Distinguish and differentiate between: (b) Diversion of Income and Application of Income.

Sr. No. Diversion of Income Application of Income 1. In case of diversion of income, Income never reaches to the assessee as his own income. By virtue of an obligation, the income is diverted at source before it reaches the assessee. In case of application of income, Income reaches to the assessee as his own income and is subsequently applied to discharge an obligation. 2. In case of diversion of income, the obligation is on the source of income. In case of application of income, the obligation is on the receipt of income i.e. after income reaches to the assessee. 3. There is an overriding title by virtue of which diversion of income takes place. There is no over riding title in this case. 4. In case of diversion of income, the income is not included in the income of the assessee. In case of application of income, income is included in the income of assessee.