Diversion of income by overriding title shifts taxability to the recipient when payment is compelled by legal obligation. Diversion of income by overriding title occurs where income is redirected because of a legal obligation before reaching the assessee; such diverted income is taxable in the hands of the recipient and not the person from whom it is diverted. Section 4 recognises diversion at source. Where income is received by an assessee and only later passed to a third person, that is an application of income and remains income of the original recipient.