The assessee has “accepted and admitted” that it has not given details with regard to proportionate expenses relatable to tax free income and argued that it was not required to disclose the same as s. 14A was not in the statute book when the ROI was filed. However, the details ought to have been given at the stage of the assessment proceedings & the failure to do so is a “failure to disclose material facts”. It is the duty of the assessee to bring to the notice of the AO particular items in the books of account or portions of documents which are relevant. Material facts are those facts which if taken into accounts they would have an adverse affect on assessee by the higher assessment of income than the one actually made. The assessee is a multinational company and it is difficult to perceive and accept that its tax or the legal department was not aware and did not have knowledge about s. 14A (Consolidated Photo 281 ITR 394 (Del) followed)

While the Special Bench was right in holding that a project with residential and commercial user to the extent permitted under DC Rules would be a “housing project” and eligible for deduction, it was not justified in confining the deduction only to projects having commercial area upto 10% of the BUA because once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80IB(10) deduction is rejected, no restriction could be imposed. If the project is approved as a “housing project” deduction u/s 80-IB(10) is allowable irrespective of the commercial area

U/s 151, a notice u/s 148 cannot be issued after the expiry of 8 years (now 4 years) from the end of the assessment year “unless the Board is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice“. In the present case, approval had been accorded by affixing a mere rubber stamp. Rubber stamping of underlying material is hardly a process which can get the imprimatur of the Court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the ITO was to be agreed upon, the least, which is expected, is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. There is no proper application of mind by the Board (Chuggamal Rajpal 79 ITR 603 (SC) followed)

To decide whether the institution exists solely for education and not to earn profit the test of predominant object of the activity has to be seen to decide. The purpose does not lose its character merely because some profit arises from the activity. It is not possible to carry on educational activity in such a way that the expenditure exactly balances the income and there is no resultant profit, for, to achieve this, would not only be difficult of practical realization but would reflect unsound principles of management. In order to ascertain whether the institute is carried on with the object of making profit or not it is duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established (Aditanars Educational Institution 224 ITR 310 (SC) & American Hotel and Lodging Association 301 ITR 86 (SC) followed)