“Section 143(1)(e)”
The decision most relied on for Section 143(1)(e) is DCIT v. Core Health Care Ltd. (298 ITR 194), cited in 165 judgments on BharatTax.
Leading authorities on Section 143(1)(e)
Interest expenditure incurred for acquiring capital assets, even if capitalized in the books, is deductible if for the purpose of business. Section 36(1)(iii) is a self-contained code regarding such deductions.
Section 2(22)(e) of the Income Tax Act, which addresses deemed dividends, does not apply to loans or advances provided by a company to its shareholders if these transactions occur in the normal course of business, are driven by business expediency, or are made in consideration of a benefit conferred upon the company by the shareholder. Conversely, gratuitous loans or advances given to shareholders fall within the purview of this section.
Genuine trade advances or amounts advanced for bona fide business transactions, driven by commercial expediency, do not fall within the definition of deemed dividend under section 2(22)(e) of the Income-tax Act.
Income of a trust that is taxable at the maximum marginal rate should be taxed accordingly, while other income is eligible for exemption under Section 11 of the Income-tax Act.
When computing the income of a charitable trust for exemption under Section 11, depreciation must be allowed as an application of income based on commercial principles. This does not constitute a double deduction.
A working capital adjustment is mandated and a prerequisite for correctly determining the Arm's Length Price (ALP) under Rule 10B(1)(e) and Rule 10B(3) of the Income Tax Rules, 1962. This adjustment accounts for differences in working capital and outstanding receivables between the assessee and comparable companies.
The provisions of Section 2(22)(e) regarding deemed dividends do not apply to transactions between a shareholder and a company that create mutual benefits and obligations, such as trade advances in the nature of commercial transactions.
When an assessment has been completed under section 143(3), reassessment proceedings initiated under section 147/148 are invalid if based merely on a change of opinion without fresh tangible material. The assessee's true and full disclosure during the original assessment restricts the Assessing Officer's power to reopen the assessment.
