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]

S. 35D: Amortisation of preliminary expenses – Capital or revenue – Expenditure incurred on public issue of shares is revenue or capital expenditure – Debatable issue – Judgement of jurisdictional High Court on the issue – Issue cannot be said to be debatable – Held, issue can be considered in proceedings under section 143(1) of the Act.

S. 35AC : Expenditure on eligible projects-Schemes–Promissory estoppel is not available to an assessee against the exercise of legislative power nor any vested right accrues to an assessee in the matter of grant of any tax concession to him-In a taxing statute, a plea based on equity or/and hardship is not legally sustainable-Withdrawal of exemption is valid. S. 35AC(7) is prospective in nature-Provision is valid in law. [S. 35AC(7), Art. 142, 226]

S. 28(iv): Business income – Waiver of loan – Remission or cessation of trading liability – S. 28(iv) does not apply if the receipts are in the nature of cash or money; but will apply if the benefits are received in some other form – Loan waiver amounts to benefit/ receipt in the form of cash – Held, waiver of loan cannot be assessed u/s 28(iv) of the Act.

S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Waiver of loan – Section 41(1) apply to a trading liability; in respect of which either an allowance or deduction is claimed by the assessee –Loan is not a trading liability and no deduction is claimed in respect of the interest expense – Held, no addition can be made u/s 41(1) of the Act in respect of waiver of loan. [S. 4, 36(1)(iii), 28(iv)]

S. 28(i) : Business income -Professional fees – Cash method of accounting – Outstanding fee of professional work done by assessee, who kept his accounts on cash basis, after close of his profession was not taxable either under head of professional income or under residuary head of income- Income which is chargeable under a particular head cannot be taxed under the residuary head [ S. 2 (45) 4, 5 , 14 ,56 ,145 and of the Indian Income- tax Act , 1922, S.2(15), 3, 4, 5, 10, 12 ]

.S.28(i): Business income – Adventure in nature-of-trade – Division of land into plots and sale to various purchasers – Test to be applied for considering the nature of trade [S.2(13), Indian Income-tax 1922, S. 10(1)]