this is
exempted. 2.5-5 lakhs will be taxed at 5% (12,500). 5 – 10 lakhs will be taxed at 20%
(10000). 10+ will be taxed at 30% (60,000).
3.7. Suppose a person’s income from salary is 10 Lakhs. He has land which is used for
agricultural purpose. So his Net Agricultural Income is 3 lakhs. Step 1: (3 lakhs + 10
lakhs: 13 lakhs) Calculate Liability on 30 Lakhs. Step II: (3 lakhs + 2.5 Lakhs = 5.5
Lakhs). Calculate Liability on 5.5 Lakhs (22,500). Step III: (Net Agricultural + Non-
Agricultural) – (Net Agricultural + Maximum Exemption) Limit). Total liability = 1
Lakh 80,000.
3.8. In this way, are you paying tax on your agricultural income? Yes, you are paying 67500
from the 3 lakhs you earned from agriculture, the remaining amount (1 lakh 80,000 –
67500) is the amount you are paying from your other income, i.e. 10 lakhs.
 3.9. Government has asked whether we need to amend the constitution to bring in the
Integration Scheme. Law Commission 49th Report has said, no need to amend, the
scheme as it is well within Entry 82 (See, Berry Case and Dhillon Case mentioned in the
Report).
3.10. High Courts have upheld the constitutional validity of the integration scheme: K
J. Joseph v. IT (1980 121 ITR 178 Ker HC); K.V Abdullah v. ITO (1986 161 ITR 589 Kar
HC); Union Home Products Limited v. Union of India (1995 215 ITR 758 Kar HC).
3.11. Raj Committee had suggested the Integration Scheme. Kelkar Committee had
also made the suggestion that in addition to the Integration Scheme, the Central
Government should tax agricultural income. Tax on Agri Income was considered to be
required by Kelkar + 49th Report on the grounds that there are lots of tax evasions in the
name of agricultural income (60% of black money is in the name of agricultural income).
Kelkar Committee said: apply Adam Smith’s principle of ability to pay, tax should be
charged. If you want farmer’s to be more prosperous, double the exemption upto 5
lakhs and then tax the rest. Alternatively, you can exempt on the basis of land owning
(upto 5/10 acres is exempted). But there is no reason to exempt agricultural income in
toto.

4. Residential Status and Incidents of Taxation: Section 5 and Section 6 IT Act

4.1. What incomes are taxable in the hands of a company/individual, i.e. what is the scope of
tax on income.
4.2. Section 5 talks about the scope of total income/incidence of tax. Section 6 talks about
how to determine residential status.
4.3. Both of these are linked, because taxability in India is conditional on you being a person
(Section 2(31)) and whether you are a person as a resident, non-resident, or non-
ordinary resident.
4.4. If you are a resident of India then your worldwide incomes are taxable in India. If you
are a non-resident then your liability will be lesser than residents, and if you are a non-
ordinary resident then your liability will be in between these two extremes.
4.5. If you are a resident of two countries at the same time (US and India), then it will lead to
double taxation (Resident v. Resident conflict). There may also be conflict between
sources (e.g. you are resident of India on payroll of British company, you receive salary
from the British company, but you are rendering services in Singapore. So, India as well
as Britain have the right to tax you. Place of rendition of service is also a source, so they
also have right to tax you. So, the conflict between Sources is between Singapore and
 Britain), or between resident and source (For example, if you are resident in India, but
source is outside India). You can be resident in India, and citizen outside India also.
Under FEMA, intention is material, i.e. why did you stay back in India. For IT Act,
intention is immaterial, you could’ve come for holiday or medical tourism, but if you
exceed the number of days prescribed, you are a resident. Major conflict is residence v.
residence and residence v. source. India always favours source-based taxation (because
we are capital importing), most developed countries favour residence-based taxation
(because they are capital exporting). However, if we enter into DTAA (Section 90) with
some poorer country, then we will favour residence based, and they will favour source
based.
