S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits – During assessment proceedings, assessee submitted revised accounts showing all payments below Rs .20000 – Not accepted by any lower authority–Held, assessee failed to substantiate its claim – Held, no substantial question of law. [S. 260A]

S. 40A(2) : Expenses or payments not deductible–Excessive or unreasonable–Agreement between assessee and related partnership firm in which one director had substantial interest –Expenditure disallowed in absence of genuineness of the transaction. [S.40A(2)(b)]

S. 37(1) : Business expenditure–Liquidated damages- Compensation for breach of contract where penalty stipulated– section covers cases where amount paid in case of breach– Liability crystallized and cannot be contingent in nature- Allowable as deduction. [Indian Contract Act, 1872, S. 73, 74]

S. 37(1) : Business expenditure–Setting up of business– Preliminary steps taken including appointment of key personnel to setting up main substantial commercial venture–Linkage between preliminary steps and ultimate activity maybe a relevant factor and assessee’s claim for deduction would be allowed.

S. 37(1) : Business expenditure-Scientific Research–No weighted deduction claimed of actual expenses–Deduction allowable as business expenditure. [S. 35(1)(ii)]

S. 37(1) : Business expenditure-Interest–Front end fees paid to bank for obtaining loan forms part of interest as defined – Expenditure towards front end fees paid is treated as revenue in nature- Matter remanded. [S. 2(28A), 35D(1)]

S. 37(1) : Business expenditure–advertisement expenses need not be debited to the capital work in progress when assessee follows completed contract method. [S. 145]

S. 37(1) : Business expenditure–amount paid to the allottees of flat for surrendering of their right therein is revenue in nature and is for the purpose of the business–such expenditure cannot be added to the cost of the stock but is an extraordinary item. [S. 145]

S. 36(1)(iii) : Interest on borrowed capital–interest free advance given to associates for the assessees’s business–Held, no disallowance required.

S. 32 : Depreciation–Plant and machinery installed for generation of power is eligible for additional depreciation under clause (iia) as electricity is covered in the meaning of ‘article or thing’. [S. 32(1)(iia)]