S. 28(i): Business loss-Foreseeable losses-Construction Contracts-Percentage of competition method-loss can be claimed in the manner provided under Accounting Standard 7 ‘Construction Contract’-For quantification of loss, the ITAT directed the AO to quantify the claim and allow it in accordance with the law. [S.37(1), AS 7]

S.14A: Disallowance of expenditure-Exempt income-Book profits-Computation-Assessee’s suo motu disallowance-Further disallowance in computation of book profits under section 115JB unjustified-Addition deleted-Disallowance where entire investment made out of interest-free own funds-No disallowance warranted-CBDT Circular No. 5 of 2014 cannot override express provisions of section 14A-Disallowance not legally tenable-Effect of Explanation inserted by Finance Act, 2022 with effect from 1-4-2022-Amendment prospective, not retrospective-Disallowance for earlier year not tenable-Suo motu disallowance-Assessee’s own interest-free funds in excess of investment-No disallowance warranted-Assessing Officer required to record dissatisfaction with correctness of suo motu disallowance-Non-recording of satisfaction precluding recourse to rule 8D-No further disallowance warranted. [S. 115JB, R. 8D]

S. 14A: Income-Expenditure relating to exempt income-Investment being share of profit in joint venture, current account transaction for loans given-Provision inapplicable-Disallowance rightly deleted. [R. 8D]

S. 10(10B): Compensation-Workmen-Voluntary Retirement Scheme on closure of the company-Entitled to exemption-Gratuity-Salary includes gratuity-Relief to be provided under section 89 in taking net gratuity amount. [S 10(10)(C), 17(iii), 89]

S. 9(1)(vii): Income deemed to accrue or arise in India-Fees for technical services-Non-resident-Fees for included services-Assessee engaged to provide concept drawings and design for statue of Sardar Vallabhbhai Patel-No development of technical design or transfer of technical plan-Drawings project-specific, not usable elsewhere-No technical know-how made available-Consideration not taxable as fees for included services in India-DTAA-India-USA [S.90, Art. 14(4)(b)]

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Effect of Supreme Court decision in Engineering Analysis Centre of Excellence P. Ltd. v. CIT (2021) 432 ITR 471 (SC)-Software licence fees, global wide area network connectivity, and global technology charges not royalty-Order of Commissioner (Appeals) upheld-DTAA-India-UK.

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-Permanent Establishment-Dependent Agent Permanent Establishment-Construction Permanent Establishment-Offshore supply-Attribution of profits-Artificial splitting of contracts-Fees for Technical Services-“Make available” clause-Additions were deleted-DTAA-India-UK.[S.44BB,90, Art. 5, 13(4)(c)]

S. 263: Commissioner-Revision of orders prejudicial to revenue–No revision where Assessing Officer rightly made no disallowance under section 14A as interest-free funds exceeded investments-Commissioner cannot invoke section 263 on an issue which is the subject matter of appeal before the Commissioner (Appeals)-Failure to refer specified domestic transaction to Transfer Pricing Officer does not render assessment erroneous where CBDT Instruction is not attracted. [S. 14A, 92BA, 92CA 250, Rule 8D]

S. 263: Commissioner-Revision of orders prejudicial to revenue-Where the AO, after examining the assessee’s eligibility for exemption under section 10(21), adopted a possible view that incidental receipts were eligible for exemption, the Commissioner could not invoke section 263 merely because he held a different opinion on a debatable issue. [S. 10(21)]

S. 263: Commissioner-Revision of orders prejudicial to revenue-AO having accepted the claim that interest received on enhanced compensation formed part of compensation exempt under section 10(37), revision under section 263 was not justified as the issue was debatable and the AO had adopted a possible view. [S. 10(37), 45, 56(2)(viii)]