4.6. For this purpose, we have Double Taxation Avoidance Treaties (Bilateral Relief), to
provide relief to tax payers. We don’t have DTAA with every country (e.g. we don’t
have with Pakistan), then you are doubly taxed. However, there are other reliefs
available i.e. Unilateral Relief available to residents in India. If you are a non-resident
and there is no DTAA then you are doubly taxed.
4.7. Section 5 says, subject to the provisions of this Act (reference is basically being made to
Section 90 which provides for DTAA), the total income of any previous year of a
person who is a resident includes all income from whatever source derived which (a) is
received or is deemed to be received in India in such year by or on behalf of such
person; or (b) accrues or arises or is deemed to accrue or arise to him in India during
such year; or (c) accrues or arises to him outside India during such year. What is material
is that there has to be a receipt which looks like an income. Income which is ‘received’
outside India before its accrual is evidently not included.
4.8. What is the difference between ‘received’ and ‘accrue/arise’? If accrual comes first, you
are liable on the basis of this. If receival comes first, then you are liable on the basis of
this. Accrual is when the right to receive vests in the assessee, i.e. a fixed date when it
becomes due. Receival may be some different date. For example, your salary becomes
due on a certain date, e.g. last day of the month, so that is the date of accrual. Date of
receipt is the day you actually get your salary (can be 10-15 days after accrual). Receipt
comes first before accrual in the case of advance salary. For example, in month of
January if you receive the salary due to you in March.
4.9. The ‘deeming’ provision has been inserted to extend the approval of accrue/arise.
4.10. As per Section 5(2), if you are a non-resident, then only (a) and (b) is taxable.
4.11. As per Proviso to Section 5(1), if you are not ordinarily resident, then the income
which accrues or arises to him outside India shall not be so included unless it is derived
from a business controlled in or a profession set up in India.
4.12. Section 6(1) read with Section 6(6a) classification of individual as resident/non-
resident/not ordinary resident. For HUFs/individuals, these three classes are there. For
other classes of persons, you are either resident or non-resident.
4.13. Individual will be said to be resident if (a) he is in India for a period of more than
182 days or more in the preceding year (b); or 60 days in this year plus 365 days in four
preceding previous years (e.g. 1 April 2019 – 1 March 2020, if you are here for 182 days
then you are resident. Also, if you are here for 60 days, and then for the last preceding
four years have been in India for 365 days, then you are resident). Explanation 1 carves
out certain exceptions, see. If you are an Indian citizen and leave India as a crew
member of an Indian ship, then ‘60 days’ is substituted by ‘182’ days. Additionally, if you
are an Indian citizen and leave India for purposes of employment outside India, then
again ’60 days’ is substituted by ‘182’ days. If you are a Person of Indian Origin/Citizen
of India who visits India, then ’60 days’ is substituted by ‘182’ days.
4.14. ‘Purposes of employment’ means you are employed in India and in relation to
this you are going outside to do some work (In Re: British Gas in India, 2006 155
Taxman 326).
4.15. Explanation 1 was added in 1990. But, is it 182 days in addition to the rule of 365
days in the four previous years? (earlier it was 60 + 365). The language of the
amendment suggests that 365 days requirement remains. However, this has been a
matter of dispute in a number of cases. See, In Re Anurag Chaudhary (2010 190 Taxmann
296 Authority for Advance Ruling (AAR))). In this case, it was said that the 365 day rule
is not essential.
4.16. Section 6(6a) provides that a person is said to be not ordinarily resident in India
in any previous year if such person is: (a) an individual who has been a non-resident in
India in nine out of the ten previous years preceding that year, or has during the seven
previous years preceding that year been in India for a period of, or periods amounting in
all to, seven hundred and twenty-nine days or less; or a Hindu undivided family whose
manager has been a non-resident in India in nine out of the ten previous years preceding
that year, or has during the seven previous years preceding that year been in India for a
period of, or periods amounting in all to, seven hundred and twenty-nine days or less.
