“Section 16(3)”
The decision most relied on for Section 16(3) is Hero Cycles Pvt. Ltd. v. CIT (379 ITR 347), cited in 361 judgments on BharatTax.
Leading authorities on Section 16(3)
The Revenue cannot substitute its judgment for that of a businessman regarding the necessity or reasonableness of an expenditure. If an expense is incurred wholly and exclusively for business purposes, it is deductible, and the Revenue cannot question its commercial expediency.
The Supreme Court holds that for income tax purposes, the term 'income' includes 'loss,' allowing for the set-off of a spouse's or minor child's business losses when their income is clubbed with the assessee. This decision emphasizes interpreting tax statutes, especially benevolent provisions, by considering the legislative scheme over a strict literal construction.
The Supreme Court in Pranay Sethi laid down the principles for determining 'future prospects' to be added to the income of a deceased person for calculating compensation under the Motor Vehicles Act. It also clarified principles of judicial discipline, including the binding nature of coordinate bench decisions and how to resolve conflicting Supreme Court judgments.
When a rule is substituted for an old rule, the old rule ceases to exist as the first step of the substitution process. Even if the new substituted rule is later declared invalid, the old rule does not revive.
The revenue authorities cannot exclude comparable companies from the final list if the Assessing Officer (AO)/Transfer Pricing Officer (TPO) had not rejected them, even if the revenue representative believes they do not pass the comparability test.
Interest received by an assessee under Section 28 of the Land Acquisition Act is not taxable.
An assessee can claim an outstanding balance as a business loss under Section 28 if it arises from regular business transactions, even if conditions for bad debt deduction under Section 36(1)(vii) are not met, provided sufficient evidence is produced.
Extrapolation is generally not permissible when the Assessing Officer relies on additional evidence and investigations indicating large-scale undervaluation by the assessee, and the facts differ from V.M. Spinning Mills.
