S. 41(2) : Profits chargeable to tax – Balancing charge – Slump sale – Business as going concern – Gain is liable to tax u/s 41(2) on itemized basis if slump price is determined on valuation of each asset/liability – Body of individuals – Where firm has sold its business as a going concern, surplus arising out of transaction has to be assessed in status of BOI and not as a firm . [ S. 2(31)(iv) , 2(31)(v), 2(42C ) 4, 45 , 50B ]

S. 40(a)(ia): Amounts not deductible – Failure to deduct tax at source – Payment exceeding Rs. 20,000 to each truck owners – Contract with a cement factory for transporting cement – Payment made to truck operator/owner amounts to payment made to a sub-contractor – Disallowance is not limited only to amount outstanding and this provision equally applies in relation to expenses that had already been incurred and paid by assessee- S. 40(a)(ia) as introduced by Finance (No.2) Act, 2004 with effect from 01.04.2005 is applicable to and from assessment year 2005-06 – Amendment by Finance Act 2014 is prospective – Disallowance held to be justified [S. 40A(3) , 194C]

S. 37(1): Business expenditure — Capital or revenue – Loan taken on mortgage of fixed assets — Amount spent towards stamps, registration fees, lawyer’s fees, etc. for availing loan – Loan neither an asset nor any business advantage nor any enduring benefit to the assessee – Nature of expenditure incurred in raising a loan not dependent upon nature and purpose of loan – Allowable business expenditure. [Indian Income-tax Act, 1922, 10(2)(xv) ]

S. 37(1): Business expenditure – Termination of services of directors and employees to facilitate take over – Retrenchment compensation an allowable deduction — “Wholly and exclusively” does not mean “necessarily” — Benefit to third party irrelevant [Indian Income-Tax Act, 1922 S. 10(2)(xv)]

S. 37(1): Business expenditure – Foreign exchange fluctuation loss as on the balance sheet – Allowable as an expenditure. [S. 43A, 145]

S.37(1) : Business expenditure – Legal expenses incurred for protecting the business of the firm – Held to be allowable business expenditure – Held, finding of fact by the Tribunal cannot be disturbed unless it found to be perverse.

S. 37(1) : Business expenditure – Method of accounting – Entries in the books of account cannot decide whether a receipt is taxable or not or whether expenses are allowable as deduction or not – Courts are compelled to go by the true nature of the receipts and not go by the entries in the books of account – Once a liability to pay has accrued during the assessment year deduction can be allowed even though it had to be discharged at a future date – Even if the assessee disputes the liability to pay sales tax by filing an appeal, once the demand for payment has been received, the said amount can be claimed as a deduction. [ S. 28(1), 37(1) , 145, Indian Income-tax Act, 1922, S. 10(2)(xv)]

S.36(1)(vii): Bad debt – Mere write off is sufficient for claiming deduction of bad debt– Held, Yes Subsequent to 01/04.1989, no requirement to establish that the debt has become irrecoverable.

S.36(1)(iii): Interest on borrowed capital – Upfront interest paid – Interest on debentures – Allowable in the first year or to be spread over a period of five years – Method of accounting – Held, entire expenditure to be allowed in the year in which interest expenditure is incurred and paid – Held, treatment in the books of account not determinative –Matching concept not to be applied in such a case [S. 35D, 37(1), 43, 145]

S. 36(1)(iii) : Interest on borrowed capital- Interest free loans and advances given to subsidiary – Interest-free funds available with assessee are sufficient to meet investment/ advances – Presumption is that investments in subsidiaries were out of interest free funds – No disallowance can be made under section 14A. [S. 14A]