4.17. A person is therefore said to be ‘ordinarily resident’ in India the moment he has
been a resident in India for two out of 10 previous years preceding that year or has
during the seven previous years been in India for periods amounting in all to more than
730 days. He has to fulfil the basic conditions for resident + these additional conditions.
Only basic, no additional: not ordinary resident. No basic: non-resident.
4.18. Being an individual if you are declared as a resident of two states, and if there is a
DTAA then DTAA will come in rescue to provide relief. Article 4 of DTAA provides
the relief, i.e. tie-breaker case where you are resident in two states. For example, you are
a citizen/resident in USA as well as India, so there will be a tie-breaker subject to the
DTAA. DTAA provides guidelines/rules for this to be applied in sequence. The first
rule is (1) where is the permanent home available to the individual? Whether it is in USA
or in India? What if he has a permanent home in both of the states or neither of the
states? Then, the second rule will apply, (2) where is his centre of vital interest, i.e. where
his personal and economic relations are closer (where is his livelihood, where is he
earning his income, etc.) If it is possible to identify, then this rule will apply. Suppose
you cannot identify because his personal relations are closer with India and economic
relations are closer with USA, then you apply the third rule; (3) If (1) and (2) do not
apply then check where he habitually resides, whether in USA or India. Suppose he
habitually resides in both, then the fourth rule applies; (4) what is his nationality?
Suppose he is national of both or neither, then the fifth rule applies; (5) MAP, i.e.
mutual agreement procedure – competent authorities of both states sit together and
decide where the person will be a resident. These rules have to be applied in sequence.
Mutual Agreement Procedures are very rare. This is part of the OECD Model.
4.19. Under Section 91 you can claim unilateral relief from tax, it is called tax credit.
Suppose you are a resident of India as well as Pak. Earned 10 lakhs in each of these
countries. You don’t have DTAA, so your tax liability is 20 lakhs. You have paid 2 lakhs
tax in Pakistan on your income of 10 lakhs. On 20 lakhs in India, your tax liability, let’s
say is 4 lakhs. You can claim 2 lakhs that you’ve already paid to reduce your tax liability.
This tax credit is available ONLY to residents.
4.20. As per Section 6(2) of the IT Act, An HUF, firm, or body of individuals, is said
to be resident in India in any previous year in every case except where during that year
the control and management of India is situated wholly outside India. So by default in
every case you are resident, unless control and management is situated outside (you have
to prove this). What does control and management signify? For HUF, it is Karta, for a
 firm it is the partners. Control and management, means who is the mind and brains for
policy decisions and from where these decisions are being taken. Place of business is
irrelevant.
4.21. Individuals and HUF can be ordinary, not ordinary and non-resident. HUF will
be ordinary or not ordinary resident depending on the position of Karta as an
INDIVIDUAL (so rules of an individual, i.e. Section 6(6) will be applied to the Karta).
4.22. As per Section 6(3), a company is said to be a resident in India in any previous
year (a) if it is an Indian company or (b) its place of effective management in that year is
In India. Now before 2016, this provision was different. Instead of ‘effective
management’ in clause (b), it was ‘control and management is wholly’. This was
modified to make it compatible with international obligations such as those under
OECD. As per the Explanation to this sub-section, for the purposes of this clause
"place of effective management" means a place where key management and commercial
decisions that are necessary for the conduct of business of an entity as a whole are, in
substance made. What is the difference between “effective management” and “control
and management”? The difference can be found in OECD Commentary on Article 4.
Control and management may lie in two places, but place of effective management can
only lie in one place. Place of business of a US Company may be in USA, but it may be
effectively managed from India. Regardless of the place of registration, it will be
declared as a resident of India for that year. This is a very rare situation.
4.23. See, 23 December 2015 guidelines by CBDT, Guideline No. 142/11/2015, ‘Draft
guiding principles for determination of place of effective management of a company’.
