“Section 122(1)”
The decision most relied on for Section 122(1) is PCIT v. Caraf Builders and Constructions Pvt. Ltd. (414 ITR 122), cited in 69 judgments on BharatTax.
Leading authorities on Section 122(1)
Disallowance under Section 14A cannot exceed the actual exempt income earned, and only investments that have yielded or are capable of yielding exempt income are considered for Rule 8D computation. The Assessing Officer must record objective satisfaction before rejecting the assessee's disallowance and applying Rule 8D, a principle also applicable to Section 115JB.
Under Indian income-tax law, the Income-tax Officer must compute income and profits according to the method of accounting regularly employed by the assessee, such as the cash or mercantile system. This distinguishes Indian law from English legislation where the tax authority is not bound by the assessee's chosen method.
An Indian company that exercises control and supervision over a seconded employee and bears the salary cost is an economic employer. Such a company is not liable to withhold tax on the reimbursement of salary to the overseas company, thereby avoiding disallowance under Section 40(a)(i).
Disallowance under Section 14A cannot be made if the assessee has not received any exempt income during the relevant assessment year. The mere possibility of earning exempt income does not trigger disallowance.
Expenses incurred and reimbursed for seconded employees under a secondment agreement are not liable to tax deduction at source and do not constitute 'fees for technical services'. The secondment agreement itself forms an independent arrangement for securing services.
Where goodwill is recorded pursuant to a merger based on purchase consideration determined by a valuation report, and no goodwill is transferred from the predecessor's books, the fifth proviso to section 32(1) of the Income-tax Act, 1961, is not applicable, and thus depreciation on such goodwill is not allowable.
Shares held as corpus by a trust, which were a precondition for notification under Section 10(23C), cannot be deemed to forfeit exemption under Section 13(1)(d) and Section 13(2)(h).
The Assessing Officer should exercise discretion under Section 40A(3) by considering business expediency, surrounding circumstances, and the facts of each case, balancing legal requirements with assessee hardship, rather than relying solely on Board circulars.
