“Section 2(14)(ii)”
The decision most relied on for Section 2(14)(ii) is Loyal Motor Service Co. Ltd. v. CIT (14 ITR 647), cited in 48 judgments on BharatTax.
Leading authorities on Section 2(14)(ii)
A payment of bonus or commission is allowable as a business deduction under Section 36(1)(ii) unless it constitutes a distribution of profits or dividends, thereby distinguishing payments genuinely for services from those merely intended to escape taxation.
Where an expense is incurred for the purpose of acquiring a capital asset, and that asset is subsequently sold, the expenditure must be considered as part of the cost of acquisition of that asset for the purpose of calculating capital gains. This is because the expense forms an integral part of the cost of acquiring the asset, not an expenditure of revenue nature.
The Supreme Court's decision in CIT v. Travancore Sugars & Chemicals Ltd. is cited for the principle of diversion of income by overriding title, distinguishing it from issues related to the deductibility of certain taxes like education cess.
The nature and character of a receipt, whether it is of a capital or revenue nature, depends on the facts and circumstances of each case, particularly the purpose for which the payment was made.