Section 6(3) of IT Act 1961 prior to its amendment by the finance act provided that a
company is said to be resident in India if it is an Indian company or control and
management of its affairs is situated wholly in India, this allowed companies to shift
insignificant or isolated events related with control and management outside India to
avoid tax. Therefore the provision was amended.
4.24. If more than 50% of passive income is located outside India then place of
effective management is outside India. What is passive income? Active income is
income from the business/trade. Passive income is return on investment, rent, royalty,
interest, dividends. See, OECD Commentary on Place of Effective Management, which
says that it is a question of facts and circumstances.
4.25. Doctrine of substance over form: form is place of registration, substance is that
from where de facto control exists.
4.26. As per Section 6(4), every other person is said to be resident in India in any
previous year in every case, except where during that year the control and management
of his affairs is situated wholly outside India. This applies to artificial juridical persons.
(for local authorities there is no doubt only).
4.27. As per Section 6(5), if a person is resident in India in a previous year relevant to
an assessment year in respect of any source of income, he shall be deemed to be resident
in India in the previous year relevant to the assessment year in respect of each of his
other sources of income.
4.28. See, Union of India v. Azadi Bachao Andolan (Division Bench). This case is related to
India – Mauritius DTAA, signed in 1983. Every Mauritius (v. important to India due to
geographic proximity, presence of Indian people) company who has capital gain from
transfer of shares would not be liable for tax in India, and in Mauritius there was no
capital gain tax. This benefit has been extended by issuing a circular no. 682 in 1994 on
30th March by the CBDT, and there’s no provision in the DTAA for this. As per this
Circular, the capital gain of any resident of Mauritius by alienation of shares of an Indian
company shall be taxable only according to Mauritius Taxation Laws and shall not be
taxed in India. To avail this benefit there was lot of FDI/FII from Mauritius to India.
Same benefit has been extended to Singapore. When we signed the DTAA we had put a
clause in the India – Singapore DTAA to the effect that any amendment in Mauritius –
India DTAA will automatically apply to India – Singapore DTAA. With Mauritius, India
had started negotiations in 2007-08 to amend the beneficial treatment to Mauritius based
companies, and finally in 2016 it was possible to amend it. It took so long as Mauritius
was not agreeing to the amendment. This is because Mauritius charged high fees from
companies to register because of the various benefits they would get, these companies
were mainly just shell companies (e.g. 45,000 companies were registered on the same
address). They were not agreeing, so we could not unilaterally amend. Some of the
income tax departments had started issuing demand notices to FIIs for tax liability, on
the grounds that benefit has been extended only to RESIDENTS of Mauritius. You are
just a shell company, so not really residents of Mauritius but of a third country. To take
the benefit of DTAA you have to be resident of contracting State (Article 4 of Indo-
Mauritius DTAA says resident of contracting State means any person who under the
laws of that state is liable for taxation by reason of his domicile, residence, place of
management or any other criteria of a similar nature). “any other criteria...” is what gave
the scope to consider “certificate of registration” as proof of residence. The government
of India on 4th April 2000 issued a Press Note clarifying that the government does not
share the views of the revenue department, and nullified the demand notice. Q. What is
the binding effect of circular? Circulars (e.g. issued by CBDT) are not binding on
assessee, or quasi-judicial bodies/courts. However, it is binding on the department even
if it is ultra vires, i.e. department cannot challenge its own circular even if the Supreme
Court has interpreted in a different way (Dhiren Chemicals Industries v. CCE 2002 254 ITR
554 SC). “We need to make it clear that regardless of the interpretation we have placed,
if a circular has been issued by CBEC which places a different interpretation on the
same phrase, then that interpretation is binding on the department”. Because of this
show cause notice people started withdrawing money from India. Subsequently, circular
no. 789 of 2000 was issued on 13th April 2000, this is the subject of challenge in this
case. The effect of provision was to recognise companies registered in Mauritius to be
residents of Mauritius for the purpose of DTAA and IT Act. The power of circular
under the Income Tax Act is discussed under Section 119 of the IT Act, which
empowers CBDT to issue circulars. However, circular cannot interfere/impose any
condition which effects assessment procedure, as assessment is a quasi-judicial function.
