UNIT 4

COMPUTATION OF TOTAL INCOME AND TAX LIABILITY OF INDIVIDUAL

AGGREGATION OF INCOME: Section 66 to 69

Section 66: In computing the total income of an assessee, there shall be included all income on
which no Income Tax is payable.

Method of computing a members share in income of association of persons or body of individuals

(Section 67A) -

1. In computing the total income of an assessee who is a member of an association of person or a

body of individuals where in the shares of the members are determinate and known, or under
any law of corresponding to that act in force in any part of India whether the net result of the
computation of the total income of such association or body is a profit or loss, his share shall be
completed as follows namely:
a. Any interest, salary, bonus, Commission or remuneration by whatever name called,
paid to any member in respect of the previous year shall be deducted from the total
income of the association or body and the balance ascertained and appropriated
among the members in the proportion in which they are entitled to share in the
income of the association or body.
b. Where the amount appropriate to a member under clause (a) is a loss, any interest,
salary, bonus, commissioner or remuneration aforesaid paid to the member by the
association of body in respect of the previous year shall be adjusted against that
amount.
c. Where the amount apportioned to a member under clause (a) is a profit, any
interest, salary, bonus, Commission for remuneration aforesaid paid to the member
by the association or body in respect of the previous year shall be added to that
amount.
2. Any interest paid by a member on capital borrowed by him for the purpose of investment in the
association or body shall, in computing his share chargeable under the head "profits and gains of
business or profession" in respect of his share in the income of the association or body be
deducted from his share.

Cash Credits (Section 68) -

Where any sum is found credited in the books of an assessee maintained for any previous year and
the assessee offers, no explanation about the nature and source there of or the explanation offered
by him is not, in the opinion of the assessing officer, satisfactory the sum credited may be charged to
Income Tax as the income of the assessee of that previous year.

Section 68 has been amended with effect from assessment year 2013-14 to provide that the nature
and source of any sum credited as share capital, share premium etc. in the books of a closely held
company shall be treated as explained only, if the source of funds is also explained by the recipient
assessee company in the hands of the resident share holder.

The onus of satisfactorily explaining such credits remains on the person in whose books such sum is
credited. If such person fails to offer an explanation or the explanation is not found to be satisfactory
then the sum is added to the total income of the person.
Unexplained Investment (Section 69) -

Where in the financial year immediately preceding the assessment year the assessee has made
investment which are not recorded in the books of account. If any, mentioned by him for any source
of income and the assessee offers no explanation about the nature and source of the investments or
the explanation offered by him is not in the opinion of the assessing officer, satisfactory the value of
the investments may be Deemed to be the income of the assessee of such financial year.

Unexplained Money, etc (Section 69A) -

Where in any financial year the assessee is found to be the owner of any money, bullion, jewelry or
other valuable article and such money, bullions, jewellery or valuable article is not recorded in the
books of account. If any, mention by him for any source of income and the assessee offers no
explanation about the nature and source of acquisition of the money, bullions, jwellary or other
valuable article or the explanation offered by him is not in the opinion of the assessing officer,
satisfactory, the money and the value of the bullion, jewelry or other valuable article may be
Deemed to be the income of the assessee for such financial year.

Amount of investments etc. not fully disclosed in books of account (Section 69B) -

Where is any financial year the assessee has made investment or is found to be the owner of any
bullions, jewellery or other valuable article and the assessing officer finds that the amount expended
on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds
the amount recorded in this behalf in the books of, no explanation about such excess amount or the
explanation offered by him is not, the excess amount may be deemed to be the income of the
assessee for such financial year.

Unexplained Expenditure etc. (Section 69C) -

Where in any financial year an assessee has incurred any expenditure and he offers no explanation
about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not
in the opinion of the assessing officer, satisfactory, the amount covered by such expenditure or part
thereof, as the case may be, deemed to be the income of the assessee for such financial year.

Amount borrowed or repaid on Hundi (Section 69D) -

Where any amount is borrowed on a hundi from, or any amount due there on is repaid to any person
otherwise than through an account payee cheque drawn on a bank, the amount so borrowed or
repaid shall be Deemed to be the income of the person borrowing or repaying the amount aforesaid
for the previous year in which the amount was borrowed or repaid as the case may be.

Explanation: The amount repaid shall include the amount of interest paid on the amount borrowed.