“Section 28(1)(c)”
The decision most relied on for Section 28(1)(c) is Motorola Inc. v. Dy. CIT (95 ITD 269), cited in 213 judgments on BharatTax.
Leading authorities on Section 28(1)(c)
Revenue must demonstrate the existence of a Permanent Establishment (PE) of a foreign enterprise in India, including establishing that transactions underlying a Dependent Agent PE were not at arm's length. Income from the sale of goods is not taxable in India if title and risk in the goods pass outside India.
The Kerala High Court held that charitable institutions claiming exemption under Section 11 are not entitled to claim depreciation on assets used for charitable purposes, taking a view contrary to most other High Courts.
Income earned from deposits or investments directly and inextricably linked to the acquisition of assets or the setting up of a business project during its construction period is incidental to the asset acquisition, reducing the project cost, or constitutes business receipts eligible for relevant deductions, rather than 'income from other sources'.
Penalty under Section 271(1)(c) cannot be levied when the quantum appeal is pending before the High Court or where a quantum addition is confirmed and a question of law is admitted by the High Court.
Proceeds from the sale of scrap packing material are to be included in the total turnover for computing deduction under section 80HHC. However, the turnover should be restricted to receipts that have an element of profit.
The power to impose a penalty under Section 28 (now 271(1)(c)) depends on the Assessing Officer's satisfaction about the existence of the specified conditions. This satisfaction must be recorded in the course of the assessment proceedings and before their conclusion.
A loss is deductible as a business loss only if it arises during the course of or is incidental to business operations, requiring a direct and proximate nexus with the business. If profits from an activity are taxable, losses from it are deductible.
Receipts derived from services rendered by an association to its members, which fall outside the scope of its primary mutual purpose, can be charged to income tax. Such services might otherwise be considered business income, but taxability depends on whether the assessee is brought within the specific terms of the relevant tax provision.
