1- Can fictitious income be taxed under Income Tax, like Satyam scam where fictitious income was shown. Or can one claim that since income was not real, how can it be challenged?
Normally fictitious income is not atxed. however if the aseessee itself asserts, and is willing to be taxed on, a very high income, the Dept has no choice but to accept it.
2-Is compensation taxable? Compensation as in settlement money paid to share holders for. Again like satyam scam, where the new Mahindra satyam paid US shareholders some settlement money. So is TDS u/s 195 deductible? is the payer liable to deduct tax or the perso receiving it?
Compensation receipt of revenue nature, is taxable. TDS u/s 195 is attracted in respect of compensation paid to non-residents.