Diversion by overriding title: professional fees remained taxable income where no pre-existing trust or legal obligation diverted the receipt.

A receipt paid to an assessee for professional services was held taxable as professional income where no pre-existing trust or overriding legal obligation diverted it at source. The payer had not created any legally enforceable trust arrangement before the amount accrued, and the assessee's later intention to create a charitable trust did not change the character of the receipt. That later step was only an application of income after receipt, so the doctrine of diversion by overriding title did not apply.

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Issues: Whether the sum of Rs. 32,500 received by the assessee was his professional income taxable in his hands or money received on behalf of a trust.

Analysis: The money was paid to the assessee in connection with his professional services in the Farrukhnagar case. The facts found did not show that the payers created any trust or imposed any legally enforceable obligation diverting the amount before it became the assessee's income. The assessee's own intention to create a charitable trust later did not amount to diversion by overriding title; it only showed an application of income after receipt. The principle of diversion by an overriding obligation therefore had no application.

Conclusion: The sum of Rs. 32,500 was professional income taxable in the assessee's hands, not trust money received on behalf of a trust.

Final Conclusion: The appeal succeeded and the High Court's answer was set aside, leaving the receipt assessable as the assessee's taxable professional income.

Ratio Decidendi: A receipt becomes taxable professional income when it accrues to and is received by the assessee in the absence of any pre-existing trust or overriding legal obligation diverting it at source; a subsequent declaration of trust is only an application of income.

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