(1) Though the assessee company was the defacto owner of the shares, the dividends could not be said to have accrued to it as it was not the dejure owner of the shares. (2) If there is an accounting standard (AS-9), the same has to be accepted in the absence of any other statutory provision.

Meaning of the terms “manufacture”, “production” and “process”. The process applied to POY either for the purpose of texturising or twisting constitutes manufacture as the article produced is recognised in the trade as distinct commodity pursuant to the process it undergoes and which amounts to manufacture.

Non-compete compensation paid to an employee for an indefinite period is business expenditure and not capital expenditure as no capital asset or benefit of enduring benefit came into existence. While the lenght of the period of the covenant is important, it is not decisive. What is more important is the purpose of the payment and its intended object and effect.

Non-compete compensation received by an employee-director for agreeing not to carry on any business activity relating to software development for a period of 18 months constitutes a capital receipt as it is for loss of a source of income.

See also: CIT vs. Narendra Desai (Bom) and Saurabh Srivastava vs. DCIT (Del) (SB).

Sections 153A and 153C are not unconstitutional either on the ground of discrimination or on the ground that they allegedly exclude the principles of natural justice.

(a) If the assessee has suffered a loss in one unit, the same has to be set-off against the profits of the undertaking eligible for deduction u/s 80IA etc and if the resultant figure is a loss, no deduction under Chapter VI-A is allowable;

(b) Where the predominant majority of the High Courts have taken a certain view on the interpretation of certain provisions, the Supreme Court would lean in favour of the predominant view.

Interest paid for purchase of land held allowable as a deduction as the fact that the income on sale of scrap obtained on demolition of buildings on the land was offered as business income showed that the assessee had bought the land for business purposes.

An order passed by the AO to give consequential effect to an appeallate order of an earlier year is not an order passed under section 154 and consequently the time limit of section 154(7) does not apply.

In the case of a chit fund following the ‘completed contract method of accounting’ and offering income at the end of the chit, held, approving the method:

(i) Recognition/identification of income under the Act is attainable by several methods of accounting including the completed contract method or the percentage of completion method.

(ii) Every assessee is entitled to arrange its affairs and follow either the completed contract method of accounting or the percentage completion method of accounting and the same is binding on the department unless it is shown the chosen method distorts the profits.

(iii) Under the mercantile system of accounting, the matching of expenses and revenue (matching concept) is required to be done on accrual basis. (Taparia Tools vs. JCIT 260 ITR 102 (Bom) referred with approval.)