This circular was challenged in the HC by Azadi Bachao Andolan for interfering in the
assessment procedure, as it was making it mandatory for commissioner of IT to accept
certificate of registration as proof of residence. HC said – quash the circular because it
is ultra vires the powers of the CBDT, it amounts to interference. See, “…Prima facie by
reason of impugned circular no direction has been issued, i.e. it doesn’t show that it has been issued
under Section 119 of the IT Act …. In as much as the impugned circular directs that certificate of
registration should be accepted as proof of residence…”. If neither DTAA nor IT Act puts any
criteria as to what can be proof of residence, then how can the circular? Power to tax
and legislate does not rest in your hands. This is a clear violation of Article 265. Power
to exempt has to come from legislative enactment, can’t come from circular. IT Dept is
entitled to lift corporate veil and see whether a company is actually resident in Mauritius
– this power is quasi- judicial – CBDT cannot interfere with this, it is contrary to the
intent of the IT Act. IT Dept has every right to look into the substance by lifting the
corporate veil, you cannot restrict this power, you cannot ask them to accept something
as conclusive evidence. The HC also said conclusiveness of a certificate of registration is
neither contemplated in DTAA nor IT Act, whether a statement is conclusive or not
must be provided in a legislative enactment and cannot be determined by a circular
issued by the CBDT. SC discussed and distinguished (indirectly overruled) the
 McDowell’s case, 3 judge bench 1985 154 ITR 148 SC. See, Mcdowell and company v. CTO.
In Mcdowell’s case, court allowed lifting of corporate veil in every case where the
department has any suspicion on the substance over the form. It was held that tax
evasion is always illegal, tax avoidance is legal, but tax avoidance through colourable
device is illegal. After all these circulars, treaty shopping (resident of a third company is
taking benefit of the Mauritius – India DTAA by opening a shell company in Mauritius)
became illegal based on McDowell’s case. The circular was quashed as ultra vires. The
matter went to SC, SC reversed the judgment of HC. SC discussed cases of different
High Courts and rules of interpretation of DTAA and IT Act, as well as the object of
DTAA. They said that purpose was to provide relief from double taxation and improve
trade/economy. Now they said that Sections 4 (charging provision) and 5 (scope of
income) both start with the sentence ‘subject to the provisions of the Act…’, i.e. limiting
the scope, making it subject to Section 90, enabling provision for DTAAs with various
countries. Inconsistency b/w IT Act and DTAA – DTAA will prevail. It was also said
that you cannot apply the strict/literal rules of interpretation applied to fiscal statues to
DTAA because that is a beneficial provision. Then the SC discussed the objective of
Section 90: “The validity and vires of delegated legislation have to be tested on the ambit of law-
making power, if the authority is clothed with the requisite power, then irrespective of whether the
legislation fails in its object or not, vires is not to be questioned. The Indo – Mauritius DTAA
reasonably construed is not ultra vires on account of its susceptibility to treaty shopping.” See, CIT v.
XYZ (Calcutta HC), where another Circular 333 was challenged. This circular said that
in case of any inconsistency between DTAA and IT Act, DTAA will prevail over IT
Act. HC had upheld the validity of the circular with reference to decisions by Bombay
and Karnataka HC. Circular 333 has been withdrawn. If you declare treaty shopping as
illegal its v. difficult to get investment into India. Now in 2016 we have amended the
DTAA and taken away the benefit, because times have changed. Now in 2020, new
amendments are coming. These are called MLI (Multilateral Instruments) (OECD’s
initiative, achieved through multilateral negotiations) to override all DTAA which has
any kind of avoidance through colourable device. All countries have to accept this.
