U/s 28 r.w.s. 29, computation of income has to be in accordance with the provisions contained in s. 30 to 43 which includes s. 37(1). If a loss of a debt does not come within s. 36(1)(vii), a claim can be made u/s 37(1). There is a clear distinction between a business expenditure and a business loss, the former is indicative of a volition but in loss it comes upon him so to speak as ab extra. Non-capital expenditure incurred for the purpose of business can be deducted u/s 37(1). The advances made by the assessee were not capital in nature and were of a type which would be within the contemplation of the words “laid out or expended wholly and exclusively for the purposes of the business”. S. 37 (1) is a residuary section extending the allowance to items of business expenditure and not of business losses which are deductible on the ordinary principles of commercial accounting (Chenab Forest Co 96 ITR 568 (J&K) & Mysore Sugar Co 46 ITR 649 (SC) followed)

It is well settled that orders passed u/s 195(2) and 197 are provisional and tentative. These orders do not bind the AO in regular assessment proceedings. and do not preempt the Department from passing appropriate orders of assessment. The fact that a determination u/s 195 & 197 is an “order” subject to challenge u/s 264 does not make any difference

U/s 208, an employee is not liable to pay advance tax on salary because u/s 192 there is an obligation on the employer to deduct tax at source. The employee cannot foresee that the tax deductible under a statutory duty imposed upon the employer would not be so deducted. The employee proceeds on the assumption that the deduction of tax at source has statutorily been made or would be made and a certificate to that effect would be issued to him. If the employer fails to deduct tax at source, the employee becomes liable to pay the tax directly. However, the liability to pay interest remains upon the person responsible to deduct the tax at source. The department is entitled to proceed against the employer u/s 201(1A). (Sedco Forex 264 ITR 320 (Utt) & other judgements followed)

The ratio of Sahney Steel 228 ITR 253 (SC), Ponni Sugars 306 ITA 392 (SC) and Mepco Industries 319 ITR 208 (SC) is that to determine whether incentives & subsidies are revenue or capital receipts, the purpose underlying the incentives is the determinative test. If the object of the subsidy scheme is to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the subsidy scheme is to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. It is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form or the mechanism through which the subsidy is given is irrelevant

What is under challenge is only the show-cause notice issued u/s 195 … it may be necessary for the fact finding authority to lift the corporate veil to look into the real nature of transaction to ascertain virtual facts. It is also to be ascertained whether the assessee, as a majority shareholder, enjoys the power by way of interest and capital gains in the assets of Sesa Goa and whether transfer of shares in the case on hand includes indirect transfer of assets and interest in Sesa Goa

S. 43(5) defines the expression ‘speculative transaction’ to mean a transaction in which a contract for the purchase or sale of any “commodity” including stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the “commodity” or scrips. The expression ‘commodity’ is not defined and so has to be given the meaning as understood in common parlance i.e. an article of trade or commerce which is tangible in nature. As futures contracts are articles of trade and commerce which are legally permitted to be traded on the stock exchange, transactions in futures are transactions in a “commodity” as contemplated by s. 43(5). Transactions in futures contracts like transactions in stocks & shares if settled otherwise than by actual delivery would be speculative transactions u/s 43(5)

The law is well settled that the jurisdiction to reopen a proceeding depends upon issue of a valid notice. If the notice is not properly issued, the proceedings are ultra vires. A notice issued on a non-existent person is void. The fact that the assessee has filed a return in response to the notice makes no difference

On facts, there is no reason to disbelieve the assessee that the deduction u/s 194C was being done on the misconceived professional advice given by the CAs. Since the payment were to be deducted from CFA no benefit was to be derived by the assessee for making lesser or inaccurate deductions. No malafide intention of any kind can be attributed to the assessee for deducting tax under one provision of law than the other. This was neither the case of malafide intention nor that of negligent intention or want of bonafide, but a case of misconceived belief of applicability of one provision of law. It cannot be said judiciously that the assessee failed to comply with s. 194-I & 194-J without reasonable cause

The assessee has sufficiently explained that a majority of the investment in the tax-free security was made before the borrowing. The assessee had demonstrated that it had other sources of investment and that no part of the borrowed fund could be stated to have been diverted to earn tax free income. As borrowed funds were not used for earning tax-free income, applying s. 14A was not justified

S. 40(b)(v) allows a deduction of payment of remuneration to a working partner if it authorized by the partnership deed and not in excess of the limits. S. 40(b)(v) does not lay-down any condition that the partnership deed should fix the remuneration or the method of quantifying remuneration. Accordingly, CBDT circular No. 739 dated 25.3.1996 which requires that either the amount of remuneration payable to each individual should be fixed in the agreement or the partnership agreement deed should lay down the manner of quantifying such remuneration goes beyond s. 40(b)(v). The CBDT cannot issue a circular which goes against the provisions of the Act. The CBDT can only clarify issues but cannot insert terms and conditions which are not part of the main statute. A partnership deed which provides that the remuneration would be as per the provisions of the Act meaning thereby that the remuneration would not exceed the maximum remuneration provided in the Act is valid and deduction is admissible