“Section 35(1)”
The decision most relied on for Section 35(1) is CIT v. Walfort Share & Stock Brokers (P.) Ltd. (326 ITR 1), cited in 543 judgments on BharatTax.
Leading authorities on Section 35(1)
For attracting Section 14A disallowance, there must be a proximate cause relating the expenditure to actual tax-exempt income, and such disallowance is not automatic but requires positive material. Additionally, Section 94(7) on dividend stripping only ignores losses to the extent of dividend received for assessment years post-April 1, 2002, allowing the remaining loss.
No disallowance can be made under Section 36(1)(va) or Section 43B for delayed payment of employee's contributions to ESI or PF if these amounts are deposited by the assessee on or before the due date for filing the return of income under Section 139(1). This aligns the treatment of employee contributions with employer contributions for allowability.
Corporate guarantee fees are subject to transfer pricing rules, and adjustments may be needed to account for differences between corporate guarantees and more liquid bank guarantees when determining arm's length price.
Expenditure that provides a commercial advantage of an enduring nature may still be classified as revenue expenditure if its purpose is to facilitate existing trading operations, improve business efficiency, or upgrade existing products, depending on the specific context and objective.
A provision for doubtful debts cannot be added back while computing book profits under Section 115JB of the Income-tax Act for Minimum Alternate Tax (MAT) purposes.
If approval from the Department of Scientific and Industrial Research (DSIR) for an in-house R&D centre is granted during the previous year, the assessee is entitled to claim weighted deduction under section 35(2AB) for the entire expenditure incurred during that year.
If an assessee possesses interest-free funds exceeding investments in tax-free securities, it is presumed that investments are made from these own funds, precluding disallowance of interest expenditure under Section 14A read with Rule 8D(2)(ii). Additionally, weighted deduction under Section 35(2AB) is computed on the gross expenditure incurred, not net expenditure after reducing income earned.
A transaction is considered an adventure in the nature of trade, constituting business income, if there is a pre-determination to sell an asset at a profit. Conduct prior to purchase, as well as subsequent improvements, are relevant in determining the character of the transaction.