4.29. Union of India v. Azadi Bachao Andolan: this case related to India-Mauritius
DTAA – certain exemptions were provided including whosoever is a resident of
Mauritius, their remuneration from sale/transfer of shares in India, was to be taxed in
Mauritius – in Mauritius there is no capital gain tax – same benefit is given to Singapore
– India receives a lot of FDI/FII from Mauritius and Singapore which have the same
benefit – whenever we amend Mauritius DTAA, it will automatically apply to Singapore
– in 2007-08, we negotiated this benefit and finally in 2016 it was amended; many
companies registered in Mauritius as post-box companies and they are residents of
Mauritius therefore – this was a source of revenue for Mauritius as they receive high
registration fees – in 1994, there was a circular extending this benefit of exemption to
Mauritius which states that the capital gain of any resident of Mauritius by alienation or
sale of shares in India will be taxable under Mauritius law and not in India – this led to a
large number of FIIs and FDIs in India – the IT Department started issuing show-cause
notices to FIIs saying that they are liable to be taxed in India – the reasoning was that
there is no residence in Mauritius but of a 3rd country and the company was a shell
company – hence they must pay the taxes – through a Press Note, it was clarified that
these notices are not in consonance with the government’s policies; what is the binding
effect of circulars? Any circular is not binding on assesses or the Courts, but it is binding
on the department who issued this circular – you cannot challenge your own circular –
referred to Dhiren Chemical Industries v. CCE, which said that you cannot challenge
your own circular – we need to clarify that regardless of the interpretation of the SC of a
phrase, if there is a circular which plays a different interpretation of a particular phrase
then that will be binding on the department which issued this circular – cannot challenge
ultra vires; another circular was issued in 2000 which says that the provisions of the Indo-
Mauritius DTAA applies to citizens on both States and the term ‘resident’ is defined –
FIIs and other investment firms are invariably incorporated in that country and they
shall be deemed to be residents of Mauritius as long as they have the registration
certificate; S. 119 empowers the department to issue circulars, but the assessment
procedure cannot be altered/put conditions on by such circulars – because of this
provision, the circular was challenged as it was putting a condition on the quasi-judicial
function of assessment procedure; ABA challenged it – the circular is ultra vires as it
interferes with the assessment procedure and the HC quashed the circular due to (1)
prima facie no direction has been issued under S. 119 and therefore it is not legally
binding (2) the circular asks them to accept the registration certificate as proof of
residence while the IT Act itself does not put any such proof – cannot exempt what is
not exempted under the Act (3) lifting of the corporate veil is a quasi-judicial power and
this cannot be interfered with – it must be checked that there is no tax avoidance by
colorable device (4) conclusiveness of the certificate issued by Mauritius is not discussed
by IT Act or Evidence Act – not acceptable under a mere circular; distinguished
 [indirectly overruled] MacDowell’s case – in this case the Court allowed the lifting of
corporate veil wherever there is suspicion of tax avoidance through colorable device is
illegal – treaty shopping means a 3rd country takes advantage of the DTAA Eg: if US
creates a shell company in Mauritius and thereafter invests in India – shell companies
are colorable devices and thus, any tax avoidance by colorable device is illegal; SC
reversed the HC judgment – said that the rules of interpretation of DTAA and IT Act –
the objective and purpose of DTAA was seen to provide relief from double taxation and
improve trade – S. 4 [charging provision] & 5 [scope of income] are important as they
both start with “subject to the provisions of this Act” i.e. subject to S. 90 and are limited
– delegated legislation allowing the executive to enter into DTAA – if there is any
conflict between a DTAA and the IT Act the DTAA will prevail since it is a special
provision – they then discussed the objective of S. 90 which is the validity of delegated
legislation has to be tested on the authority’s power to pass such legislations – the Indo-
Mauritius DTAA is not ultra vires and hence cannot be challenged in lieu of S. 90; in
CIT v. Davy Ashmore India Ltd, there was a circular that said in case of
inconsistencies between DTAA and IT Act, the DTAA will prevail – this was
