S.37(1): Business expenditure-Commercial expediency-Mutual fund-Fund manager-Assessing Officer cannot put himself in the armchair of the assessee and decide whether to incur expenses or not-Order of Tribunal affirmed. [S. 260A]

S. 37(1): Business expenditure-Capital or revenue-Advantage for enduring benefit-Non-compete fee-No monopoly achieved-Allowable as revenue expenditure.

S. 36(1)(viii) : Eligible business-Special reserve-Forty per cent. of “profits derived from such business of providing long-term finance”-Amendment brought by Finance Act, 1995-Concept of an integrated business cannot be invoked to expand scope of benefit to cover income not strictly satisfying definition-Dividend does not qualify as profits derived from business of providing long-term finance or loans Not eligible for deduction-Interest earned from bank deposits attributable to business, but not derived from activity of providing long-term finance-Not eligible for deduction-Service charges received for Sugar Development Fund loans Funds belonged to Government of India-Receipts were charges paid by Government for administrative tasks of monitoring and disbursement Proximate source was agency agreement with Government, not lending activity-Could not be equated with “profits derived from business of providing long-term finance” Not eligible for deduction-“Derived from”-Interpretation of taxing statutes-Strict interpretation-Precedent-Judgment based on old, broader law cannot be used to interpret new, stricter provision.[S.80IB, Art. 136]

S. 36(1)(iii) : Interest on borrowed capital-Advance to subsidiary-investment made for acquiring controlling interest in associate concern-Commercial expediency-Allowable as deduction. [S. 37 (1)]

S. 32 : Depreciation-Intangible asset-Non-compete agreement-Right in personam-Not an intangible asset-Depreciation not allowable on non-compete fees.[S. 32(1)(ii)]

S. 28(i) : Business income-Capital gains-Two provisions operate in distinct and independent fields-Mere receipt not sufficient to attract charge Commercial realisability required-Shares received on amalgamation-Shares held as stock-in-trade Nature of stock-in-trade wholly different from investment-No exception contemplated in case of business assets-Shares received on amalgamation-Shares held as stock-in-trade-Profit taxable as business profits-Burden on department to establish and Tribunal to apply the principles to evidence on record-Charge attracted only upon allotment of new shares-Not on appointed date or date of court sanction. [S. 2(1B), 2(14), 2(47), 28, 45(1), 47(vii) Art. 136]

S. 14A : Disallowance of expenditure-Exempt income-Disallowance is not attracted where there is no income exempt from tax-Disallowance is restricted to the extent of exempt income-Finance Bill, 2022, declaring that amendment to take effect from 1-4-2022 and accordingly applies in relation to assessment year 2022-2023 and subsequent assessment years-Order of Tribunal affirmed. [R.8D]

S. 11 : Property held for charitable purposes-Tribunal affirmed and applied proviso to section 2(15) to disentitle exemption under sections 11 and 12-Expenditure exceeded donations and no retention of income, but deficit of seven per cent-Proviso to section 2(15) not attracted and denial of exemption unsustainable.[S. 2(15), 12AA]

S. 69: Unexplained investments – Unexplained jewellery- Search – Considering the assessee’s age, social status, occupation, family background and customary gifts received on various occasions, the Tribunal held the possession of 48.9 gms to be reasonable. Diamond and precious-stone-studded jewellery cannot be excluded from the benefit of CBDT Instruction No. 1916 merely because it contains diamonds or precious stones. Accordingly, the entire addition of Rs.3,86,186/- was deleted – Enhanced rate of 60% – Search conducted on 26-07-2016 – Amendment by Taxation Laws (Second Amendment) Act, 2016 – Enhanced rate applicable prospectively – Not applicable where search was conducted prior to 15-12-2016. [ S. 69A , 115BBE , 132 ]

S. 254(1): Appellate Tribunal- Powers- Award cost – Additional evidence – Conditional remand before the Assessing Officer -Demonetisation- Unexplained cash deposits, unsecured loans, sundry creditors and agricultural income – The assessee should, within one month from the date of the order, plant 500 trees and furnish documentary evidence thereof, or deposit the requisite cost with the NGO. [ S. 68 , 143(3) ]