withdrawn – the HC upheld this circular however; in 2016 this was amended making the
companies taxable to prevent treaty shopping; A. 4 – benefit of DTAA applies only in
case of residency – for the purposed of this DTAA, anyone who is liable to taxation in
either state is a resident – certificate of registration is enough proof under the DTAA; is
treaty shopping through creating a shell company tax avoidance through a colorable
device? Under the DTAA look at the purposive interpretation and it can be understood
that treaty shopping is valid and legal as it is not a legal enactment; Phillip Baker, Law
of Treaties etc. are the devices used for interpreting the treaties
4.30. Mohsin Ali Ali Mohammed Rafiq, In Re: person is liable to tax under DTAA
by being a resident to Dubai – even though there is no income tax in Dubai they are
treated as residents under A. 4 of the DTAA
4.31. In 2020, there is going to be an MLI [OECD, but more countries], to override all
DTAA with any kind of avoidance through colorable devices; issues of DTAA fixed by
MLI: – objective of DTAA is not to give people tax avoidance opportunities at large Eg:
Vodafone, and MLI will deal with this problems; treaty override [editing IT Act to
overrule DTAA] is upheld as valid by the HC for now and this is not an issue with MLI

5. Receipt/Deemed Receipt of Income

5.1. Section 5: scope of income – 3 categories (1) received/deemed to be received in India
(2) accrued/arise [deemed] in India (3) accrue or arise outside India – 3 is not taxable for
non-residents; so important is the PLACE of receipt, accrual, arousal etc.; Eg: salary
from parent company in Britain goes to a bank account in Britain and then it is
transferred to your bank account in India, where you work for the company – under the
deeming provision you will be taxable – rendering services in India i.e. income is being
received in India; therefore, PLACE of rendering of services is most important
5.2. Place of utilization is an important factor too – Eg: Linklaters’ services are being utilized
in India – they are earning in the UK – still taxable in India
5.3. DTAA applies if IT Act applies – DTAA doesn’t create liability but the IT Act does
under Section 5 – relief may be claimed under the DTAA
5.4. Meaning of receipt: it is the first occasion when you have control over the money; it is
the FIRST receipt under the IT Act
5.5. Azam Jahi Mills v. CIT: non-resident in India enters into agreement with non-resident
outside India – the non-resident outside India had to deposit the cheque for payment
outside India, in a post office and the non-resident in India received it in India and
thereafter encashed the cheques – the moment the cheque is deposited in the post office
[agent of non-resident in India] it is received by him
5.6. Date of receipt, encashment etc. is not important
5.7. Meaning of accrual: when the right to receive is vested in you, the money has accrued to
you
5.8. Keshav Mills Limited v. CIT: The receipt of income refers to the first occasion when you
exercise control over the money, i.e. receipt includes constructive receipt by agent or
bank as long as you can exercise control. After receipt, whatever is the use of money is
mere remittance. For example, an agent outside income receives money on my behalf,
and then sends it all to me, then when I get this money, this is remittance, and when the
agent got the money it is said to have been received by me outside India. Remittance is
not taxable under the IT Act.
5.9. Trinidad Lake Asphalt operating v. CIT (1944 13 ITR 14 PC): Actual receipt does not mean
that actually you have got the money in your hands. In this case there was a company
and a shareholder, the company transferred goods etc. to the shareholder, and
shareholder owed some money to the company for this. Company also has to pay
dividend to the shareholder. Shareholder said that you adjust the money which I owe
you against the dividend due to me in the books of account. The shareholder therefore
 claimed that I have not received any money so I am not liable for tax on dividend. The
PC said that even this is receipt under IT Act, because you have agreed to adjust the
dividend amount against your loan amount, means you have received the dividend.
Even treatment in books of account is said to be receipt.
5.10. Raghav v. CIT: A resident merchant in India had to pay money to agent non-
resident outside India. The non-resident said don’t pay me commission just treat it as
paid in books of account. Merchant made the entry in his books in India showing the
commission to be paid as per the direction of the agent. Place of receipt is in India
because entry has been made in the books of account of India.
5.11. Tora Gul Boi v. CIT (AIR 1927 Lahore 512): In this case, there was a non-resident
agent and principal resident in India. Agent had undertaken some activity on behalf of
principle. He had received the whole sale proceeds outside India and then transferred
the sale proceeds to the principal in India without deducting his commission because the
terms of the commission were not settled at the time. Through consent decree in India
terms of the commission were settled subsequently. Question arises, will the agent be
taxable in India for the commission? Where is the place of receipt? Deemed receipt in
India is defined under Section 7 of the IT Act.2 However this list if not exhaustive
(unexplained money, cash credits, bullions, etc. are also included) For example,
employer’s contribution to Provident Fund (you never actually get the amount, but it is
considered deemed receipt). If it is a gratuity, then it is not your money, because it will
be uncertain (it is subject to age etc.). On every salary TDS is deducted and then you
receive salary, so can you say that TDS is not your income because it is deducted from
source? No, you cannot.
5.12. Suppose company ABC has paid GST of 10 crores in the year 2021. ABC filed a
suit that he has paid excess GST and wanted refund (due to wrong classification of
goods). In 2021-22, there was an amalgamation and new company XYZ came into
existence. In year 2022-23, the court allowed the refund, but the company ABC is no
more there, so who will receive the refund? XYZ will receive the refund. So, is this a

2
The following incomes shall be deemed to be received in the previous year :—
(i) the annual accretion in the previous year to the balance at the credit of an employee participating in a
recognised provident fund, to the extent provided in rule 6 of Part A of the Fourth Schedule ;
(ii) the transferred balance in a recognised provident fund, to the extent provided in sub-rule (4) of rule 11 of
Part A of the Fourth Schedule ;
(iii) the contribution made, by the Central Government or any other employer in the previous year, to the
account of an employee under a pension scheme referred to in section 80CCD.
 profit for XYZ? No, not earned from its own business. Therefore, it is not
income/profit but deemed income/profit because XYZ has not done anything to get it.
5.13. Suppose you are a banking company ABC Limited, in the year 2019-20 there was
a robbery in the bank, they stole Rs. 5 crores. Now Bank will claim these 5 crores as a
Trading/Business Loss in 2019-20. Now this bank is transferred to another company
XYZ in the year 2020-2021. In year 2022-23 the police has recovered the 5 crore, will be
given to the acquiring company XYZ. This money will be deemed income for XYZ. –
See Section 41 of IT Act.

6. Accrue or Arise/Deemed to Accrue or Arise

6.1. Accrue and Arise are synonymous. Accrue means something is due, right to receive is
there.
6.2. Place of accrual is important, if place is not in India you are not taxable being a non-
resident.
6.3. Scope of Section 5 has been extended by the deeming provision to tax even those
people who are earning income outside India if there is anything linked to India.
6.4. Section 9 is the most controversial provision under the IT Act, without which DTAA
become useless.
6.5. Section 9 is the provision which creates the liability for non-residents in India.
6.6. Netflix is not in India but Indian subscribers use it in India. Should Netflix be taxable in
India or not? Neither it is received in India nor accrued in India. Similarly, how to tax
google? Their business is also not in India, servers are outside India.
6.7. Every year there are new kinds of entities and transactions, to tax them, we only have
Section 9. Business connection includes ‘significant economic presence’. This includes
downloading of data because customer base is in India. In the name of this, they want to
tax Netflix and other companies. Amendments can be made for even one kind of
business activity/transaction.
6.8. In 2016 amendment was made to introduce ‘equalization levy’, i.e. tax on google.
Whether or not the non-resident has a place of business or place of residence they can
be taxable in India based on how you interpret Section 9.
6.9. Vodafone case is not relevant now because Section 9 was amended to nullify its effect
(Read more). As far as Section 9 is concerned there are always clashes between the
legislature and the judiciary. Even after the amendment, one case has been decided by
the courts as per the Vodafone case, ignoring the amendment on the grounds that
DTAA will prevail over the amendment.